As filed with the Securities and Exchange Commission on June
  3, 2005

UNITED STATES SECURITIES AND EXCHANGE COMMISSION 
  Washington, D.C. 20549

FORM 20-F

|(Mark One)
      [   ]
      [X]
      [   ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g)
        OF THE SECURITIES EXCHANGE ACT OF 1934
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
        OF THE SECURITIES EXCHANGE ACT OF 1934for the fiscal year ended December 31, 2004
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
      OF THE SECURITIES EXCHANGE ACT OF 1934for the transition period from to
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission File Number: 001-14974

THOMSON

(Exact name of Registrant as specified in its charter)

| | Not Applicable                                        | Republic of France                                    | 
| | ----------------------------------------------------- | ----------------------------------------------------- | 
| | (Translation of Registrants name
      into English) | (Jurisdiction of incorporation
      or organization) | 

46, quai Alphonse Le Gallo 
  92100 Boulogne-Billancourt
  FRANCE (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12 (b) of the Act:

|Title of each class:                                                                                                           |  | Name of each exchange 
      on which registered: | 
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------- | 
|Common Stock, nominal value 3.75 per share, and American
      Depositary Shares, each representing one share of Common Stock |  | New York Stock Exchange                           | 

Securities registered or to be registered pursuant to Section
  12 (g) of the Act: None

Securities for which there is a reporting obligation pursuant
  to Section 15 (d) of the Act: 
  None

Indicate the number of outstanding shares of each of the
  issuers classes of capital 
  or common stock as of the close of the period covered by the annual report:
  
  Common Stock, nominal value 3.75 per share: 273,308,032

Indicate by check mark whether
  the registrant (1) has filed all reports required to be filed by Section 13
  or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period that the Registrant was required to file such reports)
  and (2) has been subject to such filing requirements for the past 90 days: Yes
  [X] No [   ]

Indicate by check mark which financial statement item the Registrant
  has elected to follow:

Item 17 [   ] Item 18 [X]

---

|TABLE OF CONTENTS                         |                                                              
|----------------------------------------- | -------------------------------------------------------------
|                                          |                                                              
|INTRODUCTION                              | 3                                                            
|FORWARD-LOOKING STATEMENTS                | 3                                                            
|STATEMENTS REGARDING COMPETITIVE POSITION | 4                                                            
|REPORTING CURRENCY                        | 4                                                            
|                                          |                                                              
|                                          |                                                              
|PART I                                    |                                                              
|ITEM 1                                    |  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS      
|ITEM 2                                    |  OFFER STATISTICS AND EXPECTED TIMETABLE                    
|ITEM 3                                    |  KEY INFORMATION                                            
|ITEM 4                                    |  INFORMATION ON THE COMPANY                                 
|ITEM 5                                    |  OPERATING AND FINANCIAL REVIEW AND PROSPECTS               
|ITEM 6                                    |  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                 
|ITEM 7                                    |  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS          
|ITEM 8                                    |  FINANCIAL INFORMATION                                      
|ITEM 9                                    |  THE OFFER AND LISTING                                      
|ITEM 10                                   |  ADDITIONAL INFORMATION                                     
|ITEM 11                                   |  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
|ITEM 12                                   |  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES     
|                                          |                                                              
|                                          |                                                              
|PART II                                   |                                                              
|ITEM 13                                   |  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES            
|ITEM 14                                   |  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS   
|                                          | AND USE OF PROCEEDS                                          
|ITEM 15                                   |  CONTROLS AND PROCEDURES                                    
|ITEM 16A                                  |  AUDIT COMMITTEE FINANCIAL EXPERT                           
|ITEM 16B                                  |  CODE OF ETHICS                                             
|ITEM 16C                                  |  PRINCIPAL ACCOUNTANT FEES AND SERVICES                     
|ITEM 16D                                  |  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 
|ITEM 16E                                  |  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
|                                          | PURCHASERS                                                   
|                                          |                                                              
|                                          |                                                              
|                                          |                                                              
|                                          |                                                              
|PART III                                  |                                                              
|ITEM 17                                   |  FINANCIAL STATEMENTS                                       
|ITEM 18                                   |  FINANCIAL STATEMENTS                                       
|ITEM 19                                   |  EXHIBITS                                                   

2

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Thomson Group

INTRODUCTION

In this Annual Report on Form 20-F, the terms the Company, the Group, Thomson, we and our mean THOMSON, together with its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

In order to utilize the safe harbor provisions of the U.S. Private
  Securities Litigation Reform Act of 1995, we are providing the following cautionary
  statement. This Annual Report contains certain forward-looking statements with
  respect to our financial condition, results of operations and business and certain
  of our plans and objectives. These statements are based on managements
  current expectations and beliefs in light of the information currently available
  and are subject to a number of factors and uncertainties that could cause actual
  results to differ materially from those described in the forward-looking statements.
  In addition to statements that are forward-looking by reason of context, other
  forward-looking statements may be identified by use of the terms may,
  will, should, expects, plans,
  intends, anticipates, believes, estimates,
  projects, predicts and continue and similar
  expressions identify forward-looking statements. By their nature, forward-looking
  statements involve risk and uncertainty because they relate to events and depend
  on circumstances that are anticipated to occur in the future. Such statements
  are also subject to assumptions concerning, among other things: our anticipated
  business strategies; our intention to introduce new products; anticipated trends
  in our business; and our ability to continue to control costs and maintain quality.
  We caution that these statements may, and often do, vary from actual results
  and the differences between these statements and actual results can be material.
  Some of the factors that could cause actual results and events to differ materially
  from those expressed or implied in any forward-looking statements are:

- our ability
    to design, develop and sell innovative products and services, which are offered
    in highly competitive markets characterized by rapid technology changes and
    subjective and changing customers preferences;
- economic
    conditions, including consumer spending, in countries in which our systems,
    equipments and services are sold or patents licensed, particularly in the
    United States, Europe and Asia;
- our ability
    to protect our patents and other intellectual property rights and the outcome
    of any claims against us for the alleged infringement of third parties
    intellectual property rights;
- general
    economic trends, changes in raw materials and employee costs and political
    and social uncertainty in markets where we manufacture goods, purchase components
    and finished goods and license patents, particularly in Latin America and
    Asia;
- increased
    competition in video technologies, components, systems and services and finished
    products and services sold to customers in the entertainment and media industries;
- force majeure
    risks, especially related to our just-in-time inventory, supply and distribution
    policy;
- challenges
    inherent in our repositioning strategy, as detailed in Item 4: Information
    on the CompanyHistory and Development of the Company;
- the success
    of our partnership strategy for our displays (television tubes and related
    components) and
    consumer products activities such as TTE, of certain other partnerships and
    joint ventures that we may not control, as well as future business acquisitions,
    combinations or dispositions;
- technological
    advancements in the entertainment and media industries;
- changes
    in exchange rates, notably between the euro and the U.S. dollar, Chinese yuan,
    Canadian dollar, Mexican peso, Polish zloty and British pound;
- warranty
    claims, product recalls or litigation that exceed or are not covered by our
    available insurance coverage;

3

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Thomson Group

- our failure
    to maintain contractual arrangements with our customers, or material adverse
    changes in the financial condition or creditworthiness of our key customers
    and clients over the long term; and
- capital
    and financial market conditions, prevailing interest rates and availability
    of financing.

Furthermore, a review of the reasons why actual results and developments may
  differ materially from the expectations disclosed or implied within forward-looking
  statements can be found under Item 3: Key InformationRisk Factors
  below. Forward-looking statements speak only as of the date they are made, and
  we undertake no obligation to publicly update any of them in light of new information
  or future events. We advise you to consult any documents we may file or furnish
  with the U.S. Securities and Exchange Commission (SEC), as described
  under Item 10: Additional InformationDocuments on Display.

STATEMENTS REGARDING COMPETITIVE POSITION

This Annual Report contains statements regarding our market share, market position and products and businesses. Unless otherwise noted herein, market estimates are based on the following outside sources, in some cases in combination with internal estimates:

- Understanding
    & Solutionsfor
    information on CDs and DVDs (Content and Networks);
- Gesellschaft
    für Konsumer Markt- und Absatzforschung(GfK)
    for information on TV, VCR, DVD and audio in the Europe 5 market
    which comprises France, Germany, the United Kingdom, Italy and Spain (Consumer
    Products);
- SYNOVATE
    (formerly Institute for Market Research)for
    information on TV, VCR, DVD, audio and telephony markets in the Americas (Consumer
    Products);
- Kinetic
    Strategies and Infoneticsfor
    information on cable modems (Broadband Access Products); and
- Frost & Sullivan, SCRI, TrendWatchand NABfor information on the broadcast and media solutions markets (Broadcast & Media Solutions).

Statements contained in this Annual Report that make reference to value market share or market share based on value mean that the related market estimate is based on sales, and statements referring to volume market share or market share based on volume mean that the related market estimate is based on the number of units sold.

Market share and market position statements are generally based on sources
  published in the fourth quarter of 2004 or beginning 2005. Statements concerning
  our content services businesses operating under the Technicolor brand are based
  on a combination of internal estimates and external sources published mid- to
  late 2004.

REPORTING CURRENCY

Our consolidated financial statements that form part of this Annual Report on Form 20-F are presented in euro. Effective January 1, 2001, our consolidated financial statements are presented using the euro as our reporting currency.

For your convenience, this Annual Report contains translations of certain
  euro amounts into U.S. dollars. Unless otherwise indicated, dollar amounts have
  been translated from euro at the rate of 1.00 = U.S. $1.2568, the noon
  buying rate in New York City for cable transfers in euro as announced by the
  Federal Reserve Bank of New York for customs purposes (the Noon Buying
  Rate) on May 27, 2005.

4

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Thomson Group

PART I

ITEM 1  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

5

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Thomson Group

ITEM 3  KEY INFORMATION

A  Selected Financial Data

We have derived the following selected consolidated financial data from our consolidated financial statements for the five-year period ended December 31, 2004. You should read the following selected consolidated financial data together with Item 5: Operating and Financial Review and Prospects and our consolidated financial statements.

Beginning January 1, 2003, Thomson formed the following divisions:  Content and Networks, Components, Consumer Products and Licensing. The operations of the former New Media Services division were absorbed in 2003 by Consumer Products activities (principally guide-related activities) and Content and Networks activities (principally the screen-advertising activity).

From 2003, the Broadband Access Products activity, which was previously included
  in Consumer Products, was managed within the Content and Networks segment. Previous
  years have been restated accordingly.

In November 2004, Thomson announced its intention to reorganize its activities effective January 1, 2005. This new structure organizes the Groups businesses around three principal divisions: Services, Systems & Equipments and Technology. Two additional divisions regroup our remaining activities: Displays & Consumer Electronics Partnerships and Corporate. This new organization replaces the intermediate segmentation announced on February 11, 2004, which was not fully implemented in 2004 from an internal management and reporting perspective.  As a result, the Groups main developments during 2004 discussed herein and our consolidated financial statements are presented according to the organization under which we reported for 2003, namely the divisions Content and Networks, Consumer Products, Components and Licensing.

Our television activity was deconsolidated effective August 1, 2004 following the creation of TTE Corporation (TTE) in partnership with TCL International and TCL Corporation (TCL). Accordingly, our consolidated statements for 2004 reflect seven months of Thomson as operator of its television business and the remaining five months as a service provider to TTE pursuant to certain contractual arrangements. As a result of our relationship with TTE, the Components division recorded external sales of 192 million for the last five months of 2004 for components sold to TTE, sales which prior to TTEs creation would have been considered intra-group sales and eliminated at the Group level. Consumer products include television sales for first seven months of 2004 of 845 million, and manufacturing and sales and marketing agency services provided to TTE during remaining five months of 2004 representing 152 million.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in France (French GAAP), which differ in certain significant aspects from accounting principles generally accepted in the United States (U.S. GAAP). Notes 31 and 32 to our consolidated financial statements describe the principal differences between French GAAP and U.S. GAAP as they relate to us and include a reconciliation of our net income and shareholders equity. We also summarize these differences in Item 5: Operating and Financial Review and Prospects.

Effective January 1, 2005, Thomson will prepare its consolidated financial
  statements in accordance with International Financial Reporting Standards (IFRS).
  For a discussion of the anticipated impact of IFRS on our consolidated financial
  statements and critical accounting policies, see Item 5: Operating and
  Financial Review and ProspectsTransition to IFRS.

6

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Thomson Group


|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|------------------------------------ | --------------------------------------------- |  | ----------- |  | ----------- |  | ----------- |  | ----------- |  | ----------- | 
|                                     | 2000                                          |  | 2001        |  | 2002        |  | 2003        |  | 2004        |  | 2004        | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|                                     |                                              |  |            |  |            |  |            |  |            |  | (U.S.$)     | 
|                                     | (in millions except share and per-share data) | 
|Income Statement Data (amounts in    |                                               |  |             |  |             |  |             |  |             |  |             | 
|accordance with French GAAP):        |                                               |  |             |  |             |  |             |  |             |  |             | 
|Net sales                            | 8,995                                         |  | 10,391      |  | 10,187      |  | 8,459       |  | 7,994       |  | 10,047      | 
|Content and Networks                 | 1,581                                         |  | 3,460(1)    |  | 3,924       |  | 3,714       |  | 4,073       |  | 5,119       | 
|Components                           | 1,686                                         |  | 1,642       |  | 1,560       |  | 1,072       |  | 1,167       |  | 1,467       | 
|Consumer Products                    | 5,339                                         |  | 4,884       |  | 4,264       |  | 3,198       |  | 2,325       |  | 2,922       | 
|Licensing                            | 378                                           |  | 395         |  | 429         |  | 462         |  | 404         |  | 508         | 
|Corporate (2)                        | 11                                            |  | 10          |  | 10          |  | 13          |  | 25          |  | 31          | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|Cost of sales                        | (6,915)                                       |  | (8,116)     |  | (7,761)     |  | (6,536)     |  | (6,284)     |  | (7,898)     | 
|Gross margin                         | 2,080                                         |  | 2,275       |  | 2,426       |  | 1,923       |  | 1,710       |  | 2,149       | 
|Selling, general and administrative  |                                               |  |             |  |             |  |             |  |             |  |             | 
|expense                              | (1,183)                                       |  | (1,271)     |  | (1,334)     |  | (1,120)     |  | (999)       |  | (1,256)     | 
|Research and development expense     | (351)                                         |  | (368)       |  | (374)       |  | (295)       |  | (277)       |  | (348)       | 
|Operating income                     | 546                                           |  | 636         |  | 718         |  | 508         |  | 434         |  | 545         | 
|Content and Networks                 | 271                                           |  | 458         |  | 420         |  | 436         |  | 407         |  | 511         | 
|Components                           | 262                                           |  | 111         |  | 84          |  | (101)       |  | (105)       |  | (132)       | 
|Consumer Products                    | (179)                                         |  | (160)       |  | (52)        |  | (124)       |  | (64)        |  | (80)        | 
|Licensing                            | 319                                           |  | 338         |  | 387         |  | 411         |  | 325         |  | 408         | 
|Corporate (2)                        | (127)                                         |  | (111)       |  | (121)       |  | (114)       |  | (129)       |  | (162)       | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|Interest income (expense), net       | (10)                                          |  | (29)        |  | 9           |  | (9)         |  | (24)        |  | (30)        | 
|Other financial expense, net(3)      | (67)                                          |  | (160)       |  | (137)       |  | (70)        |  | (55)        |  | (69)        | 
|Other income (expense), net(4)       | (81)                                          |  | 8           |  | (96)        |  | (249)       |  | (769)       |  | (966)       | 
|Income tax                           | 1                                             |  | (139)       |  | (56)        |  | (63)        |  | (88)        |  | (111)       | 
|Net income before minority interests | 376                                           |  | 264         |  | 360         |  | 34          |  | (635)       |  | (798)       | 
|Minority interests                   | 18                                            |  | 22          |  | 13          |  | (8)         |  | (1)         |  | (1)         | 
|Net income                           | 394                                           |  | 286         |  | 373         |  | 26          |  | (636)       |  | (799)       | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|Basic net income per share(5)        | 1.56                                          |  | 1.04        |  | 1.35        |  | 0.09        |  | (2.32)      |  | (2.92)      | 
|Diluted net income per share (5)     | 1.56                                          |  | 1.04        |  | 1.29        |  | 0.09        |  | (2.32)      |  | (2.92)      | 
|Weighted average number of shares    |                                               |  |             |  |             |  |             |  |             |  |             | 
|basic outstanding                    | 252,039,992                                   |  | 274,181,607 |  | 277,240,438 |  | 276,796,602 |  | 273,646,869 |  | 273,646,869 | 
|Dividend paid(6)                     | N/A                                           |  | N/A         |  | N/A         |  | (62)        |  | (71)        |  | (89)        | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 
|Approximate amounts                  |                                               |  |             |  |             |  |             |  |             |  |             | 
|in accordance with U.S. GAAP(7)      |                                               |  |             |  |             |  |             |  |             |  |             | 
|Operating income                     | 284                                           |  | 204         |  | 465         |  | 32          |  | (180)       |  | (226)       | 
|Net income (loss)                    | 136                                           |  | 191         |  | 351         |  | (46)        |  | (567)       |  | (713)       | 
|Basic income (loss) per share(5)     | 0.54                                          |  | 0.72        |  | 1.26        |  | (0.17)      |  | (2.16)      |  | (2.60)      | 
|Diluted income (loss) per share (5)  | 0.54                                          |  | 0.69        |  | 1.21        |  | (0.17)      |  | (2.16)      |  | (2.60)      | 
|                                     |                                               |  |             |  |             |  |             |  |             |  |             | 

|(1) | Increase reflects primarily the acquisition in 2001 of Technicolor
      and certain other companies in the Content and Networks division.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Corporate amounts consist principally of research
      carried out centrally by us and other corporate costs not allocated to our
      operating segments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(3) | Other financial expense, net, includes principally valuation
      allowances on investments carried at the lower of cost or market value,
      interest on pension plans and on other non-financial payables. For further
      details, please refer to Note 5 to our consolidated financial statements.                                                                                                                                                                                                                                                                                                                                       
|(4) | Other income (expense), net, is discussed further under Item
      5: Operating and Financial Review and Prospects and in Note
      6 to our consolidated financial statements. In 2004, includes non-cash impairment
      charge of 530 million related to the Groups decision to actively
      seek a partnership in the display (tubes) business and corresponding reassessment
      of the carrying value of the fixed asset of this business. For more information
      on our restructuring expenses, see Note 18 to our consolidated financial
      statements.                                                                  
|(5) | Net income (loss) per share for each year shown equals net
      income (loss) for that year divided by average number of shares outstanding
      for such year. As the number of shares outstanding has varied from year
      over year since 2000, the net income (loss) per share figure is not comparable
      on a year-to-year basis. The average number of shares from 2001 includes
      15.5 million shares underlying the redeemable bonds subscribed by Carlton
      Communications Plc., which were redeemed for 15.5 million of our shares
      on March 16, 2002. See Note 31 ad ii) to our consolidated financial statements.
|(6) | A dividend of 0.285 per share was proposed by the Board
      of Directors on March 1, 2005 for the year ended December 31, 2004 and was
      approved at the shareholders meeting on May 10, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(7) | Please refer to Item 5: Operating and Financial Review
      and ProspectsOverviewPrincipal Differences between French GAAP
      and U.S. GAAP and Notes 31 and 32 to our consolidated financial statements
      for further details.                                                                                                                                                                                                                                                                                                                                                                                                       



7

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|                                        | 2000  |  | 2001  |  | 2002          |  | 2003  |  | 2004     | 2004   
|--------------------------------------- | ----- |  | ----- |  | ------------- |  | ----- |  | -------- | -------
|                                        |       |  |       |  |               |  |       |  |          |        
|                                        |      |  |      |  |              |  |      |  |         | (U.S.$)
|                                        |       |  |       |  | (in millions) |  |       | 
|Balance Sheet Data (amounts in          |       |  |       |  |               |  |       |  |          |        
|accordance with French GAAP):           |       |  |       |  |               |  |       |  |          |        
|Intangible assets, net(1)               | 196   |  | 1,696 |  | 2,183         |  | 1,935 |  | 2,206    | 2,772  
|Property, plant and equipment, net      | 1,122 |  | 1,536 |  | 1,622         |  | 1,474 |  | 1,054(2) | 1,325  
|Total investments and other             |       |  |       |  |               |  |       |  |          |        
|non-current assets                      | 314   |  | 417   |  | 218           |  | 185   |  | 280      | 352    
|Total fixed assets                      | 1,632 |  | 3,649 |  | 4,023         |  | 3,594 |  | 3,540    | 4,449  
|Inventories                             | 1,477 |  | 1,120 |  | 962           |  | 744   |  | 569      | 715    
|Other current assets                    | 2,420 |  | 3,489 |  | 3,266         |  | 2,559 |  | 2,510    | 3,155  
|Cash and cash equivalents(3)            | 1,772 |  | 1,532 |  | 1,463         |  | 2,383 |  | 1,906    | 2,395  
|Total assets                            | 7,301 |  | 9,790 |  | 9,714         |  | 9,280 |  | 8,525    | 10,714 
|Reserves for retirement benefits        | 633   |  | 709   |  | 705           |  | 653   |  | 589      | 740    
|Restructuring reserves                  | 179   |  | 183   |  | 127           |  | 118   |  | 104      | 131    
|Other reserves                          | 277   |  | 246   |  | 216           |  | 206   |  | 176      | 221    
|Financial debt (short-term              |       |  |       |  |               |  |       |  |          |        
|and long-term)(3)(4)                    | 1,143 |  | 1,131 |  | 1,694         |  | 2,128 |  | 2,501    | 3,143  
|Total current liabilities(5)            | 2,155 |  | 3,492 |  | 2,987         |  | 2,583 |  | 2,465    | 3,098  
|Minority interests                      | 54    |  | 71    |  | 38            |  | 9     |  | 20       | 25     
|Shareholders equity(6)                 | 2,860 |  | 3,958 |  | 3,947         |  | 3,583 |  | 2,670    | 3,356  
|Total liabilities, shareholders equity |       |  |       |  |               |  |       |  |          |        
|and minority interests                  | 7,301 |  | 9,790 |  | 9,714         |  | 9,280 |  | 8,525    | 10,714 
|Approximate amounts in accordance       |       |  |       |  |               |  |       |  |          |        
|with U.S. GAAP                          |       |  |       |  |               |  |       |  |          |        
|Shareholders equity                    | 3,411 |  | 3,399 |  | 3,859         |  | 3,433 |  | 2,577    | 3,239  
|                                        |       |  |       |  |               |  |       |  |          |        

|(1) | Since 2001, reflects the Technicolor acquisition and the professional
      broadcast business acquired from Philips by successive parts. Please refer
      to Note 8 to our consolidated financial statements for more details on intangibles
      assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | On August 1, 2004, Thomson transferred 128 million of
      fixed assets to TTE pursuant to the Combination Agreement. As of December
      31, 2004, 2003 and 2002, the accumulated depreciation includes 595
      million, 56 million and 38 million, respectively, of write-downs
      that have been recognized in the context of the related restructuring plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | In October 2000, we received net proceeds of 844 million
      from a global equity offering. In addition, we issued 11,175,385 convertible/exchangeable
      bonds (2000 OCEANE) due 2006 for an aggregate amount of 812 million.
      In March 2002, we issued 14,814,815 convertible/exchangeable bonds (2002
      OCEANE) due 2008 for an aggregate amount of 600 million. In 2003,
      we received proceeds of 369 million ($406 million and GBP 34 million)
      from private placements of senior notes. On September 16, 2004, Thomson
      issued 23,084 convertible/exchangeable subordinated bonds to Silver Lake
      Partners LLC, with a nominal value of U.S.$ 21,660 each, for an aggregate
      amount of U.S.$ 499,999,440. The bonds bear interest at 3% per annum in
      arrears on January 1 and June 30 of each year, except the first interest
      payment which was due and paid December 31, 2004.
|(4) | As of December 31, 2003 and 2004, accrued interest of 61
      million and 60 million, respectively, has been classified as part
      of the financial debt caption. Please refer to Note 20 to our consolidated
      financial statements for further information on our financial debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5) | Includes in 2001 U.S.$600 million of promissory notes due
      to Carlton for the acquisition of Technicolor (681 million at the
      December 31, 2001 closing rate), excluding accrued interest. At December
      31, 2004, the amount of promissory notes due to Carlton is U.S.$103 million
      (75 million at December 31, 2003), excluding accrued interest. For
      more information, please refer to Note 22 to our consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(6) | The decrease of 913 million in shareholders equity
      is primarily attributable to the 636 million loss in net income recorded
      in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

8

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|                                          |               |  |         |  |         |  |       |  |        |  |         | 
|----------------------------------------- | ------------- |  | ------- |  | ------- |  | ----- |  | ------ |  | ------- | 
|                                          | 2000          |  | 2001    |  | 2002    |  | 2003  |  | 2004   |  | 2004    | 
|                                          |               |  |         |  |         |  |       |  |        |  |         | 
|                                          |              |  |        |  |        |  |      |  |       |  | (U.S.$) | 
|                                          | (in millions)
|Cash Flow Data (amounts in                |               |  |         |  |         |  |       |  |        |  |         | 
|accordance with French GAAP):             |               |  |         |  |         |  |       |  |        |  |         | 
|Net cash provided by operating activities | 410           |  | 1,005   |  | 1,104   |  | 1,183 |  | 401(1) |  | 504     | 
|Net cash used in investing activities     | (398)         |  | (1,173) |  | (1,716) |  | (792) |  | (902)  |  | (1,134) | 
|Net cash provided by (used in)            |               |  |         |  |         |  |       |  |        |  |         | 
|financing activities                      | 1,413         |  | (34)    |  | 540     |  | 511   |  | 5      |  | 6       | 
|Net increase (decrease)                   |               |  |         |  |         |  |       |  |        |  |         | 
|in cash and cash equivalents              | 1,370         |  | (240)   |  | (69)    |  | 920   |  | (477)  |  | (599)   | 
|                                          |               |  |         |  |         |  |       |  |        |  |         | 

|(1) | The decrease from 2003 is primarily due to the
      negative cash impact of 30
      million from an increase in working capital in 2004, compared to the reduction
      in working capital of 640
      million in 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

B  Exchange Rate Information

Our shares are denominated in euro. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar price of our American Depositary Shares (ADSs) on the New York Stock Exchange.  In addition, as we intend to pay any cash dividends in euro, exchange rate fluctuations will affect the U.S. dollar amounts that owners of ADSs will receive on conversion of dividends. Furthermore, fluctuations in the exchange rate between the euro and the U.S. dollar affect the U.S. dollar equivalent of the price of our shares on Euronext Paris S.A.

The following table shows the euro/U.S. dollar exchange rate for the periods presented based on the Noon Buying Rate. We do not make any representations that euro could have been converted into dollars at the rates shown or at any other rate.

|Month                |  | Period End         |  | Average |  | High |  | Low  | 
|-------------------- |  | ------------------ |  | ------- |  | ---- |  | ---- | 
|                     |  |                    |  | Rate(1) |  |      |  |      | 
|                     |  |                    |  |         |  |      |  |      | 
|                     |  | (euro/U.S. dollar) | 
|May 2  May 27, 2005 |  | 1.26               |  | 1.27    |  | 1.29 |  | 1.25 | 
|April 2005           |  | 1.29               |  | 1.29    |  | 1.31 |  | 1.28 | 
|March 2005           |  | 1.30               |  | 1.32    |  | 1.35 |  | 1.29 | 
|February 2005        |  | 1.33               |  | 1.30    |  | 1.33 |  | 1.28 | 
|January 2005         |  | 1.30               |  | 1.31    |  | 1.35 |  | 1.30 | 
|December 2004        |  | 1.35               |  | 1.34    |  | 1.36 |  | 1.32 | 
|November 2004        |  | 1.33               |  | 1.30    |  | 1.33 |  | 1.27 | 
|                     |  |                    |  |         |  |      |  |      | 

|(1)                                      | The average of the Noon Buying Rates for euro
      on the business days of each month during the relevant period.
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------
|Source: Federal Reserve Bank of New York



|Year |  | Period End         |  | Average |  | High |  | Low  | 
|---- |  | ------------------ |  | ------- |  | ---- |  | ---- | 
|     |  |                    |  | Rate(1) |  |      |  |      | 
|     |  |                    |  |         |  |      |  |      | 
|     |  | (euro/U.S. dollar) | 
|2004 |  | 1.35               |  | 1.25    |  | 1.36 |  | 1.18 | 
|2003 |  | 1.26               |  | 1.14    |  | 1.26 |  | 1.04 | 
|2002 |  | 1.05               |  | 0.95    |  | 1.05 |  | 0.85 | 
|2001 |  | 0.89               |  | 0.89    |  | 0.95 |  | 0.84 | 
|2000 |  | 0.94               |  | 0.92    |  | 1.03 |  | 0.83 | 
|     |  |                    |  |         |  |      |  |      | 

|(1)                                      | The average of the Noon Buying Rates for euro
      on the last business day of each month during the relevant period.
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------
|Source: Federal Reserve Bank of New York

The euro/U.S. dollar exchange rate for May 27, 2005 was 1.00 = U.S.$
  1.2568 based on the Noon Buying Rate on that date.

9

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C  Risk Factors

This section describes some of the risks that could affect our businesses. The factors below should be considered in connection with any forward-looking statements in this document and with the cautionary statements contained in Forward-Looking Statements at the beginning of this document.

The risks below are not the only ones that we face. Some risks may not yet be known to us and some that we do not currently believe to be material could later turn out to be material. Any of these risks could materially affect our business, financial condition and results of operations.

Our businesses operate in concentrated markets and depend in large part on a number of major customers and the long-term maintenance of relationships and contractual arrangements with them. Our financial results may suffer if these relationships weaken or terminate, if we are unable to renew these contractual arrangements when they expire or are only able to renew them under significantly less favorable terms, or if certain of our customers face financial difficulties.

Our businesses operate in, and our strategy is to be a preferred partner of, the Media & Entertainment industries, which is a concentrated market.  The Groups client base is therefore similarly concentrated.  In addition to this industry concentration, relationships have historically played an important role in the Media & Entertainment industries we serve, notably on the professional side of our business. As a result of the combination of these factors, several of our businesses depend on a number of major customers and our long-term relationships and contractual arrangements with them. For example, our content services activities, the largest contributors to the net sales of our Content and Networks division, currently rely on our relationships with major motion picture studios.  We generally negotiate exclusive, long-term contracts with these studios.  In the Broadband Access Products unit within our Content and Networks division, a large proportion of our revenue is derived from various broadcasters occasionally under long-term contractual arrangements, including an agreement recently entered into with DIRECTV. Our technology licensing business is dependent upon our relationships with a relatively limited number of consumer products manufacturers, to whom we license both new and mature technologies. Licensing agreements typically have a duration of five years, and our top ten licensees account for approximately 69% of our total licensing revenues in 2004. If we fail to maintain these relationships, these customers may reduce or cease purchases and use of our products, services and technologies, which could adversely affect our businesses and prospects.  Moreover, if we fail to maintain these relationships, or if we are not able to develop relationships in new markets in which we intend to compete in the future, including markets for new technologies and expanding geographic markets such as China and India, our business, results and prospects could suffer.

In addition, although most of our major client relationships comprise multiple contractual arrangements of varying terms, in any given year certain contracts come up for renewal across each of our business lines. If we were unable to renew them under similar or more favorable terms, or if our relationship with several of these customers suffered or ended, our financial results could suffer.

From time to time, one or a small number of our customers or licensees may represent a significant percentage of our revenues, particularly from our Content and Networks or Licensing divisions. A decision by any of our major customers or licensees not to use our products, services or technologies, or their failure or inability to pay amounts owed to us in a timely manner, or at all, whether due to strategic redirections or adverse changes in their businesses or for other reasons, could have a significant effect on our operating results.

The success of our strategy to be preferred partner of the Media & Entertainment industries and our Two-Year Plan to implement our strategy depend in large part on our ability to timely and correctly identify and adapt to new or changing market trends and to develop and deliver

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Thomson Group

innovative technologies, products and services for these industries in general and, in particular, for developing market segments such as electronic content management and distribution and Internet Protocol (IP) devices and solutions. If we fail to do so, we may also fail to achieve growth or the stated objectives of our Two-Year Plan, and our financial results may suffer.

The markets for our professional products, services and technologies are characterized by rapid change and technological evolution. We will need to expend considerable resources on research and development in the future in order to continue to design and deliver innovative products, services and technologies for the Media & Entertainment industries, including technologies that we may license to consumer product manufacturers and other third parties, as we have committed to do as part of our Two-Year Plan.  Despite our efforts, we may not be able to develop and effectively market new products, services and technologies that adequately or competitively address the needs of the changing marketplace. New products, services and technologies can be subject to delays in development and may fail to operate as intended.  There is no proven market for some of the advanced products, services and technologies that our businesses have begun to offer and have under development. There may be no or limited market acceptance of new products, services or technologies which we may offer, or significant competitive products, services or technologies may be successfully developed by others.

We expect that the future growth of our revenue will depend, in part, upon the growth of, and our successful participation in, new or evolving markets in the Media & Entertainment industries. We have based our growth strategy on our vision of how the Media & Entertainment industries may develop by 2010, including such significant long-term economic drivers as the following: some consolidation will occur in the European M&E industries, while significant M&E groups and markets will emerge in Asia, particularly China; our M&E clients will have outsourced many of their activities; China and India will have become mainstream M&E markets; the transition to High Definition (HD) will be complete; mobile video will be pervasive; intellectual property will remain a key differentiator and significant source of direct and indirect revenues; security technologies and services to combat piracy will have been implemented; China will have become a technology standards-setter; electronic delivery of content into the home will have emerged; consumers will continue to buy pre-recorded content at retail, but will also be purchasing or renting content (events, etc.) directly from home; in addition to film print, digital delivery of movies to cinemas will have developed; network operators will have largely switched to IP technologies; all networks will have triple play offerings; connected products will be ubiquitous inside and outside the home; and home networking will have been implemented. There is a risk this vision may be incorrect and the media and entertainment market may evolve differently and present different characteristics in the future.  Should this risk materialize, our business could be adversely affected and our financial results could suffer.

Based on the above assessment, in the shorter term, we have identified two business units that we expect to remain the main engines for revenue growth, physical media (film and DVD) and Access Platforms & Gateways/Set-Top Boxes for satellite, cable and digital terrestrial operators, as well as eight growth boosters for revenue growth during the Two-Year Plan period. We have identified four primary boosters (post-production, network operations services, telcos/ISPs, and broadcast systems and equipment) and four secondary boosters (ECD services, networks, home networking, and silicon and software solutions), each of which includes geographic expansion opportunities, often in Europe but also in China and India, among other markets.  See Item 4: Information on the CompanyOur StrategyPreferred Partner of the Media & Entertainment Industries.

We may have identified economic drivers, including growth engines and boosters, which may not develop or may develop at a slower pace than we expect. We may also not identify new or changing market trends at an early enough stage to capitalize on market opportunities. At times such changes can be substantial, such as the shift over the last few years from VHS tapes to DVDs for consumer playback of movies in homes and elsewhere. Our growth and the success of our Two-Year Plan depends

11

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to a great extent on our ability to develop and deliver innovative products,
  services and technologies that are widely adopted in response to changes in
  the media and entertainment industry and that are compatible with the products,
  services or technologies introduced by other entertainment industry participants.
  If we fail to correctly and timely identify and assess such economic drivers
  and new or changing market trends or to develop and deliver such products, services
  and technologies, we may fail to achieve growth or the stated objectives of
  our Two-Year Plan, and our financial results may suffer.

The success of our strategy to be preferred partner of the Media & Entertainment industries and our Two-Year Plan to implement our strategy depend in large part on events, conditions and trends in the Media & Entertainment industries. If these industries fail to grow at the pace we project or are affected by other events, conditions or trends, our growth and business prospects may be limited, we may fail to achieve the stated objectives of our Two-Year Plan, and our financial results may suffer. For example, events, conditions and trends in the motion picture industry, such as piracy of film and video content may adversely affect our customers businesses and decrease their demand for our content management and distribution services, which could adversely affect our financial results.

The ultimate
  success of our strategy and related Two-Year Plan depend in large part on events,
  conditions and trends in the Media & Entertainment industries, which are
  outside our control. Changes in the business practices, consumer demands and
  other industry-wide factors in the Media &
  Entertainment industries, whether due to regulatory, technological or other
  developments, could adversely affect demand for our products, services and technologies.

For example, our major customers in the motion picture industry are continually threatened by the piracy of film and video content, which is made easier by technological advances and the conversion of motion pictures into digital formats, which facilitates the creation, transmission and sharing of high quality unauthorized copies of motion pictures. This development may weaken our customers sales. As a result, the demand by these customers for our film and video content preparation services may ultimately decrease, which could adversely affect our results.

In addition, our ability to further penetrate the Media & Entertainment industries may be limited, particularly for our Content and Networks division, because of the widespread use of our current products, services and technologies by major industry players in these concentrated markets. This may exacerbate our dependence for future revenue growth upon growth and other events and conditions in these industries.

If the Media & Entertainment industries fail to grow at the pace we project or is affected by other events, conditions or trends (such as or different from those described above), our growth and business prospects may be limited, we may fail to achieve the stated objectives of our Two-Year Plan, and our financial results may suffer.

Technological innovations can make older products and services less competitive and can have an adverse effect on the value of our existing patents and our licensing revenues.  Our financial results, in particular our revenues from patent licensing, may suffer, and we could be at a competitive disadvantage in our other businesses if we are unable to develop or have access, either independently or through alliances, to new and widely-used products, services and technologies in advance of our competitors.

The markets in which we operate are undergoing a technological evolution resulting from the increasing use of digital technology and an increasing overlap among video, voice and data services. Technological advances and new product and service introductions may render obsolete or significantly reduce the value of previously existing technologies, services, products and inventories. This could have a material adverse effect on our ability to sell these products and services or to make

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Thomson Group

a profit from these sales. For example, the emergence of digital technology has had this effect on many products or services based on older analog technology. The emergence of new technologies could also have an adverse effect on the value of our existing patents and licensing revenues. Also, within the physical digital formats, any technological shift could have an adverse effect on our ability to produce and sell such products, like DVD disks, to provide services based on digital technologies, or to make a profit from these sales. For example, we have witnessed in recent years a radical shift toward DVD disks and away from VHS cassettes. Further, advances in technologies for downloading content from the Internet such as video-on-demand and similar or other technologies, which Thomson is also active in developing, may significantly reduce the demand for our DVD products or otherwise negatively affect our business.

We expect that the development of digitalization and the convergence of video, voice and data services will increase the pace and importance of technological advancement in our industry. As a result, we are investing large sums in the development and marketing of new products, services and technologies.  These investments might be made in unproven technologies or for products or technologies with no proven markets and may therefore yield limited returns.

We continue to implement a repositioning and partnership strategy for the major part of our Components division. This strategy may fail. We also face risks relating to certain partnerships, joint ventures and subsidiaries that we do not control, such as TTE.

Over recent years, we have been implementing a strategy to occupy leading
  positions in the Media & Entertainment industries, which culminated with
  the announcement in November 2004 and on-going implementation of our Two-Year
  Plan. See Item 4: Information on the CompanyOur StrategyPreferred
  Partner of the Media & Entertainment Industries. A major element of
  our strategy is to reduce our involvement in activities which are not in line
  with our strategy  hence our partnership strategy for our Displays activity.
  The Group has confirmed that this partnership strategy involves write-offs and
  cash costs, and that these write-offs and cash costs assume the successful sale
  of parts of the Displays business. In February 2005 we transferred our Anagni
  tube production site to Videocon. See Item 5: Operating and Financial
  Review and ProspectsResults of Operations for 2004 and 2003Other
  Income and ExpensesRestructuring Costs and Notes 18 and 29 to our
  consolidated financial statements. We continue discussions with potential partners
  for our other major Displays assets. Potential difficulties inherent with this
  partnership strategy such as not consummating transactions with potential partners
  for these Displays assets within a suitable timeframe or at favorable contractual
  terms, may materially adversely affect our results, financial condition or prospects
  and could lead to additional charges or cash costs.

In addition, some of our activities are, and will in the future be, conducted through entities that we do not entirely control or in which we have minority interest, like certain partnerships and joint ventures. For example, with effect from August 1, 2004, we contributed substantially all of our television production business to the newly formed company, TTE, in exchange for a 33% interest therein. Under the governing documents or agreements for certain of these partnerships and joint ventures, including TTE, certain key matters such as the approval of business plans require the agreement of our partners and decisions regarding these matters may be made without our approval. There is also a risk of disagreement or deadlock among the stakeholders of jointly controlled entities and that decisions contrary to our interests will be made. These factors could affect our ability to pursue our stated strategies with respect to those entities or have a material adverse effect on our results, financial condition or prospects.

The growth elements of our Two-Year Plan depends in part on expanding our product and services offering, our technologies portfolio and our geographic coverage, and hence our client base, through acquisitions and partnerships. This aspect of our strategy poses risks and uncertainties typical of such transactions.

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The success of our Two-Year Plan depends on our ability to expand our products and services offering, technologies portfolio and geographic coverage, particularly in Asia, to broaden our client base in the media and entertainment industries. We seek to accomplish this objective through, among other strategies, long-term partnerships and selective acquisitions.  This strategy depends on identifying suitable partnership or joint venture opportunities and obtaining the required regulatory and other approvals.  Failure to do so may materially adversely affect our results or prospects.  This strategy further depends on our ability to identify suitable acquisition targets, finance their acquisitions and obtain the required regulatory and other approvals. As a result of these acquisitions, we may also face an increase in our debt and interest expense.  In addition, we face risks associated with acquisitions or partnerships or joint ventures, including the integration of numerous entities, organizations, employees and facilities and fortifying new relationships with different customers. We also encounter increasing risks in connection with the protection of our intellectual property rights and potential conflicts over co-developed technologies with our R&D partners. Those and other risks or potential difficulties inherent in acquisitions, partnerships and joint ventures, such as delays in implementation, unexpected costs or liabilities, disputes with partners, or not realizing operating benefits or synergies from completed transactions, may adversely affect our results, financial condition or prospects.

We rely on third-party suppliers, particularly based in China, to manufacture a substantial and increasing number of our products or sub-components, which entails financial, reputational and other risks to Thomson.  In addition, we are developing or producing a number of our new products and solutions in partnership with other companies. If any of these companies were to fail to perform, we may not be able to bring our products and solutions to market successfully or on a timely basis. Also, our practices of selective co-development and of managing inventory on a just-in-time basis expose us to performance risks in respect of these suppliers, as well as certain force majeure risks.

We increasingly procure from third-party suppliers, particularly based in China, a substantial and increasing number of our products or sub-components. In addition, we consign to external suppliers extensive activities including procurement, manufacturing, logistics and other services. Reliance on outside sources increases the chances that the Group will be unable to prevent products from incorporating defective or inferior third-party technology or components. Products with such defects can adversely affect our net sales and reputation for quality products.  This reliance on external suppliers may also expose Thomson to the effects of suppliers insufficient compliance with applicable regulations or third-party intellectual property rights, as well as to the effects of production delays or other performance failures of such suppliers, which may also have an adverse effect on our sales, profits and reputation.

In addition, we complement our internal research and development or production activity by entering into co-development agreements and research programs with strategic partners or investors or by subcontracting certain activities, including the production of many of the products that we sell, to outside providers.  These arrangements involve the commitment by each company of various resources, including technology, research and development as well as personnel.  If these arrangements do not develop as expected, especially those that involve proprietary components and complementary technologies, if the products or solutions developed produced by companies working with us are not developed in a timely fashion, do not meet the required quality standards or experience production shortfalls or delays or other performance failures, or if the financial standing of our partners deteriorates, our ability to develop and produce these new products and solutions successfully and on schedule may be hampered.

Moreover, we manage our inventory on a just-in-time basis, which expose us to performance risks of our suppliers as well as to certain force majeure risks. As a result, in addition to delays on other performance failures of our suppliers, our operations may be disrupted by external factors beyond our

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Thomson Group

control, including acts of God (e.g., natural disasters, environment and health conditions or calamities), labor disputes or strikes, civil disturbances, war, terrorism, or delay or failure in performance by our suppliers or transporters.  Depending on the severity and duration of the disruption, our results of operations could be adversely affected.

The licensing of patents constitutes a significant source of revenue and profits for us. If sales by our licensees of products incorporating our technologies decline or if we are unable to replace expiring patents with new patents or proprietary technologies, our financial results could suffer.

We derive significant profit from the licensing of our various technologies to consumer electronics product manufacturers. We derived a significant portion of our operating income from our technology licensing business in fiscal year 2002, 2003 and 2004, respectively. Our top ten licensees account for approximately 69% of our total licensing revenues in 2004. Our licensing revenue is dependent on sales by our licensees of consumer electronics products that incorporate our technologies.  We cannot control these and other manufacturers product development or commercialization efforts or predict their success. In addition, our license agreements, which typically require manufacturers of consumer electronics products and software developers to pay us a specified royalty for every consumer electronics product shipped that incorporates our technologies, do not require these manufacturers to include our technologies in any specific number or percentage of units, and only a few of these agreements guarantee us a minimum aggregate licensing fee. Accordingly, if our licensees sell fewer products incorporating our technologies, or otherwise face significant economic difficulties, our licensing revenue and profits will decline. Lower sales of products incorporating our technologies could occur for a number of reasons. Changes in consumer tastes or trends, or changes in industry standards, may affect our licensing revenue.  Demand for new video and consumer electronics products incorporating our technologies could also be adversely affected by increasing market saturation, competing products and alternate consumer entertainment options. In addition, our main licensees, for whatever reason, may not choose to or may not be able to incorporate our technologies in the future, which could in turn adversely affect our financial results.

We hold patents covering much of the technology that we license to consumer electronics product manufacturers, and our licensing revenue is tied in large part to the life of those patents. Our right to receive royalties related to our patents terminates with the expiration of the last patent covering the relevant technologies. However, many of our licensees choose to continue to pay royalties for continued use of our trademarks and know-how even after the licensed patents have expired, although at a reduced royalty rate.  Our intellectual property portfolio results from an extensive patenting process that might be challenged by open innovation, strategic alliances, outsourced development and changes in regulations. To the extent that we do not continue to replace licensing revenue from technologies covered by expiring patents with licensing revenue based on new patents and proprietary technologies, our licensing revenue and profits could decline.

In addition, standards-setting bodies, may require the use of so-called open standards, meaning that the technologies necessary to meet those standards are freely available without the payment of a licensing fee or royalty. The use of open standards may reduce our opportunity to generate revenue, as open standards technologies are based upon non-proprietary technology platforms in which no one company maintains ownership over the dominant technologies.

If we are unable to protect effectively our intellectual property rights in the technologies, brands and know-how we use or license to our customers, our business could be adversely affected. We may have difficulty enforcing our intellectual property rights effectively in many important markets, such as China, including as a result of the limited recognition and enforcement of intellectual property and contractual rights in many jurisdictions outside the European Union and North America.

15

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Our business is dependent upon our patents, trademarks, trade secrets, copyrights and other intellectual property rights.  Effective intellectual property rights protection, however, may not be available under the laws of every country in which our products and services and those of our licensees are distributed. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time consuming.  We have taken steps in the past to enforce our intellectual property rights and expect to continue to do so in the future. However, it may not be practicable, effective or cost-efficient for us to enforce our intellectual property and contractual rights fully, particularly in certain countries outside the European Union and North America or where the initiation of a claim might harm our business relationships. For example, we have experienced, and expect to continue to experience, problems with Asian and other consumer electronics product manufacturers incorporating our technologies into their products without our authorization. If we are unable to successfully identify and stop unauthorized use of our intellectual property, we could experience increased operational and enforcement costs both inside and outside important manufacturing markets, such as China, and suffer substantial loss of licensing or other revenues and profits, which could adversely affect our financial condition and results of operations.

We generally seek patent protection for our innovations. It is possible, however, that some of these innovations may not be protectable. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important. Moreover, we have limited or no patent protection in certain foreign jurisdictions. For example, in China we have only limited patent protection. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will be insufficient or that an issued patent may later be found to be invalid or unenforceable. Moreover, we seek to maintain certain intellectual property as trade secrets. These trade secrets could be compromised by third parties, or intentionally or accidentally by our employees, which would cause us to lose the competitive advantage resulting from them.

Our business relies on intellectual property, some of which is owned by third parties. If we cease to have access to any such intellectual property or can only have such access on unfavorable terms, our business and financial results could be adversely affected. In addition, we are, and may in the future be, subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to use certain technologies in the future.

In addition to our proprietary technology, we also rely on certain technology that we license from third parties. We cannot provide any assurance that these third-party licenses will continue to be available to us on commercially reasonable terms or at all. The loss of or inability to maintain any of these technology licenses could adversely affect our business and financial results.

In addition, companies in the Technology and Media & Entertainment industries own large numbers of patents, copyrights and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. We have faced such claims in the past, we currently face such claims and we expect to face similar claims in the future. Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert management resources and attention. For example, in the past we have settled claims relating to infringement allegations and agreed to make payments in connection with such settlements. An adverse determination could require that we pay damages (including to indemnify our licensees of the related intellectual property) or stop using intellectual property found to be in violation of a third partys rights and could prevent us from offering our products and services or licensing the intellectual property to others. In order to avoid these restrictions, we may have to seek a license for the intellectual property. This license may not be available on reasonable terms, could require us to pay significant royalties and may significantly increase our operating expenses.  The intellectual property also may not be available for license to us at all. As a result, we may be required to develop alternative non-infringing intellectual property, which could require significant effort and expense. If

16

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Thomson Group

we cannot license or develop technologies for any infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our operating results and our financial condition.

Economic and geopolitical conditions may adversely affect our results and financial condition.

General economic trends in the countries in which our products and services are sold, primarily in North America, Europe and increasingly in China, can have a significant impact on prices and demand for such products and services. Pricing pressure and soft demand in the markets in which we sell our products and services could result in further pressure on our profit margins, which could in turn adversely affect our financial results.

Prices for products we sell are also affected by economic trends in the countries or regions in which these products are manufactured.  An economic downturn in a producing region can lead to a decrease in local demand and, if the value of the local currency decreases, a decrease in the production costs of local producers. These factors could lead to intensified export competition to our primary other markets and aggressive price-cutting by these producers. This could result in pressure on our profit margins.

In addition, we produce and purchase a large number of goods in emerging markets and are subject to risks inherent in these markets, including currency fluctuations, political and social uncertainty, exchange controls and expropriation of assets.  These risks could disrupt our production in such countries and our ability to produce and procure goods for sale in our principal North American and European markets.

For more detailed discussions on our sales in our principal markets, refer to Item 5: Operating and Financial Review and Prospects, and for more information on our main production sites, refer to Item 4: Information on the CompanyBusiness OverviewProperty, Plants and Equipment.

Currency exchange rate fluctuations may lead to decreases in our financial results.

To the extent that we incur costs in one currency and make our sales in another, our profit margins may be affected by changes in the exchange rates between the two currencies. Most of our sales are in U.S. dollars and in euros; however, certain expenses are denominated in Chinese yuan, Mexican peso and Polish zloty, in particular those of our significant production facilities in Asia, Mexico and Poland. Although our general policy is to hedge against these currency transaction risks on an annual or six month basis, given the volatility of currency exchange rates and the occasional illiquidity in some emerging markets currencies together with the potential for changes in exchange control regulations in such emerging markets, we cannot assure you that we will be able to manage effectively these risks. Volatility in currency exchange rates may generate losses, which could have a material adverse effect on our financial condition or results of operations. For more detailed information on our hedging policies, refer to Item 11: Quantitative and Qualitative Disclosures about Market Risk.

Product defects resulting in a large-scale product recall or successful product liability claims against us could result in significant costs or negatively impact our reputation and could adversely affect our business results and financial condition.

We are sometimes exposed to warranty and product liability claims in cases of product performance issues. There can be no assurance that we will not experience material product liability losses arising from such claims in the future and that these will not have a negative impact on our reputation and our sales. We generally maintain insurance against many product liability risks and record warranty provisions in our accounts based on historical defect rates, but there can be no assurance that this coverage and these warranty provisions will be adequate for liabilities ultimately incurred. In addition,

17

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there is no assurance that insurance will continue to be available on terms acceptable to us.  A successful claim that exceeds our available insurance coverage or a product recall could have a material adverse impact on our financial condition and results of operations.

Our success depends upon retaining key personnel and hiring qualified personnel.

Our success depends to a significant degree upon the contributions of our management team. A limited number of individuals have primary responsibility for managing our business, including our relationships with key customers and licensees. Losing the services of any key member of our team, whether from retirement, competing offers or other causes, could prevent us from executing our business strategy, cause us to lose key customer or licensee relationships, or otherwise adversely affect our operations.

Our performance also depends upon the talents and efforts of highly skilled individuals. Our products, services and technologies are complex, and our future growth and success depend to a significant extent on the skills of capable engineers and other key personnel. Continued re-training of currently competent personnel is also necessary to maintain a superior level of innovation and technological advance. The ability to recruit, retain and develop quality staff is a critical success factor for us.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our ability to operate our business, our financial results and investors view of us.

We have a complex business organization that is international in scope. Ensuring that we have adequate internal financial and accounting controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We have begun the process of documenting, reviewing and, if appropriate, improving our internal controls and procedures in connection with the application of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments starting with fiscal year 2006. We may, during testing, identify material weaknesses or significant deficiencies in our internal controls over financial reporting requiring remediation, or areas for further attention or improvement. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In addition, investors perceptions that our internal controls are inadequate or subject to material weaknesses or significant deficiencies or are otherwise perfectible, or that we are unable to produce accurate financial statements may adversely affect our stock price.

Our share price has been volatile in recent years and is exposed to the fluctuations in the equity capital markets.

The stock market in recent years has experienced extreme price and volume fluctuations which have particularly affected the market prices of technology companies. Volatility in our share price has also been significant during this period. This volatility can result in losses for investors in a relatively short period of time.

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Thomson Group

ITEM 4  INFORMATION ON THE COMPANY

A  History and Development of the Company

|Company Profile            |                                  
|-------------------------- | ---------------------------------
|                           |                                  
|Legal and Commercial name: | THOMSON                          
|Registered office address: | THOMSON                          
|                           | 46, quai Alphonse Le Gallo       
|                           | 92100 Boulogne-Billancourt France
|                           | Tel.: 33 (0) 1 41 86 50 00       
|                           | Fax: 33 (0) 1 41 86 58 59        
|                           | E-mail: webmaster@thomson.net    

Domicile, legal form and applicable legislation:Thomson is a French corporation (société anonyme)with a Board of Directors, governed by Title II of the French Commercial Code pertaining to corporations and by all laws and regulations pertaining to corporations.

Date of incorporation and length of life of the Company:Thomson was formed on August 24, 1985. It was registered on November 7, 1985 for a term of 99 years, expiring on November 6, 2084.

Fiscal year:January 1 to December 31.

Thomson provides technology, systems & equipment and services to help its Media and Entertainment clients  content creators, content distributors and users of its technology  realize their business goals and optimize their performance in a rapidly changing technology environment. The Group intends to become the preferred partner to the Media & Entertainment industries through its Technicolor®, Grass Valley®, RCA®and THOMSON®brands.

In fiscal year 2004, we generated net sales of approximately 7,994 million, of which 5.9 billion related to our Media & Entertainment clients. At December 31, 2004, the Group had approximately 49,000 employees in more than thirty countries.

Historical Background

Thomson and its predecessor companies, RCA and Technicolor, have a long history in the development of technologies for the broadcast of radio and television, as well as for the colorization and processing of cinema film content. These technologies remain important for the group today. However, in 2000, many of Thomsons activities and clients were focused on consumer electronics products and on the manufacturing and assembling of components. In the second half of 2000, the Group started to reposition itself beyond the traditional consumer electronics market to benefit increasingly from its technological expertise. The Group made several acquisitions as part of this repositioning strategy, including Technicolor®, Philips professional broadcast business and Grass Valley®. Furthermore, the Group continued in 2004 to reduce its historical consumer electronics focus and reshape its Consumer Products and Components businesses with the creation of TTE, into which substantially all of our television businesses were transferred, and our decision in 2004 to pursue a partnership strategy for our displays activity, which comprise our television tubes and related components business (referred to herein as the Displays activity). For further details on TTE and our partnership strategy for our Displays activity, please refer to Business OverviewMainstream Consumer Products and Business OverviewComponents, respectively.

Our restructuring and repositioning strategy has been accompanied and facilitated by a significant shift in our capital structure. Six years ago, Thomson (formerly Thomson Multimedia) was wholly-owned by

19

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TSA (formerly Thomson S.A.), wholly-owned by the French State. Following a
  series of transactions in our share capital in the period 1998-2003, TSA reduced
  its interest in Thomson, which, as of March 31, 2005, amounted to approximately
  2.1% of our share capital. At that date, the public owned approximately 92%
  of the share capital of Thomson, and our employees owned approximately 3.5%.
  Our base of investors has developed further in 2004, most notably with the strategic
  investment by Silver Lake Partners LLP (Silver Lake), as described
  below. For more details on our share capital, please refer to Item 7: Major
  Shareholders and Related Party TransactionsDistribution of Share Capital.

Our Strategy  Preferred Partner of the Media & Entertainment Industries

Thomsons strategy is to build on its position as a preferred partner of the Media & Entertainment (M&E) industries, to take advantage of the expected growth in this sector. Our stated mission is to provide the M&E industries with services, systems and equipment, and technologies they need to achieve their commercial objectives and to optimize their performance in a changing technology environment for video and imaging.

Several key steps occurred in the second half of 2004 to accelerate the implementation of this strategy: the presentation of a Five Point Plan by the Board of Directors on July 20, 2004, approved by the shareholders meeting on September 15, 2004; the definition of five strategic priorities, announced on October 21, 2004; and the development of a Two-Year Plan to implement these strategic priorities, defined on November 30, 2004 and approved by our Board of Directors.

The Five Point Plan encompassed the objective to:

|1. | Support the Groups development with a strategic investment
      of U.S.$500 million by Silver Lake, an American investment company specializing
      in taking significant shareholdings in leading technology companies. The
      investment by Silver Lake took the form of an issuance to them on September
      16, 2004 of subordinated bonds convertible or exchangeable into new or existing
      shares. See Item 7 Major Shareholders and Related Party TransactionsDistribution
      of Share CapitalConvertible/Exchangeable Bonds.        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Recognize individual shareholders long-term loyalty
      through the issuance of warrants (bons dacquisition ou de souscription
      dactions nouvelles, or BASA), reserved for individual
      shareholders who satisfied certain conditions. The Board of Directors on
      September 22, 2004 approved the issuance of 14 million BASA and determined
      their terms and conditions. Approximately 12 million BASA were subscribed.
      See Item 7 Major Shareholders and Related Party TransactionsDistribution
      of Share CapitalBASA.
|3. | Further incentivize Thomson employees to deliver the Groups
      strategy through the implementation of a new stock option plan based on
      a maximum of 8.5 million stock options, decided by the Board of Directors
      on September 22, 2004. See Item 7 Major Shareholders and Related Party
      TransactionsDistribution of Share CapitalStock Option Plans.                                                                                                                                                                                   
|4. | Optimize the Groups financial structure through the
      implementation of a 400 million share buy-back program over an 18
      month period. See Item 7 Major Shareholders and Related Party TransactionsDistribution
      of Shares CapitalShare Repurchase Program.                                                                                                                                                                                                                                                                                  
|5. | Reinforce the management team by combining the functions of
      Chairman and Chief Executive Officer and appointing of Frank E. Dangeard
      to this position, decided by the Board of Directors on September 15, 2004.                                                                                                                                                                                                                                                                                                                                      

Thomson
  announced on October 21, 2004 its five strategic priorities, which were
  defined based on its vision
  of how the M&E industries may evolve between now and 2010. For a more detailed
  discussion

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Thomson Group

of this
  vision, please refer to Item 5 Operating and Financial Review and ProspectsOverviewKey
  Economic Drivers. On November 30, 2004, we announced our Two-Year Plan
  setting out the associated targets to be achieved by year end 2006. Our five
  strategic priorities and associated Two-Year Plan goals are to:

|1. | Broaden
        our Offering to Existing M&E Clients and Expand our M&E Client
        Base, Including in Asia:The
        range of imaging and video systems and services that we can provide to
        our M&E clients has increased significantly in recent years. On the
        other hand, the M&E industries are highly
        concentrated, and the Groups client base follows this pattern in
        content creation and in content
        distribution, although the users of Thomsons technologies are more
        diversified.
      Accordingly,
        we have set as a strategic priority to:
      Expand
          the range of systems and services we offer to our existing M&E clients,
          including geographically,
          particularly in Asia; and
        Expand
          our M&E client base by targeting (i) new categories of content creators
          and distributors,
          and (ii) M&E groups in Asia (e.g., China, India) and Europe.With
        all of our clients, we are prepared to enter into long-term partnerships
        for the co-development of solutions tailored to their specific needs,
        and for the outsourcing of certain of their non-core activities. Thomson
        therefore expects the expansion of its business generally to take the
        form of long-term contractual relationships, which are prevalent in our
        existing business already today.
      Our
        2006 objectives aiming to diversify the Groups activities and client
        base and seize growth opportunities are to:
      Double the number of clients from whom the Group generates over 25
          million in sales;
        Double the size of the Groups addressable markets by developing
          appropriate skills/competencies; and
        Add at least five new revenue-generating activities to Groups
          portfolio.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Focus on M&E Technologies:We own or have access to many of
        the technologies that are key to our M&E clients development.
        We have set as a strategic priority to focus on the technology needs of
        our M&E clients in a digital environment (create, capture, package,
        distribute and access visual content securely and effectively in standard
        and high-definition digital formats).
      Accordingly,
        the Group intends to increase its R&D efforts, launch new R&D
        initiatives (including a number of Group-wide multi-year projects, including
        in wireline and wireless content distribution, digital content production
        and management systems, and digital cinema), strengthen
        its R&D partnerships, develop a strategy for technology acquisitions
        and give more visibility to its areas of technology excellence, while
        continuing its commitment to intellectual property
        and to its licensing activities under traditional (patent- and trademark-based)
        or new licensing
        models. As part of these efforts, Thomson has constituted a Scientific
        Council to assess Thomsons R&D in light of external developments
        in video technologies and Thomsons strategy,
        to challenge R&D teams on their processes,
        output, roadmaps, and team qualifications and
        to make related recommendations to Thomsons Chairman and Chief Executive
        Officer.
      Our
        2006 objectives are to:
      Define
          a strategic vision of the future of M&E technology;
        Double
          revenues in technology from outside licensing-in silicon solutions (communication                                                                                                                                                                  

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|   | (DSL), video (set-top boxes, digital television), professional applications
          (encoding, etc.), tuners (RF), optical modules, etc.) and software and
          technology solutions (security, imaging, user interface, networking,
          etc.); and
      Increase spending on core R&D by 50% in each of 2005 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | Seize Growth Opportunities in Electronic Content Management and Distribution:It is as a strategic priority to expand further in the digital preparation
        of content, the management on behalf of our M&E clients of digital
        content flows and the management of certain elements of video-specific
        infrastructure.
        Electronic content management and distribution span all activities and
        divisions in Thomson, from post-production to broadcast equipment and
        media services, to access and home networking devices, and present significant
        growth opportunities for the Group. Certain of these activities, such
        as post-production, are important contributors to the Groups revenues
        and profit, while others, such as network services (advertising networks,
        play-out outsourcing, video-centric infrastructure management), are emerging
        activities within the Group. The Group intends to commit significant resources,
        notably in support of client-led initiatives, in the areas of security,
        IP-based distribution and network services.
      Our 2006 objectives are to:
      Generate significant additional revenues in identified business opportunities:
          post-production, electronic content distribution (ECD) services (digital
          cinema and Video-on-Demand (VoD)), head-ends (within networks), device/consumer
          premises equipment (CPE) management (within networks), gateways and
          CPE devices, and network operations services; and
        Continue developing our intellectual property assets and selected
          key technologies in this area.
|4. | Lead in IP-Devices and Solutions:Distribution networks for visual
        content are embracing Internet Protocol (IP) technologies,
        enabling voice/data/video content to be accessed seamlessly by end-customers.
        Network operators focus on access devices as an important link to their
        end-customers, and a way to differentiate their offering.
      Accordingly, we have set as a strategic priority to provide our distribution
        clients with the appropriate connected devices, device and
        network solutions and integration services, building on our leading position
        in set-top boxes, DSL modems and our strong Integrated Circuit (IC)
        design capabilities. We also intend to leverage our core asset base of
        brands, physical distribution strength and consumer marketing and technology
        know-how to develop related home networking solutions for end-consumers
        and integration solutions for network operators.
      Our 2006 objectives are to:
      Become world leader in IP devices and solutions for video applications;
          and
        At least double direct revenue with telecom operators/Internet Service
          Providers (ISPs).                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|5. | Actively seek Partnerships in Displays:We
      have set as a strategic priority to ensure that our Displays activity participates
      swiftly in the consolidation of the display industry. The consolidation
      is a response to the rapid evolution of this industry, as TV manufacturers
      respond to end-customer and technology changes with varied strategies by
      geographic region. By rapidly repositioning and pursuing partnership in
      our Displays activity, we intend to stabilize the future development of
      this activity, allowing us to focus on our growing and higher-return M&E-related
      activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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Thomson Group

| | As part of this strategy, we have completed the sale of our Anagni plant.
        For information about restructuring costs and recent developments relating
        to this strategy, please refer to Item 5: Operating and Financial
        Review and ProspectsResults of Operations for 2004 and 2003Other
        Income and ExpensesRestructuring Costs and Item 5: Operating
        and Financial Review and ProspectsEvents Subsequent to December
        31, 2004Recent Developments Relating to Our Partnership Strategy
        for the Displays Activity, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Two-Year Plan also seeks to achieve significant revenue growth. In the
  framework of our Two-Year Plan, we have identified:

- Two revenue-generating
    business units that we expect to remain the main engines for revenue
    growth during the Two-Year Plan period: physical media (film and DVD), and
    Access Platforms and
    Gateways/Set-Top Boxes for satellite, cable and digital terrestrial operators;
    as well as
- Strong
    opportunities for increasing revenues during the period through a further
    eight identified businesses, or growth boosters, summarized in
    the table below. Four of these businesses are expected to grow strongly and
    are considered primary boosters of revenue, while four others
    are
    viewed as secondary boosters, which may provide us with significant
    long-term growth opportunities but less growth over the two year period ending
    December 31, 2006. Each of the eight boosters includes geographic expansion,
    often in Europe but also in China and India, among other markets. We set out
    below these eight boosters together with the division they will
    contribute to under our 2005 segmentation:



Finally,
  as part of our strategy,
  we have reorganized
  our activities internally in a manner we believe allows us to focus fully on
  the implementation of our Two-Year Plan, as discussed below in Our
  OrganizationTransformation to Implement Our Strategy.

Our
  Organization  Transformation to Implement Our Strategy

Until January
  1, 2005, the Group
  comprised four operating divisions:

- Content
    and Networks(50.9%
    of 2004 Group net sales): This division comprised services related to the
    preparation and distribution of video content, including screen-advertising
    businesses, as well as providing products and solutions to professionals in
    the M&E industries, in particular movie studios, network operators and
    broadcasters. Thomson is the world leader in content preparation
    for content owners/creators under the Technicolor®trademark.
    See Business OverviewMarket Position, Competitors, Clients
    and Suppliers. We also believe that we are the second-largest supplier
    of broadcast
    equipment under, in particular, our Grass Valley®trademark.

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> With
>     respect to video content distribution, Thomson is a major participant in the
>     supply of broadband access products, including digital decoders/set-top boxes
>     and DSL modems under its RCA®,
>     THOMSON®and
>     Speedtouch trademarks.

- Components(14.6%
    of 2004 Group net sales): This division supplied key components for consumer
    electronics products, which have been sold both internally and to original
    equipment manufacturers (OEMs). These components included displays
    for television sets, digital optical components for DVD players and game consoles
    and the development of integrated circuits. Thomson believes it was the second
    largest producer worldwide based on volume of large and very large size cathode
    ray tubes and one of the world leaders in optical components. We are now actively
    pursuing a partnership strategy for our Displays activity and have accordingly
    incurred
    an impairment charge of 530
    million for fiscal year 2004.
- Consumer
    Products(29.1%
    of 2004 Group net sales): This division comprised television and home
    audio/video products, on the one hand, and accessories, retail services and
    personal audio/video and residential telephony products, on the other hand.
    The products of this division were marketed principally under the RCA®trademark
    in the United States and THOMSON®in
    Europe. We also marketed our residential communications products under the
    GE trademark in the United States and the Alcatel trademark in
    Europe. On July 31, 2004, Thomson contributed substantially all of its television
    and related products manufacturing and development activities to TTE in exchange
    for a 33% interest in this new company, while Thomson became a preferred supplier
    to TTE for certain services. The former activities were deconsolidated with
    effect from the date of contribution.
- Licensing(5.1%
    of 2004 Group net sales): This division manages a major portfolio of patents
    relating principally to video technologies, which we license under various
    licensing programs to other manufacturers and technology groups.

Achievement of our 2006 objectives requires an organization better focused
  on the implementation of our strategic roadmap and Two-Year Plan. Consequently,
  we implemented effective from January 1, 2005 a new divisional structure that
  is designed to better address our different M&E customers needs. 
  Our customers include content makers (e.g., film studios, broadcasters, game
  developers and advertisers), content distributors (e.g., broadcasters, cable
  and satellite providers, telecommunications providers and ISPs, cinemas and
  retailers) and users of our technologies (e.g., consumer electronics manufacturers
  and IT industries). For these customers, we have created the following divisions
  for each of our capabilities, each with a simple and flexible organizational
  and management structure:

- Services:This
    division offers end-to-end management of services for our customers in the
    M&E industries in the following areas
    Physical
        media: Film and DVD (as well as CD and VHS) services
        including content preparation, replication
        and distribution services.
        These comprise the businesses analyzed below in  Business
        OverviewContent Services under the headings Post-Production
        Services, Film Services
        and Home Entertainment
        Services (DVD).
      Electronic
        media: Archiving, media asset management, Video-on-Demand (VoD)
        and digital cinema, in addition to the increasingly electronic nature
        of the post-production services we provide. The new Electronic Content
        Distribution Services business unit was established to pursue opportunities
        which we expect to arise as the electronic distribution of content becomes
        more widespread.
      Network
        operations services:
        Out-of-home advertising
        (currently principally
        cinema advertising)
        and broadcast play-out and other related services outsourced by broadcasters.
        These businesses are described below in Business OverviewContent
        Services under the headings Network Services and Screen
        Advertising.
- Physical
        media: Film and DVD (as well as CD and VHS) services
        including content preparation, replication
        and distribution services.
        These comprise the businesses analyzed below in  Business
        OverviewContent Services under the headings Post-Production
        Services, Film Services
        and Home Entertainment
        Services (DVD).
- Electronic
        media: Archiving, media asset management, Video-on-Demand (VoD)
        and digital cinema, in addition to the increasingly electronic nature
        of the post-production services we provide. The new Electronic Content
        Distribution Services business unit was established to pursue opportunities
        which we expect to arise as the electronic distribution of content becomes
        more widespread.
- Network
        operations services:
        Out-of-home advertising
        (currently principally
        cinema advertising)
        and broadcast play-out and other related services outsourced by broadcasters.
        These businesses are described below in Business OverviewContent
        Services under the headings Network Services and Screen
        Advertising.

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Thomson Group

- Systems
    & Equipment:This
    division plays a strategic role at both ends of the M&E distribution chain,
    interfacing with content makers through the provision of video-focused systems
    and equipment such as television broadcast cameras and outside broadcast vans,
    on one end of the chain, and with retailer and end-consumers through sales
    of equipment such as set-top boxes, at the other end. This division comprises:
    Broadcast & Networks (Grass Valley): This business is described below
        under Business OverviewContent and NetworksBroadcast
        & Media Solutions;
      Access
        Platforms & Gateways:
        This
        business is
        described below
        under Business
        OverviewContent
        and NetworksBroadband Access Products; and
      Connectivity:
        This business unit comprises the Essential Consumer Products
        businesses described below under Consumer Products and
        the Home Audio/Video business from Mainstream
        Consumer Products.
- Broadcast & Networks (Grass Valley): This business is described below
        under Business OverviewContent and NetworksBroadcast
        & Media Solutions;
- Access
        Platforms & Gateways:
        This
        business is
        described below
        under Business
        OverviewContent
        and NetworksBroadband Access Products; and
- Connectivity:
        This business unit comprises the Essential Consumer Products
        businesses described below under Consumer Products and
        the Home Audio/Video business from Mainstream
        Consumer Products.

- Technology:We
    established this new division to strengthen our focus on media technologies
    and to consolidate the realignment of research and development with our long-term
    strategy. In addition,
    in order to help the technology intensity of the Groups activities,
    a high-level Scientific Council
    comprising prestigious outside experts has been established to make annual
    recommendations directly to the Chairman and Chief Executive Officer. The
    division includes the following activities:
    Research
        through eight laboratories (described below under Business
        OverviewResearch, Innovation and Product Development);
      Licensing
        of patents and trademarks (described below under Business
        OverviewLicensing);
      Silicon
        solutions: IC design, tuners and optical modules (described below under
        Business OverviewComponents and Business
        OverviewResearch, Innovation and Product Development); and
      Software
        and technology solutions: Security, user interface, imaging and networking
        software services, including our remote control businesses and other technologies.
        For an example of our investments in these technologies, see Item 5: Operating
        and Financial Review and ProspectsEvents Subsequent to December
        31, 2004Microsoft-Time Warner-Thomson Complete Acquisition Of ContentGuard.
- Research
        through eight laboratories (described below under Business
        OverviewResearch, Innovation and Product Development);
- Licensing
        of patents and trademarks (described below under Business
        OverviewLicensing);
- Silicon
        solutions: IC design, tuners and optical modules (described below under
        Business OverviewComponents and Business
        OverviewResearch, Innovation and Product Development); and
- Software
        and technology solutions: Security, user interface, imaging and networking
        software services, including our remote control businesses and other technologies.
        For an example of our investments in these technologies, see Item 5: Operating
        and Financial Review and ProspectsEvents Subsequent to December
        31, 2004Microsoft-Time Warner-Thomson Complete Acquisition Of ContentGuard.

We have also established a fourth activity, Displays & Consumer Electronics
  Partnerships, which will implement the Groups strategy to participate
  in the consolidation of the television tubes industry. It is also responsible
  for our consumer electronics partnerships, in particular TTE, including our
  role as sales and marketing agent for TTE, and our on-going sub-contract manufacturing
  operations at Angers, France, which principally supplies TTE.

The activities
  of our historical divisions are described in detail below in Business
  Overview. For information
  on geographic breakdown of revenues by division, refer to Item 5: Operating
  and Financial
  Review and ProspectsOverview.

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B Business Overview

The table below sets forth the consolidated net sales of each division in 2002, 2003 and 2004.

Our television activity was deconsolidated effective August 1, 2004 following the creation of TTE Corporation (TTE) in partnership with TCL International and TCL.  Accordingly, our consolidated statements for 2004 reflect within the Consumer Products segment seven months of Thomson as operator of its television business and the remaining five months as a service provider to TTE pursuant to certain contractual arrangements. As a result of our relationship with TTE, the Components division recorded external sales of 192 million for the last five months of 2004 for components sold to TTE, sales which prior to TTEs creation would have been considered intra-group sales and eliminated at the Group level. Consumer products include television sales for first seven months of 2004 of 845 million and manufacturing and sales and marketing agency services provided to TTE during remaining five months of 2004 representing 152 million.

|                     | 2002                                |  | % of total |  | 2003  |  | % of total |  | 2004  |  | % of total | 
|-------------------- | ----------------------------------- |  | ---------- |  | ----- |  | ---------- |  | ----- |  | ---------- | 
|                     |                                     |  |            |  |       |  |            |  |       |  |            | 
|                     | ( in millions, except percentages) | 
|Content and Networks | 3,924                               |  | 38.5%      |  | 3,714 |  | 43.9%      |  | 4,073 |  | 50.9%      | 
|Components           | 1,560                               |  | 15.3%      |  | 1,072 |  | 12.7%      |  | 1,167 |  | 14.6%      | 
|Consumer Products    | 4,264                               |  | 41.9%      |  | 3,198 |  | 37.8%      |  | 2,325 |  | 29.1% (1)  | 
|Licensing            | 429                                 |  | 4.2%       |  | 462   |  | 5.5%       |  | 404   |  | 5.1%       | 
|Others               | 10                                  |  | 0.1%       |  | 13    |  | 0.1%       |  | 25    |  | 0.3%       | 
|Total                | 10,187                              |  | 100%       |  | 8,459 |  | 100%       |  | 7,994 |  | 100%       | 
|                     |                                     |  |            |  |       |  |            |  |       |  |            | 

|(1) | Net
      sales in Consumer Products as a percentage of total Group sales decreased
      from 37.8% in 2003 to 29.1% in 2004 primarily due to the transfer of substantially
      all of our television business to TTE as of July 31, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2004,
  Thomson presented its businesses in four divisions: Content and Networks, Components,
  Consumer Products and Licensing. Our divisional structure has since been modified
  going forward as discussed in History and Development of the CompanyOur
  OrganizationTransformation to Implement Our Strategy. For a tabular
  presentation of our market position, main competitors and main clients and suppliers
  for our various activities, see below Market Position, Competitors,
  Clients and Suppliers.

Content and Networks

Content and Networks generated consolidated net sales in 2004 of 4,073 million (50.9% of the Groups consolidated net sales). Operating income for the division in 2004 was 407 million. In 2004, the Content and Networks division comprised the content services businesses operating under the Technicolor brand as well as the Screenvision screen-advertising businesses (described below together under Content Services), and our broadcast businesses comprised Broadcast & Media Solutions and Broadband Access Products (described below under Broadcast & Media Solutions and Broadband Access Products, respectively). Our Content Services activities contribute a little over half of our Content and Networks revenues, while our broadcast businesses contribute the balance of the divisions revenues. Broadband Access Products and Broadcast & Media Solutions account for approximately three-quarters and one-quarter of our broadcast business revenues, respectively.  Currently, Network Services and Screen-Advertising represent a relatively small proportion of Content and Networks revenues.

Effective January 1, 2005, our content services business will be comprised within the new Services division, while our broadcast businesses are grouped together with the Connectivity businesses from the Consumer Products division to form the new System & Equipment division.

Operating under the Technicolor brand, we are the worldwide leader in the development and replication of film reels, and DVD and VHS services for content owners/producers. We offer end-to-

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Thomson Group

end solutions, ranging from post-production services to content preparation, planning, replication and distribution services for physical media. These services include post-production activities such as colorization services, visual effects, manipulation of digital intermediates (i.e. , the digital manipulation of images and the data from which images are generated (including the correction of color) as part of the finishing process for theatrical (film) and broadcast (TV) content), subtitling, editing and creation of final masters for theatrical film and video release. Our services also include DVD and VHS content preparation, planning, manufacturing and physical distribution services, storage (compression, archiving, indexing), digital media asset management (storage, manipulation, retrieval and streaming of video and audio content), asset rights management, anti-piracy/security solutions and technology consulting.

The broadcast businesses provide network operators with equipment and services such as cameras, film imaging and signal processing equipment, encoders/decoders, broadcast servers, routers and set-top boxes.

The Content and Networks division operates in the growing worldwide market for the capture and distribution of video content.  The division seeks growth by extending the range and depth of its product and service offerings to its existing customers, by supplying them with solutions that integrate multiple services and functions enabling our customers to better commercialize their content, while developing new solutions to support their transition to digital technology and developing relationships with new important customers. This growth strategy is supported by the Groups strong positioning in this business segment, its very close relationships with M&E clients and Thomsons strong capabilities in research and innovation. Some segments of the M&E industries are increasingly concentrated, resulting in a number of key clients accounting for a significant proportion of our Content and Networks business and revenues.

In pursuit of this growth strategy, the Content and Networks division made selective investments over the past three years.  The acquisition of Grass Valley Group in March 2002 and Panasonic Disc Services in June 2002 consolidated the Groups position in the professional broadcast equipment and DVD services markets, respectively.  A number of smaller acquisitions also strengthened specific service capabilities and our geographical presence: post-production, DVD compression, language versioning and content management services in North America (Command Post, VidFilm, Pacifica Media Affiliates and Still in Motion) and in Europe (International Recording and Moving Picture Company), optical disc replication and VHS cassette duplication in Australia (Southern Star Duplitek), distribution services in Canada (Victoria Films), film processing and post-production services in Asia and Europe (Cinecolor, Madrid Film) and digital cinema (buyout of Qualcomms 20% interest in the joint venture company, Technicolor Digital Cinema). We also continued to grow our broadcast playout services (e.g., services such as providing live studios, graphics, audio production and post-production and transmission play-out) through the acquisition in November 2004 of Corinthian Television in the United Kingdom. We also expanded our Broadcast & Media Solutions business with the acquisition of the video division of Parkervision.  Our Broadband Access Products business has grown significantly, notably in 2004 with the agreement signed with the DIRECTV Group, Inc., as described below under Broadband Access Products.

Content Services

The Content Services businesses have been built around Technicolor, which was acquired in March 2001.  Under the Technicolor brand, we are the world leader in traditional film and video content preparation, creative services, digital post-production, visual effects and post-post production (i.e., post-theatrical release services such as mastering, compression and subtitling) and distribution services to the entertainment industry. Technicolors leadership position is based on more than 70 years of motion picture industry leadership and a combination of access to the Groups technology, technical excellence, global reach and scale, an integrated and secure service offering to its customers and an organization-wide focus on quality and customer service.

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We provide services and products on a global scale from operating locations in North America, Europe and Asia. Our Content Services operations comprise Post-Production Services, Film Services, Home Entertainment Services (DVD), Network Services and Screen-Advertising, each described further below.

With the acquisition of Panasonic Disc Services in June 2002, the Group acquired contracts to perform optical disc replication for Universal Studios and Paramount.  In addition, following the signature of significant contracts, Technicolor began to work on Universal Studios worldwide film processing and Paramounts European home entertainment DVD replication business in the first half of 2003 and 20th Century Foxs European film processing in the second half of 2003. In the second half of 2003, Technicolor completed its acquisition of Cinecolor, one of the premier companies in the Austral-Asian film and post-production markets. In 2004, Thomson expanded its Canadian service offering with the acquisition of Command Post, based in Toronto and Vancouver. It also purchased Madrid Film, the largest film and digital film servicing provider in Spain, with facilities in both Madrid and Barcelona.  In mid-2004, we expanded our foreign language versioning offering with the acquisition of International Recording, a sound business with a long history of servicing customers sound requirements, located in Rome.  Late in 2004, Thomson expanded its service offerings in feature and commercial advertising visual effects creation and broadcast playout services with the acquisitions of Moving Picture Company and Corinthian Television, respectively. Also in 2004, we announced that we would construct our first studio-based digital intermediate facility where content can be manipulated in digital form (before conversion back to analog form where appropriate), to be located on the Sony Studios lot in Culver City, California, increasing our capacity for the digital intermediate service offering the Company launched in 2001.

Relationships with most major customers are covered by exclusive long-term contracts (usually three to five years), which typically cover volume and time commitments, as well as pricing and geographical territories served. In any given year certain contracts come up for renewal. Major client relationships are typically the result of multiple contractual arrangements for specific types of services, which include a fixed duration and specific terms depending on the particular geographical zone. Under the terms of certain of these contracts, we make advance payments at the commencement of the contractual relationships, which are reimbursed in line with manufactured volume over the duration of the contracts (for more information, see Note 14 to our consolidated financial statements). Our key customers in 2004 included major film studios such as Disney, Warner Bros., Universal Studios, DreamWorks, 20th Century Fox and Paramount, and software and games publishers such as Microsoft and Electronic Arts.

We continue to support and guide our customers through an industry-wide transition that is underway to digital formats and services. Based on our current and targeted customer base, we believe this transition offers substantial growth opportunities, in particular in the areas of DVDs, development of ancillary (e.g., MiniDVD, UMD) and high definition optical disc formats, digital cinema, digital post-production and post-post production, digital foreign language versioning services, digital media asset management and broadcast play-out services in both our existing markets (principally the United States, Europe and Asia) and in new geographical regions. Operational and technological synergies exist between the Technicolor businesses and Thomsons other units for the next generation of technologies for content distribution, including copy protection, digital rights management, media asset management and networking technologies.

> Post-Production Services

Through the Post-Production Services unit, we offer a comprehensive set of content creation, content completion and management services to theatrical (cinema), television production and commercial/advertising customers. Through recent acquisitions, we expect to continue to grow our support services to the commercial advertising creative and production communities. The range of services provided includes processing of daily film rushes and high definition digital dailies during filming, negative assembling, digital intermediate color-grading services, editing and the creation of

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Thomson Group

masters including those used for theatrical film release, post-theatrical release services (including video/format mastering, compression, authoring and asset management), DVD replication, broadcast television (covering all global standards such as NTSC, PAL and High Definition). We continue to expand our digital media asset management capabilities and roll-out our global digital network to ensure rapid and secure roll-out of content.

We currently provide services in both analog and digital formats and the ability to move easily back and forth between them.  These services support the content creators needs to work in both environments simultaneously.  With the transition of the creative process to digital, the secure management of digital media assets is becoming increasingly important. We have developed digital media asset management solutions allowing the storage, management and retrieval of content for easy distribution to multiple distribution channels. The concept of a proprietary global digital network to allow rapid and secure movement of content, particularly during the time-critical production phase, is now being offered to our key customers.

In the area of content security, we have developed innovative solutions, which have been adopted by content creators. In 2003, we developed an infrastructure permitting the identification and tracking of advance screening copies of films for Academy Award nominations in the United States.  In addition, Thomson developed hologram and other copy protection supports for Microsoft game content.

The post-production services market is highly fragmented with significant elements still being handled internally by some major studios.  The market is, however, now beginning to consolidate with increasing proportions of work being outsourced by the studios to multiple suppliers who can meet their technical and service requirements.  Thomson has a growing share of the post-production market and has significantly enlarged its global service offerings and expertise to benefit from the growth of this market. Our main competitors for post-production include Deluxe, a subsidiary of Rank plc, and Ascent Media, based in the United States.

> Film Services

After the creative process is complete, our film services business offers
  bulk-printing services for the release of a film to cinemas. A major studio
  worldwide release today can require in excess of 10,000 copies of a film to
  be printed and delivered to cinemas for simultaneous release. Increasingly,
  releases are occurring simultaneously worldwide, which requires copying films
  on a large scale and close coordination with the creative processes to handle
  multiple language versions in a fast and efficient manner. Through five main
  facilities in North America, Europe and Asia, Technicolor processed over 5 billion
  feet of film in 2004, compared to 4.2 billion feet in 2003. Our Mirabel film
  processing facility located near Montreal, Canada, handles over 50% of the Groups
  North American requirements. We also provide logistical support in North America,
  delivering prints and studio marketing materials to cinemas. We continue to
  pursue opportunities to expand these logistical service operations to support
  the worldwide release of films and to provide real time information to distributors
  and cinemas regarding the status of film content. Our main competitor in this
  business is Deluxe. In 2004, we expanded our film laboratory operations in Europe
  with the acquisition of Madrid Film, a laboratory and digital post-production
  company located in Madrid and Barcelona, Spain.

> Home Entertainment Services (DVD)

Through Home Entertainment Services (DVD), we provide DVD and VHS-related content services. We prepare content and manufacture and distribute DVDs and VHS cassettes, video and game DVDs and CDs via 23 locations across North America, Europe and Australia. We provide a turnkey integrated solution for video and games content producers that spans mastering, manufacturing, packaging and distribution, including direct-to-retail, direct-to-consumer and returns handling, as well as procurement, information services and retail inventory management systems.  In recent years, we

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launched Continental European distribution services and expanded services into Holland (2002), servicing the Benelux, German and Austrian markets, Spain (2004), Scandinavia (2004) and France (2004), to augment the existing distribution infrastructure based in Italy. To support this pan-European distribution network, a new information services platform (ESCO) was implemented in February 2004. This network provides end-to-end supply chain services for our clients.

Thomson initiated a reorganization of Technicolors operations to lower
  costs and improve efficiency and customer service levels. Optical replication
  was transitioned from our former facilities in Charlottesville, Virginia and
  Cork, Ireland, primarily to our facilities in Guadalajara, Mexico, and Piaseczno,
  Poland. Further, the majority of capacity expansion for optical disc replication
  was focused in these low-cost production facilities. Packaging and distribution
  in the United States continues to be consolidated in expanded facilities such
  as in Memphis, Tennessee. VHS duplication in Holland, Spain and Italy was relocated
  to the existing facility in Wembley, United Kingdom. Similarly, our VHS operations
  in Camarillo, California, were consolidated into our facilities in Livonia,
  Michigan, and Mexicali, Mexico, in 2004. In light of the continued rapid growth
  of DVD volumes and the rapid degradation of VHS volumes, continued consolidation
  will be pursued in 2005.

In December 2004, Thomson had annual capacity to produce 1.5 billion DVDs and 500 million VHS cassettes supported by five million square feet of dedicated distribution space.

The packaged media industry continues to grow steadily, most recently fueled by consumer demand for video DVDs as well as games. We believe we are the largest independent DVD replicator in the world.

> Network Services

During 2003, in partnership with Disney, Technicolor designed and built a broadcast play-out facility for Disney Channel Japan. Effective November 2003, we are managing the operations on behalf of Disney, ranging from content preparation to broadcasting of television-related content. In 2004, as part of the Groups intentions to continue the development of this service offering, Technicolor acquired U.K.-based Corinthian Television, one of Europes leading independent broadcast play-out facilities.

> Screen-Advertising

Since 2001, we have developed our screen-advertising activities in two 50:50 joint ventures with Carlton Communications (now ITV). Through both Screenvision Europe and Screenvision U.S., we are engaged in the business of cinema screen-advertising across Continental Europe and the United States, respectively. The contracts with cinema owners or operators vary in length from approximately three to five years. In return for granting exclusive rights to our screen-advertising operations, the cinema owner or operator receives a share of the revenues from advertisers, and in certain cases may be provided by a minimum revenue guarantee. In addition to selling advertising on the cinema screen, our joint venture operations have also developed supplementary revenue streams for cinema owners or operators. Revenues are also generated from promotional activity in cinema foyers and poster units have been installed in many cinemas allowing advertisers further opportunities to target the valuable cinema-going audiences.

In 2004, we also participated in the roll-out of digital technology in the screen-advertising industry, which we expect to continue to develop. For a description of our recent investments in this field, see Item 5: Operating and Financial Review and ProspectsEvents Subsequent to December 31, 2004Thomson and Screenvision Launch Digital Distribution Network in the United States.

We hold leading market positions in the United States. Our key territories in Europe include France, Spain, Portugal, Belgium and the Netherlands. Our cinema screen advertising businesses compete

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Thomson Group

with similar sales operations controlled by cinema owners or operators. Competition includes Regal Cinemedia (part of the Regal entertainment group, a major exhibitor) and NCN (owned by AMC, another major exhibitor) in the United States and Mediavision in Europe.

Broadcast & Media Solutions

Broadcast & Media Solutions provides products, systems design and integration
  expertise, as well as professional services for the global broadcast, film production,
  professional audio/video, and network provider (including cable, satellite,
  telecommunications and terrestrial broadcast) industries. Effective January
  1, 2005, our Broadcast & Media Solutions activities form part of the new
  Systems & Equipment division.

We offer one of the industrys broadest set of solutions for media and entertainment clients, including high-definition and standard definition cameras for outside broadcast and studio use; PC-based software for news, sports and feature production; storage and playback devices; digital video vision mixers and routing switchers; products for converting and synchronizing digital signals within broadcast facilities; and software for monitoring products within broadcast facilities.  For the film industry, we provide digital cinematography cameras and a complete set of digital post-production products. In addition, we offer a set of advanced video compression and distribution products and network management software for network and pay-TV operators.

Broadcast & Media Solutions is now well-positioned to exploit growth opportunities generated by technology shifts in the field of digital media acquisition, production and creation, management and distribution.  For example, one of the most notable of these trends in 2004 was the accelerated migration to the high definition (HD) format in the United States, as well as a significant increase in HD adoption in Europe and Asia. This provided a substantial increase in Thomsons market share in HD and multi-format cameras, storage, and production products, particularly for the worldwide outside broadcast (e.g., live transmission of sporting and entertainment events) or mobile production (e.g., live transmission of news reports) markets.

Production leaders such as HBS (host broadcaster of the 2002 and 2006 FIFA World Cups) and NEP SuperShooters (provider of mobile production support for nearly every major entertainment and sports event in the United States) continued to adopt Grass Valley HD products and solutions for such key events as the 2004 Olympics and 2004 European Football Championship Games, and future events such as the 2006 World Cup and the 2008 Olympics.

Another key trend in 2004 was the on-going move from video tape-based to digital disk-based newsrooms. In this market, Broadcast & Media Solutions continued to see increased adoption of its digital video servers for storage and playback, as well as for its standard PC-based software for news content and feature production for small- to large-scale news operations worldwide. Major adopters in 2004 included the CBS owned and operated stations in the United States, France 3, Hong Kong Cable TV, Network 7 (Australia) and the European Commission. In addition, strong follow-on orders were received from the ABC and NBC owned and operated stations in the United States.  New product innovation in this area was accelerated by the acquisition and successful integration of the video division of ParkerVision into Broadcast & Media Solutions. The products acquired, combined with the Grass Valley digital news production tools, have resulted in a full suite for news, sports and feature production.

With the continued move toward multi-distribution strategies in the network provider market, we continued to see momentum for our ViBE compression platform, with major orders from leaders such as FOXTEL (Australia), NTL (United Kingdom), DIRECTV (United States) and Italia Media (Italy). We also pursue our innovative efforts in the delivery of an HD version of the ViBE platform and continued investment in MPEG 4-based platforms for highly efficient HD compression.

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A key objective of media leaders worldwide is to create and produce the highest quality content in the most efficient manner possible. This is a key trend worldwide, from well-established broadcasters to those in emerging digital media markets such as China and in adjacent markets, such as professional audio/video users in corporate and university media centers, distance learning and governmental networks. In 2003, Broadcast & Media Solutions announced an initiative for digital affordability  a product development program which leveraged Broadcast & Media Solutions leadership in combining IT, standard PC and networking software, and broadcast-quality video technologies to deliver a set of lower-cost products.  In 2004, Broadcast & Media Solutions introduced 25 new products and diversified its distribution network to reach this expanded set of customers.

Broadcasters ongoing drive to create and distribute the highest quality content in the most efficient manner has also created new maintenance, professional services and support opportunities for Broadcast & Media Solutions. In 2004, through continued expansion of an integrated professional services organization, Broadcast & Media Solutions enlarged its revenue base of service agreements with its main customers.

Broadcast & Media Solutions operates in more than 22 countries and has received 19 Emmy Awards for its products.  Trends and transitions towards digitization and high definition infrastructures contributed to growth for Broadcast & Media Solutions in 2004. It also benefited from the cyclical upturn in capital expenditures in the broadcast industry during 2004, as well as modest market share gains and increased penetration in the professional audio/visual market.

Broadcast & Media Solutions is the second largest technology innovator and supplier of equipment to the broadcast, film, and professional video markets based on volume and value, with leading market positions in production switchers and mobile van camera applications. It also continues to hold the number one position in the compressed broadcast video server market based on volume and value, supporting highly efficient workflows in the areas of converging IT and video, and digital media asset management. Broadcast & Media Solutions is ranked second based on volume and value in digital news production, being driven by the market movement from tape-based systems to digital workflow environments.  Primary competitors in the Broadcast market include Sony, Panasonic and Avid. Professional audio visual competitors include Extron, Sony and Pinnacle.

Network operators (cable, satellite, telecom, and terrestrial television) continue to seek to expand their product range and also look to Broadcast & Media Solutions to provide both turnkey and specific customized products and solutions. Our Broadcast & Media Solutions business has responded to this demand by offering compression and transmission and processing solutions that satisfy customers technical and budgetary requirements. Potential growth areas within this market include Video-on-Demand, video over IP and the ability to insert advertising into media transmissions using digital technology. Key competitors in the network operators market include Harmonic, Tandberg, Scientific Atlanta and Motorola.

Broadband Access Products

Through our Broadband Access Products activities, we develop technologies and products for broadband network operators who deliver their content, video and data to consumers and professional broadcasters. Effective January 1, 2005, our Broadband Access Products activities form the Access Platforms & Gateways sub-unit in the new Systems & Equipment division.

Broadband Access Products organization is customer-driven, comprising satellite and retail, telecommunications, and cable activities. Our satellite and retail activity, which primarily designs and sells digital satellite set-top boxes to satellite operators (in particular under the THOMSON®and RCA®brands, when sold through retailers) and digital terrestrial set-top boxes to retailers, was the largest contributor to Broadband Access Product revenues in 2004.  Our telecommunications activity

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Thomson Group

comprises offerings such as DSL gateways and modems for the residential and small-office, home-office (SOHO) markets (marketed under the SpeedTouch brand), set-top boxes for IP networks (IP STB) and telephone handsets. Our cable activity comprises supplying cable modems and cable set-top boxes to major cable network operators worldwide.

The mission of Broadband Access Products is to partner with broadband network operators (including satellite, telecommunications, cable and terrestrial) to enhance the delivery of digital entertainment, data and voice to their residential and business customers. Thomson is one of the leading global broadband solutions providers, offering a full spectrum of customized solutions which integrate hardware, software and services.  We are a leader in the field of digital audio/video compression (MPEG2, mp3), video modulation/distribution network technology customization/integration and broadband modems. We were one of the first to enter broadband entertainment over ten years ago with the development of the direct broadcast satellite industry. In the following years, we have refined our technical expertise with leading products, powerful brand names and extensive distribution networks providing solutions to operators, which, in turn, provide services to end-users. Essentially all of our telecommunications and cable products are manufactured by sub-contractors, while we now outsource manufacturing of a vast majority of our satellite products.

In order to expand our Broadband Access Products activity and to enhance its profitability further, we continue to further our technological, integration and distribution expertise with new developments in advanced compression technologies (MPEG4, H.264 and mp3PRO), advanced security and encryption, home networking and emerging broadband technologies (ADSL 2.0, 2+).  Worldwide, consumers are increasingly demanding a wider variety of entertainment options, requiring operators to expand their network capacities. In addition, consumers expect more high definition programming which consumes far more delivery capacity.  In order to deliver more HDTV content and more channels, network operators will need to implement next generation digital compression technologies. To that end, Thomson is a leading participant in the development of next-generation, low bit-rate, advanced compression standards with the International Telecommunication Union and its Joint Video Team (JVT) group.

We seek to differentiate ourselves from the competition by offering a broad, technologically advanced range of products, by our expertise and experience in the sector, and by our growing global reach. Through partnering with the worlds largest network operators and retailers, we seek to provide end-to-end solutions enabling our customers to capitalize upon market opportunities.

Major developments in the Broadband Access Products activity in 2004 include:

- Announcement of a definitive agreement with The DIRECTV Group, Inc., which is associated with the News Corporation group of companies and parent company of Hughes Network Systems, Inc. (HNS), for the long-term development and supply of digital satellite set-top boxes (STBs). As part of the transaction, Thomson acquired HNS set-top box manufacturing assets. Under the terms of the supply agreement, Thomson will be involved in the technology development of new STB models during the contract period and will manufacture a full range of receivers including DIRECTV-brand high definition and digital video recorder (DVR) receivers. This development further expands our leading market position in the United States. Based on the contract terms, Thomson expects to more than double its current annual revenues with DIRECTV. DIRECTV can earn a U.S.$50 million rebate from Thomson if Thomsons aggregate sales of DIRECTVs STBs are at least U.S.$4 billion over the initial five-year contract term plus an optional one year extension period (the Contract Term). Thomson will be liable on a pro rata basis for an additional U.S.$100 million rebate payment to DIRECTV if Thomsons aggregate sales of DIRECTV STBs are in excess of U.S.$4 billion and up to U.S.$6 billion during the Contract Term. DIRECTV received from Thomson U.S.$250 million cash upon close of the sale of HNS set-top box manufacturing assets, which occurred in June 2004. The rebate referred to above could thus increase the amount paid by Thomson to DIRECTV to as much as U.S.$400 million. In addition,

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> Thomson will be the lead supplier of DIRECTV System set-top receivers accounting
>     for half of its needs.

- Successful restructuring of the cable modem business, where Thomsons
    increased focus on sales and marketing activities helped improve our market
    share and profitability.
- Operationally, we continued the move toward a contract manufacturing (CM)
    supply environment, with the transition of products from several of our own
    manufacturing facilities to CMs. Additionally, we recently divested a major
    factory based in Mexico.
- We capitalized on the strength of our close relationships with customers
    and our ability to efficiently manage different distribution channels, evidenced
    by our support of DIRECTV in its evolving business model change to control
    distribution in-house rather than primarily utilizing the retail channel,
    as previously.Digital Decoders & Retail

Thomson is the world leader in digital decoders, with volumes significantly exceeding those of its closest competitors.  Aided by our 2004 agreement with DIRECTV and our relationship with both DIRECTV and Echostar, we believe we are the industry leader based on volume market share in the growing U.S. market.

Thomson offers a full range of products, including DVR and HD DVR, in addition to standard, more affordable products provided to expand the basic subscriber base. Elsewhere in the Americas, we gained market share based on volume via the launching of new products for DIRECTV Latin America, Sky Mexico and Sky Brazil.

In Europe, we expanded our volume of business with BSkyB. Specifically, we made the first deliveries of the Sky+PVR and were selected to develop the next MPEG4 HD platform. A key new customer was added in Sky Italia, to which we sold over half a million units during the year. Furthermore, we continued our longstanding relationships with other leading satellite operators, including Canal Satellite, TPS, Sogecable and Viasat. Capitalizing on our early leadership in the United Kingdom, we also confirmed our position as the worldwide leader in digital terrestrial decoders based on volume and launched new products in Germany, Italy and Scandinavia.

In Asia, our digital decoder business is developing rapidly.  Deliveries of product for Astro, the Malaysian satellite broadcaster, began in the third quarter of 2004, and we consolidated Nokias Asian STB business in the fourth quarter of 2004. Key commitments were secured with SpaceTV in India as well as a successful launch of digital decoders to mass merchandisers in Australia.

Our leadership within satellite decoders provides a strong foundation to the Broadband Access Product business.  Operationally, we have taken measures to ensure high-quality supplies for our customers, primarily through our relationships with several global CMs. From a product perspective, we have the economy of scale to provide high-volume, high-quality product to meet our customers current needs in the Americas, Europe and Asia. Given our strong relationship with network operators, we are able to leverage our expertise in these technologies to partner with them in developing and delivering new products which offer enhanced video and audio quality, primarily through the expansion of high definition broadcast delivery.  Our capabilities also enable us to develop more sophisticated products encompassing the ability to record content.

> Telecommunications

Broadband Access Products telecommunications business serves customers around the globe and is organized and managed in four major categories: telephony, high-speed DSL modems, IP STBs and mobility. Through this focused organization, we can provide our customers with specific solutions

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for their needs.  Whether it is providing telephone handsets to telecommunication operators, DSL modems with value-added gateway and wireless networking capabilities, or IP STB which enables the delivery of fully-featured video entertainment over existing DSL lines, this business unit provides solutions meeting market needs. In addition, our Mobility business markets handheld audio and video devices which will connect to wireless networks to deliver data, audio and video entertainment, and web access to mobile users.

Our telecommunications business continues to benefit from key positions established with European telecommunications providers, with strong sales within the DECT range, strong sales of telephone handsets, and the voice over IP product development. Special features (e.g., voice mail and caller ID) support value-added services provided by our telecommunications customers.

Thomson is a global leader in DSL modems with strong market share in major markets around the globe, particularly in Europe. Our range of technologies and products includes wired and wireless gateways, ADSL/ADSL2/2+, SHDSL, VDSL product and value-added software. We have achieved strong growth in sales of DSL modems in the Chinese market. Marketed under the SpeedTouch brand, our DSL product family has expanded to include value-adding gateway and wireless networking products that provide our customers with a versatile, robust and secure broadband connection. We seek to capitalize on opportunities in cutting-edge wireless, voice and triple play emerging market segments and have so far achieved significant growth in China.

We continue to develop and market IP STBs that allow for the delivery of video entertainment over broadband DSL IP networks. This represents a new market and business opportunity for DSL network operators by enabling them to broaden their service offerings to consumers. Along with the IP STB, Thomson is the leading vendor of digital encoders and video networking equipment. Capitalizing on our expertise with middleware and conditional access systems, we are well-positioned for growth in this new market area.

> Cable

In the second half of 2004, Thomson grew its market share in the cable modems market to become the second largest supplier worldwide by volume, with strong positions in Europe and North America. With a wide product range, including modems, wireless cable gateways and embedded voice over IP gateway solutions, we are well-positioned to build on our position in this area.  During 2004, we lowered our cost base through a close partnership with an Asian supplier. Introduction of high margin products and expansion of our market presence enables Thomson to remain a leader in this important market segment.

Building on our strong market position in Europe, we continue to play a leading role in the worldwide transition to digital technology through our cable set-top box business (CSTB).  Thanks to our expertise in digital video and compression technologies, our competitive cost position and our customization skills, our CSTB offerings are chosen by many cable network operators in Europe, the Middle East, Latin America and China.

With strong interest from operators for double-play (video and data or data and voice) and triple-play (video, data and voice) boxes, we are enjoying increasing synergies between our cable modems and CSTB businesses.

Components

The Components division produces television tubes and other components used
  in the manufacture of various consumer electronics products. It generated consolidated
  net sales in 2004 of 1,167 million (14.6% of the Groups consolidated
  net sales), comprising sales to customers outside of the Group. The Components
  division recorded revenues of 1,348 million before intercompany

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eliminations, with internal sales to our Consumer Products division amounting
  to 181 million. A substantial portion of these internal sales represented
  sales of television tubes. As a result of our relationship with TTE, the Components
  division recorded external sales of 192 million for the last five months
  of 2004 for business conducted with TTE. The operating loss for the division
  in 2004 was 105 million.

In our Displays activity (i.e., our television tubes and related components businesses), our strategy, announced on October 21, 2004, is for our business to participate in the consolidation of the display industry. This consolidation is a response to the fast evolution of the display industry, as television manufacturers respond to end-consumers demands and technology changes with varied strategies by geographic regions. By pursuing an active repositioning and partnership policy, Thomsons objective is to permit its displays business to pursue its development through such consolidation, while the Group focuses on its media and entertainment activities. Our tubes business accounted for approximately 90% of our 2004 revenues in the Components division.  Effective January 1, 2005, pending the completion of our partnership strategy for this business, our tubes business has been relocated to our new Displays & Consumer Electronics Partnerships activity.  For information describing recent developments relating to our partnership strategy, please refer to Item 5: Operating and Financial Review and ProspectsEvents Subsequent to December 31, 2004Recent Events Relating to Our Partnership Strategy for the Displays Activity.

Our strategy in Components outside television tubes will remain to focus on a limited number of key hardware and software components such as digital tuners used in televisions (satellite, cable or terrestrial) directly or through adapters, which we believe have a potential for growth. A digital tuner is a tuning device that allows a television set to receive signals via airwaves, satellite or cable and translate them into a signal the device can display. Other products include universal remote control units and related software, which interact with digital tuners. In 2004, these products accounted for approximately 10% of the Components divisions revenues. Effective January 1, 2005, our activities in this area form part of the new Technology division.

Television Tubes

In 2004, we were one of the worlds leading suppliers of television cathode tubes, selling 18.9 million color picture television tubes. We believe we hold the number two position worldwide in the large and very large size tube market based on volume. Our television tubes business is vertically integrated, as we produce a significant proportion of the key components that go into a finished picture tube. In 2004, we produced 37% of our requirements for glass panels and funnels and nearly all of our requirements for electron guns and deflection yokes.

In 2004, the global market for television tubes was stable in volume (approximately
  169 million units), as growth in demand for true flat tubes and large and very
  large tubes offset a decrease in curved tubes demand. As in previous years,
  the strongest markets were in Asia (particularly in China). Overcapacity remained
  in the North American market, despite market rationalization since 2001, essentially
  because of the imports of television sets from countries with lower manufacturing
  costs. Imports of television sets made in China were significantly reduced compared
  to the previous year due to the introduction of anti-dumping duties in November
  2003 on television sets above 21 manufactured in China. However, this
  reduction was partially offset by an increase in imports of television sets
  from other Asian countries. In Europe, local tube makers were severely impacted
  by the significant increase in direct tube imports, especially from Asia and
  the Indian subcontinent. This led to an overcapacity situation, more particularly
  in Western Europe, where local tube makers faced severe price pressure.

As competition for volume remained very strong and alternative technologies (LCD and Plasma in particular) gained market share, price pressure was particularly intense in 2004. In 2004, we continued

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Thomson Group

to roll out our second generation true flat products rapidly and sold 2.7 million more true flat tubes than in the prior year.  We also maintained our strong position in the large and very large tube segments, which represents a high proportion of tube demand.

In 2004, Thomson successfully integrated its Fortune factory in China (acquired in January 2004). This acquisition strengthened our operations in low cost countries, with 86% of our total production achieved in such countries as China, Poland and Mexico, with China in particular accounting for 42% of production. We also entered into a partnership agreement in 2004 relating to television components with Konka (based in China) with the objective of securing our Displays business in the Chinese market.  In parallel, we successfully restructured our activities in the NAFTA region within the anticipated budget and timeframe, which involved the closure of our tube plant in Marion, Indiana, and our television glass plant in Circleville, Ohio.

Finally, in March 2005, Thomson completed a major step in the implementation of its partnership strategy for its Displays activity with the transfer of its loss-making Italian tube manufacturing facility in Anagni to Videocon, Indias leading manufacturer of consumer electronics and white goods (i.e., large home appliances such as fridges and washing machines).

Other Displays

We pursue our research and development efforts in cathode ray tubes technologies, but also in new displays technologies, notably technologies related to Organic Light-Emitting Diodes (OLEDs) and to micro displays projection technologies with a considerable performance and manufacturing cost advantages. Effective January 1, 2005, this activity forms part of the Technology division.

Digital Optical Components

Effective May 1, 2004, Thomson transferred its optical components manufacturing operations to Foxconn, a manufacturer of high precision parts, connectors and cable assemblies for personal computers and electronic consumer goods. Under the terms of transfer, Foxconn acquired Thomsons optical pick-up (OPU) manufacturing facilities in Nantou and Longhua, China, and related inventories valued at a total of approximately 28 million. Thomsons decision to exit this manufacturing business was due to the intense price competition in this market. In 2004, prices for optical components decreased on average by 7% for CD products and 22% for DVD products. Since this transfer, Thomson has concentrated its efforts on R&D for optical products, in particular on the development of an OPU for consumer DVD recorders.

Other Components

We also produce other components both for our Consumer Products needs and for sale to other manufacturers.  These components include both digital and analog tuners and remote control systems.

We continue to pursue the development of digital components which enable advanced features such as recording, search and interactivity within consumer video electronics products, including set-top boxes, personal video recorders, DVD players and television sets.

Effective January 1, 2005, this activity forms part of the Technology division.

Integrated Circuits

We have an in-house integrated circuit design team, which designs several of the essential integrated circuit components used in our products, from professional to consumer equipment, generally in

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partnership with selected semi-conductor vendors. Integrated circuits are key components of digital products from the perspective of cost, performance and time to market. Our integrated circuit design team employs more than 100 engineers with specialized skills in digital, analog, mixed digital-analog, and radio frequency signal processing. This team operates out of four facilities located in Indianapolis (U.S.), Rennes (France), Villingen (Germany) and Edegem (Belgium). In 2002, we started building a center in Bangalore (India), where we have deployed subcontracting activities in 2003 and 2004.

The production of integrated circuits is achieved through a manufacturing sub-contracting business model. Effective January 1, 2005, the Integrated Circuits activity is managed as a separate business unit within the newly created Technology division.

Consumer Products

In 2004, the Consumer Products division generated 2,325 million in consolidated net sales (29.1% of the Groups consolidated net sales) and recorded operating loss of 64 million. The Consumer Products division marketed products through two business units, Essentials and Mainstream. The Mainstream business (including revenues of our television and related products business through July 31, 2004, when they were contributed to TTE) contributed slightly more than 50% of the divisions 2004 revenues, while the Essentials business contributed the remainder of the divisions revenues.

The Essentials business consists of personal audio/video products, consumer accessories solutions, and communications (the ATLINKS residential communications business), each of which contributed approximately one-third of the revenues of the Essentials business in 2004.  Effective January 1, 2005, the Essentials business is being reorganized under the name Connectivity and included in the Systems & Equipment Division with three profit centers: Consumer Audio/Video, Home Networking Accessories and Retail Communications. A key area of focus is cooperation and effective interaction with Access Platforms & Gateways (formerly Broadband Access Products) to optimize R&D resources and drive cross-selling opportunities.

The Mainstream activity manufactured and marketed televisions
  (until July 31, 2004) and home audio/video products, including DVD devices.
  In 2004, we continued to reshape our business model with the creation of TTE
  for the television business, as discussed further below. TTE commenced operations
  on August 1, 2004. Effective January 1, 2005, the new Displays & Consumer
  Electronics Partnership activity encompasses our on-going business with TTE
  as a subcontractor manufacturer and as TTEs exclusive sales and marketing
  agent in Europe and North America. The residual Mainstream audio/video
  activities, principally DVD devices and home cinema products, are included in
  Connectivity in the Systems & Equipment Division in 2005.

Essential Consumer Products

> Personal Audio/Video products

Personal Audio/Video includes audio products such as digital audio players, compact disc players and clock radios. They are marketed under the GE and RCA®brand names in the Americas and under the THOMSON®brand in Europe. The industry in the Americas grew over 20% as measured in U.S. dollars, driven by the fast growth in the mp3 Digital Audio Player category which more than offset declines in other categories such as personal and portable CD players. We continued to innovate with the introduction of a portable, hard drive-based media player called the Lyra Audio/Video Jukebox, as well as several flash-based digital audio players.

In order to continue our momentum in digital audio/video, investments are being made in new products and several innovative products were announced at the Consumer Electronics Show in Las Vegas in January 2005.  New introductions include an mp3 player that measures heart pulse and calculates calories burned, a 5GB hard-drive based Micro Jukebox for music with a color screen for

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Thomson Group

photos, and a second generation of the Lyra Audio/Video Jukebox. Thomson is expected to be first to the market with a Bookshelf Audio System that includes a 5-disc CD changer and a built-in mp3 flash-based digital audio player, designed to attract consumers who are not yet comfortable managing their music through a computer.

As part of the Two-Year Plan, we announced a strategy to focus on certain
  markets, capitalizing on our global product development, distribution and sourcing
  strengths. This so-called Rest-of-World and OEM strategy focuses
  our selling efforts in markets located outside North America and Europe and
  on large retail customers, which nameplate our products with their own house
  brands, as though Thomson were operating as an in-house R&D company from
  such customers. We expect this strategy will contribute to the future growth
  of the business.

> Consumer Accessories Solutions

Today, Consumer Accessories Solutions (renamed Home Networking Accessories (HNA) in 2005) provides universal accessory products and services to leading retailers in North America and Europe. Our main clients are national chain stores in the United States such as Best Buy, Walmart, The Home Depot and RadioShack. In Europe, we distribute our products through groups such as Carrefour, Auchan and Mediamarkt. Through our extensive brand portfolio (such as RCA, THOMSON, Acoustic Research, Jensen, Spikemaster and Advent), we have been able to broaden our distribution in both of our key markets.  We continue to maintain a leadership position in remote control units, TV antennae, and wireless headphones and speakers. We are strengthening our position in audio/video cabling and power surge protector products.

In July 2004, we acquired Gyration, which has a unique gyroscope technology and markets a line of remote controls, computer mice and keyboards. This acquisition has not only helped us to establish a foothold in the PC user interface market, but it also provides a patented technology that positions us well for controller devices as consumer electronics and information technology products converge. Additionally, as we drive to increase our market position in home connectivity, we have completed the development of a new wireless home networking product designed to link the PC and the high-definition display. Our Acoustic Research Digital MediaBridge product enables users to stream music, high-definition photos and videos from their PC to a television utilizing an existing WiFi home network. The market launch date for this product is scheduled for June 2005.

In 2004, we initiated activities to expand our presence in both the business-to-business
  markets and Rest-of-World (i.e., non-North American and non-European, or ROW)
  markets. In the business-to-business arena, we are serving both the automotive
  video and video gaming markets with OEM products. We have also entered into
  agreements with a number of the largest custom installation distributors. We
  have expanded our ROW sales initiatives with new distributors in Australia,
  New Zealand, South Africa and Turkey.

> Communications

ATLINKS operates Thomsons global communications business, selling residential communications devices such as telephone handsets and answering machines under the GE, Alcatel and THOMSON®brand names.

In North America, we estimate that we held our number one position based on volume market share. In 2004, the communications industry declined, however, with units sold down 7% and value in dollars down 2%, as the industry shifted from 900MHz to 5.8GHz communications products. To maintain our competitive position, we introduced a range of SOHO products under the RCA brand and expanded our distribution in North America with retailers specializing in the SOHO market (e.g., Office Depot and Office Max). The products sold to these retailers offer more advanced features and are sold at a higher price than more standard telephone products.

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ATLINKS is also investing in the development of new products with a focus on integration with mobile telephones. At the Consumer Electronics Show in Las Vegas in January 2005, we introduced a new range of cell dock phones, which will allow consumers to use a home telephone to both make and receive cellular phone calls.

In Europe, we sell telephones under the Alcatel brand name in France and the THOMSON®brand name in the rest of Europe. Slightly over 80% of the products sold in our four main European markets were DECT (Digital Enhanced Cordless Telecommunications) products. As countries in the ROW markets such as China shift to this technology, we expect to be able leverage on our existing vendor base.

Supporting our ROW business in 2004, we continued our expansion strategy by
  entering new markets like Argentina and grew sales in existing markets such
  as India and the Middle East.

Mainstream Consumer Products

> Launch of TTE

On January 28, 2004, Thomson, TCL International and TCL entered into a Combination Agreement to combine their respective television manufacturing businesses and assets into TTE, a company formed for the development, manufacturing and distribution of television sets. TTE became fully operational on August 1, 2004. In consideration for a 33% shareholding interest in TTE, Thomson contributed into TTE certain television production plants, including its television manufacturing plants and businesses in Mexico, Poland and Thailand. Thomson also contributed its television R&D centers worldwide and certain other assets constituting substantially all of the television manufacturing business of Thomsons Consumer Products division.

This business employed approximately 6,600 Thomson employees who were transferred to the new entity. Thomson retained the cash and cash equivalents, accounts receivable, finished goods and certain raw materials of its own business and will retain ownership of its brands, intellectual property, marketing and sales organization and certain value-added manufacturing assets. Thomson granted to TTE a license on certain of its brands and its intellectual property related to the television manufacturing business. In consideration for a 67% shareholding interest in TTE, TCL International contributed into TTE certain television production plants and other television business assets.

Under certain operational agreements entered into in connection with the Combination
  Agreement, Thomsons Components division became a preferred supplier to
  TTE of tubes and other selected components in China and worldwide. In addition,
  Thomsons sales and marketing network of the Consumer Products division
  began to act as the exclusive sales and marketing agent to TTE for distribution
  into North America and the European Union countries and to provide value-added
  services such as product design, client coverage, logistics, quality certification
  and after-sales services and some value-added build-to-order manufacturing services.
  In addition, Thomson is responsible for the licensing of TTEs intellectual
  property related to the TV business.

As part of the agreement with TCL International, the component sales, service contracts and parts distribution business as well as the distribution of Telefunken, Brandt and GE branded televisions in Latin America and Europe remained with Thomson.  Following the creation of TTE, our Angers operation manufactured goods for TTE as a sub-contract manufacturer, and, effective January 1, 2005, forms part of our new Displays & Consumer Electronics Partnerships division.

Prior to TTE becoming fully operational, Thomson continued to develop and
  market television sets from the period between January through July 2004 under
  the RCA®, THOMSON® and GE brand

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Thomson Group

names. The RCA and THOMSON Scenium range was used in both Americas and
  Europe to market high-end products such as the Digital Light Processing high-definition
  televisions.

The parties to the Combination Agreement and TTE also entered into a shareholders
  agreement and other arrangements, including undertakings not to compete with
  TTEs television business and restrictions on Thomsons ability to
  transfer its interest in TTE for up to a period of five years. Thomson also
  entered into a receivables purchase and sale agreement with TTE, effective for
  up to two years, and assumed certain of TTEs restructuring costs up to
  a maximum of 33 million. Thomson has no other obligation to provide any
  financing support to TTE or for its benefit to any person. Further, Thomson
  granted TCL International the option to acquire up to 2.5 million Thomson shares
  at a price of 18.12 per share, and Thomson was granted an option to exchange
  all of its TTE shares, under certain circumstances, for shares in TCL International
  representing up to 30% of the share capital of TCL International.

> Televisions

Television sales from the period of January to July 2004 inclusive amounted to 845 million. From August 1, 2004 onwards, television sales were accounted for in TTE and accordingly not consolidated in Thomsons financial statements. During that period, the Group focused its efforts in North America on its close relationships with key retailers and its distribution infrastructure, while developing its high-end products under the RCA Scenium brand name.

The THOMSON®brand in Europe capitalizes on our Scenium products line, in particular in high-end products such as retro-projection television and Plasma Flat Screen. We also held significant and growing market positions in Eastern European television markets, particularly in Russia, Poland, the Czech Republic and Ukraine.  In addition, Thomson further strengthened its links with its main distributors.

> Home Audio/Video

The smaller business of Home Audio/Video includes home cinema products and DVD devices, including DVD recorders and hard drive products. They are marketed under GE and RCA®brand names in the Americas and THOMSON®in Europe.

The market for these products in the Americas was down almost 17% in U.S. dollars in 2004, but Thomson estimates that its market share grew slightly as we introduced higher priced DVD products to mass merchandisers.  In Europe, competition intensified as Chinese manufacturers made significant inroads supplying less established brands and private label customers.  Despite our growth in higher value-added products, particularly DVD and Hard-Disc Drive combination products as well as DVD recorders, revenues for DVD devices decreased significantly.

Licensing

In 2004, Thomsons licensing division generated 404 million in consolidated net sales (5.1% of the Groups consolidated net sales) and 325 million in operating income, with operating margin of 80.2%.  At December 31, 2004, this division employed 192 people based in France, Germany, Switzerland, Japan, South Korea, China and the United States.

We have made it a strategic priority to protect and monetize our intellectual property. Our strong patents portfolio in video technologies combined with our licensing expertise constitute significant competitive advantages. The Licensing division was created in early 1999, integrating the RCA.TL patent and license management business transferred from General Electric Co. to the Group on January 1, 1999. From January 1, 2005, the Licensing division forms part of the new Technology division.

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The Licensing team works closely with Thomsons research and development centers to identify ideas that may be potential patent candidates, to draft patent applications and to detect uses of our patents by third parties. As of December 31, 2004, we held approximately 45,740 patents and applications worldwide, derived from more than 6,720 inventions. In 2004, we filed 588 priority applications, which are applications in respect of new inventions that are filed for the first time.

We believe that our patent portfolio is well-balanced between new technologies and mature technologies. Among the new patented technologies, the Group has significant positions in the areas of digital decoders, high-definition and digital television sets, optical module patents for CD and DVD players, MPEG video compression, the mp3 audio compression format, interactive TV technologies, storage technologies and new screen technologies such as liquid crystal display and plasma. The Group also holds strong positions in patents of mature technologies, including color television sets, color television tubes, VCRs, camcorders and color tube display monitors.

We currently have approximately 878 licensing agreements relating to a diversified mix of video products and services covering almost all consumer electronics companies in the Americas, Europe and Asia. Our top ten licensees account for approximately 69% of our total licensing revenues. The licensing agreements are typically renewable and have an average duration of five years, and royalties are primarily based on sales volumes.

The Licensing division requires relatively little infrastructure and has a limited cost base.  When considering the relative profitability of the Licensing division, however, it is important to note that our other divisions support research and development costs, but do not benefit from income from patents licensed which was attributed to the Licensing division.

Our strategy for the Licensing division is to further develop our intellectual property portfolio, through widespread, but highly targeted, patent applications and through the acquisition of additional patents that have strong commercial and technical complementarities with our existing portfolio. Furthermore, we intend to increase the number of licensees through a more systematic enforcement of existing patents, especially in emerging markets where production facilities have been relocated but also in Europe and the United States, and through the launch of new licensing programs around flat displays and digital and interactive television patents. However, the results of this enforcement strategy will depend in part on the level of recognition and protection of intellectual property rights provided by local law, particularly in emerging markets. Since July 2002, we participate in a consortium pooling and managing the licensing patents essential to the MPEG-2 video compression standard. Finally, we are leveraging our expertise in licensing through portfolio licensing services to third parties. Thus, in connection with the TTE partnership referred to above (see Consumer ProductsMainstream Consumer Products), Thomson provides patent management and licensing services to TTE.

For information on certain risks to which our Licensing business is subject, please refer to Key InformationRisk Factors.

Research, Innovation and Product Development

Thomson maintains a longstanding commitment to investing in a broad range of research and development initiatives to support and expand its product and service offerings and licensing programs in order to create competitive advantages and to establish new markets.

Most of the long-term research is managed centrally through Thomsons Research and Innovation department, which employs approximately 500 people mainly in eight research centers on three continents as of December 31, 2004. The largest center, located in Rennes, France, has a staff of 180. Mid-2004, a new research center was opened in Beijing, China. This center is co-located within the facilities of the new Access Products & Gateways activities (prior to January 1, 2005, the Broadband

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Thomson Group

Access Products activities) and has the specific mission to provide local R&D support to this division. The other centers are located in Hanover and Villingen (Germany), Burbank, Indianapolis and Princeton (United States) and Tokyo (Japan).  Since August 1, 2004, TTE operates its own R&D activities.

Product development is carried out within each of Thomsons divisions primarily in the United States, France, Germany, the Netherlands, Belgium, Italy, Singapore, South Korea and China.

Historically, Thomsons research and development efforts have covered a wide spectrum of technologies associated with a consumer electronics company.  Over the past two years, these research and development efforts have been progressively redirected towards projects serving the short- and long-term needs of the M&E industries, utilizing core competencies and knowledge gained through close relationships with Thomsons client base.  Thomsons goal is to develop new technologies to meet clients needs as they face the growth of their digital activities. At the same time, it intends to expand its intellectual property portfolio, enhance product integration in cooperation with its business units, and reduce the time required to bring products and solutions from design to production and eventually to market.  To respond to customer needs, Thomson focuses on key technologies for the M&E industries, including:

- In the
    area of digital content, Thomson focuses on image capture, processing, and
    manipulation technologies that address the wide range of display formats,
    image qualities and applications found
    in the media industry. Examples include cinema formats such as pan-and-scan,
    and standard and high-definition TV. Applications encompass conventional and
    digital cinema, home cinema,
    and Internet. Thomsons research and development focuses on delivering
    highly flexible image capture and processing equipment, and on developing
    next-generation display technologies such as OLED (Organic Light-Emitting
    Diodes), rear-projection and digital cinema.
- In the
    area of digital content production, Thomson develops storage, networking,
    search, access, and asset management solutions, examples of which are Storage
    Area Network (SAN) and multi-SAN architectures. The company also develops
    MPEG-2 compression solutions and platform architectures that allow the exchange
    of content between professional sites across multiple network formats and
    sizes. Leveraging its expertise in compression and IC design, Thomson prepares
    the next generation of encoders and decoders that incorporate MPEG-4 technology.
    In particular, Thomson is playing a leading role in the finalization of the
    new MPEG 4 PART 10/H.264 video compression standard, which will be used in
    bandwidth and storage critical applications.
- In order
    to address customers need to deliver content from multiple sources through
    a diverse range of networks, Thomson develops streaming technologies, adaptive
    network technologies, and
    network systems integration. In addition to its traditional focus on satellite,
    terrestrial and cable
    networking technologies, Thomson develops advanced solutions for ADSL (Asynchronous
    Digital Subscriber Line), quality of service
    and caching solutions for heavy video content delivery
    over
    the Internet, and content delivery over 3G Cellular and WiFi wireless networks.
    It is believed that these wired and wireless technologies will eventually
    become jointly used for delivering digital content to consumers with a high
    degree
    of convenience. Additionally,
    investments are made
    in developing both critical enabling technologies and content-driven applications,
    like streaming video over mobile and heterogeneous networks.
- Thomsons
    research and development leverages its core competence and knowledge of the
    needs of consumers, content providers,
    and distributors to develop innovative digital home networking,
    home media servers, and content protection solutions. The forthcoming digital
    home network architecture and transmission technologies are under development
    to allow the exchange of digital content via different platforms, with particular
    attention paid to the emergence of products based on hard-disk drives, which
    are bringing considerable improvements to the end-consumer experience and
    opening up new opportunities for content providers and network operators.

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- Thomson
    continues to invest in OLEDs, a technology we believe has considerable performance
    and manufacturing cost efficiency potential.
- Currently,
    major product development initiatives include enhanced television displays,
    electronic program guides, interactive service interfaces, digital and high
    definition television, DVD players, tape-less audio/video recorders, digital
    set-top boxes and cable modems.

From January 1, 2005, Research and Innovation is included with Licensing within
  the newly formed Technology division. Thomson has announced that in connection
  with the re-alignment of its strategy, one of the targets in the Groups
  Two-Year Plan is to increase spending on core research by 50% in each of 2005
  and 2006.

Thomsons internal research and development activity is complemented by subcontracting certain research activities to outside providers, as well as by entering into research or co-development activities with strategic partners.  For example, Thomson developed the mp3 digital compression standard in cooperation with the Fraunhofer Institute and Coding Technologies, and in 2001 launched with these two partners mp3PRO, a new version of mp3 that doubles the amount of music that can be stored in memory and improves the audio quality of compressed music files.  Other key R&D partners include INRIA (Institut National de Recherche en Informatique et Automatique)in France, HHI (Heinrich Hertz Institute) and many universities in Germany, LGE in South Korea for some imaging-related R&D projects, and CDT (Cambridge Display Technologies) in the United Kingdom. To access key technologies and accelerate the transition toward digital technologies, products and services, the company also makes selective minority investments in companies with leading technologies considered beneficial to its product lines.  In addition, its internal research and development is supplemented by appropriate intellectual property acquisitions.

As part of our Two-Year Plan, Thomson has constituted a Scientific Council to assess Thomsons R&D in light of external developments in video technologies and Thomsons strategy, to challenge R&D teams on their processes, output, roadmaps, and team qualifications and to make related recommendations to Thomsons Chairman & Chief Executive Officer.

Market Position, Competitors, Clients and Suppliers

The following table provides information on our market position, main competitors and main clients and suppliers for our various activities.

|                                                                              | Market position                                                                                                   |  | Main competitors                                                                                                                                                                                                          |  | Main clients and suppliers                                                                                                                                                                                                              | 
|----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                              |                                                                                                                   |  |                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                         | 
|                                                                              |                                                                                                                   |  |                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                         | 
|Content and Networks
      Post-Production Services
        and Film Services | The Group believes it is the largest independent
      film replicator in the world, based on internal estimates. |  | The Groups main competitor in film processing is Deluxe, a subsidiary
        of the Rank Group.
      The Groups main competitor in post-production services in this
        highly fragmented market is Ascent Media. |  | The Groups principal clients are large film studios such as Disney,
        Warner Bros., Universal Studios, DreamWorks, and large broadcasters such
        as ABC, UPN, and the BBC.
      Our major suppliers include Kodak (film). | 
|                                                                              |                                                                                                                   |  |                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                         | 

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Thomson Group

|                                                             | Market position                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Main competitors                                                                                                                                                                                                                                                                         |  | Main clients and suppliers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 
|Content and Networks
      Home Entertainment Services (DVD) | Thomson has significant presence in the DVD replication
      market in the United States and in Europe (based on Understanding &
      Solutionsmarket studies).                                                                                                                                                                                                                                                                                   |  | The Groups principal competitors are Cinram, Sony DADC, Sonopress
        and Deluxe for DVDs, and Deluxe and Cinram for VHS cassettes.                                                                                                                                                 |  | Major customers include, Disney, Warner Bros., Universal Studios DreamWorks,
        Paramount and Microsoft.
      Our major suppliers include Singulus for replication lines for DVDs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 
|Content and Networks
      Broadcast & Media solutions       | Broadcast & Media solutions (using the brand
      name Grass Valley) businesses are present in more than 22 countries. Based
      on internal estimates, Thomson is the leading supplier worldwide in IT-based
      broadcast servers, switchers, routers and film imaging equipment used in
      post-production. Thomson also estimates that it holds the number two position
      worldwide in broadcast cameras based on volume and value. |  | The main competitors for Thomsons Grass
      Valley businesses are Sony, Panasonic and Avid in the established broadcast
      market (e.g., TF1 and NBC), Extron and Pinnacle in the professional market,
      and Harmonic and Tandberg Television in the network operators market. |  | Broadcast & Media Solutions supplies its digital broadcast solutions,
        equipment and service to a large number of television, post-production
        professionals and digital TV network operators worldwide.
      Its products and services offerings include reporting and studio video
        cameras; digital processing and management equipment and systems for television
        studios and mobile outdoor broadcasting vans; image and sound processing
        equipment for broadcasters and post-production operators; as well as management,
        transmission and compression systems for pay television operators. Such
        equipment and systems are produced and developed internally or purchased
        from different suppliers such as for certain video cameras. | 
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 

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|                                                     | Market position                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Main competitors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Main clients and suppliers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Content and Networks
      Broadband Access Products | The Group estimates it is the worldwide leader in satellite set-top boxes
        (decoders) based on volume and value. Our estimates indicate that our
        market position improved significantly in the U.S. set-top box market
        in the second half due to the supply agreement signed with DIRECTV. We
        continue to build our presence in Asia.
      We believe that we are the worldwide leader in DSL modems based on volumes
        sold.
      We also have a strong market share in cable modems and cable set-top
        boxes, particularly in Europe. |  | The Groups main competitors in satellite STBs in the Americas include
        Humax, Phillips and Samsung. In Europe and the Asian-Pacific region, our
        main competitors in satellite and terrestrial STBs are Pace, Phillips
        and Humax.
      The Groups main competitors in telecommunications products include
        Uniden, Vtech, and Siemens in the Americas. Siemens, Sagem, Phillips,
        and Vtech are the main competitors within European market.
      Our main competitors in DSL modems are Siemens and Sagem.
      Our main competitors in cable modems are Motorola and Scientific Atlanta.
        Our main competition in cable set-top box are Motorola, Pace, and Scientific
        Atlanta. |  | Our strong relationship with DIRECTV leads our customer list in the
        Americas decoder business, with Echostar and Sky Latin America also being
        important customers in the Americas.
      Our largest satellite customers in Europe are BSkyB and Sky Italia.
        Additional important European customers include Canal Satellite, ViaSat
        and Sogecable. A majority of our satellite STBs business is conducted
        with News Corp affiliates.
      Our largest telecommunications customers are France Telecom, Telefonica
        and KPN. Telstra (Australia), Telmex (Mexico) and British Telecom also
        are significant Telco customers.
      Key customers within our cable business (cable modems and set-top boxes)
        include Comcast, Time Warner Cable, Liberty Globals European affiliates,
        Noos (acquired by Liberty Global in 2004), Eltisalat and NetBrazil, UPC
        Europe and Golden Channels. | 
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|Components                                           | In 2004, Thomson was one of the leading providers
      worldwide of cathode ray tubes for televisions. In the market of large and
      very large size tubes, the Group believes it is the second largest manufacturer
      worldwide in terms of volume, based on internal estimates.                                                                                                                                                                                                                                                                                             |  | Our main competitors are LG/Philips Displays,
      SDI, MTPD (Matsushita Toshiba Picture Displays)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Our main clients are the large consumer electronics
      products manufacturers (see Consumer Products below), including
      large Chinese consumer electronics groups (such as ChangHong, Skyworth,
      TCL/TTE and Konka).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 

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Thomson Group

|                  | Market position                                                                                                                                                                                       |  | Main competitors                                                                                                                                                                                                                                                                                                                                                                        |  | Main clients and suppliers                                                                                                                                                                                                             | 
|----------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                  |                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                        | 
|                  |                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                        | 
|Consumer Products | The Group estimates that it had a high single digit market shares in
        both U.S. and European markets for televisions, prior to the transfer
        of the television business to TTE in 2004. |  | The Groups principal competitors are:
      for audio products: Panasonic, Philips, Sony and Apple;
        for retail communication products: Panasonic, Uniden and V-Tech; and
        for consumer accessory solutions: Monster Cable, Philips/Gemini, Belkin,
          Hama, Vivanco.The principal competitors of TTE are Matsushita, Philips, Samsung, Sony
        and Toshiba. |  | Our main distributors were national retail chains in the United States
        such as WalMart, Best Buy, Target, Circuit City, RadioShack and Home Depot
        and, in Europe, groups such as MediaMarkt, Carrefour, FNAC and Kesa. | 
|                  |                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                        | 

Licenses and
  Trademarks

We believe that we own or have licenses in the technology necessary to compete in the markets for our products and systems.  Since the practice in these markets has historically been to provide licenses on reasonable and equitable terms, we expect to continue to have access to the licenses necessary to manufacture and sell our products.

We also believe we have licenses in and are able to use the trademarks that are necessary to our business.

We acquired ownership of the RCA®brand name in 2002 after having used it for 15 years under a license conceded with respect to certain regions and products pursuant to certain agreements in 1987 with General Electric. In March 2001, we acquired the Technicolor assets and businesses, including the Technicolor®trademark.  During 2001, we purchased the THOMSON®names and all attached rights from TSA and Thalès S.A.  For more details on these contracts, refer to Item 7:  Major Shareholders and Related Party TransactionsRelated Party Transactions.  In March 2002, we acquired Grass Valley Group, Inc., which owns the Grass Valley®trademark.

In July 2003, Thomson acquired from the American company Recoton Inc. the trademarks of Recoton, Ambico, Discwasher and Sole Control in the accessories business.

Thomson has also granted a 20-year exclusive license (until August 1, 2024 ) to TTE to produce and market television sets under the RCA®and THOMSON®brands principally in the United States and the European Union, as well as certain other regions.

Sourcing

Thomson has a centralized sourcing organization. The department consists of
  approximately 220 employees directly and indirectly involved in global sourcing
  initiatives, compared to approximately 330 employees in 2003. This decrease
  resulted primarily due to the transfer of a certain number of sourcing employees
  to TTEs organization in connection with its creation.

Our employees work closely with each business unit and are present both in countries where suppliers are located (particularly Asia) and where our businesses are located. These individuals select and

47

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manage our network of suppliers of raw materials, components, finished goods, services and equipment. Their objective is to optimize supply arrangements and benefit from global volumes and common vendors, the standardization and deployment of best practices throughout the different operational divisions, while staying in close touch with the business units needs.  In addition, Thomson has built relationships with key suppliers like Kodak, Elcoteq, Schneider Logistics and STMicroelectronics, thus strengthening its position for the purchase of raw materials, contract manufacturing, logistic services and key integrated circuits.

For several years, Thomson has been implementing specific programs to improve global sourcing costs and continuously increase efficiency and performance. Our sourcing resources are organized to manage global commodities and services centrally across business units.  We also focus on expanding upstream sourcing activities in coordination with our Research & Innovation and Product Development teams in order to optimize cutting edge technology with sourcing requirements based around standard platforms. In order to strengthen the Groups cash generation, sourcing also focuses on payment extensions and working with key suppliers on vendor managed inventory structures.

Thomson has obtained significant price reductions linked to the sourcing performance and to the increased competition among our suppliers. In 2004, we have continued to experience a significant decrease in materials costs across our organization. By focusing proactively on driving down total material costs, while controlling sourcing function costs, we have been able to absorb adverse raw material price movements from oil and metals, and enhance our capacity to partially offset selling price declines.

In addition, we have increased our use of electronic exchanges with our suppliers, achieving increased automation and improving the reliability of ordering and forecasting processes, and have implemented innovative collaborative planning projects. Since 2000, these initiatives have been extended towards indirect purchasing, for example, with the comprehensive deployment of an e-procurement platform called Easysource, in order to control and optimize non-production purchasing. With our TOCOM database for direct materials and Easysource for indirect materials and services, we believe Thomsons sourcing system is one of the most advanced and efficient tools in the industry.

In 2001, we created a joint venture named KeyMRO with the objective to group Thomsons non-production purchases with those of two other French companies, Rhodia and Schneider, and thereby to reduce the total cost of non-production goods and services purchased by leveraging combined volumes. In December 2004, Thomson, Rhodia and Schneider sold to IBM their stake in KeyMRO. As part of the agreement, Thomson, Rhodia and Schneider has signed a 7-year services agreement with IBM for the provision of key procurement services for indirect supplies such as business travel, office supplies, information technology, telecommunications, marketing and advertising and manufacturing maintenance.  IBMs expertise and knowledge, together with the larger scale of purchases, should further enhance the performance of KeyMRO.

Our sourcing organization not only participates in the integration of newly-acquired businesses through the implementation of our global processes, but also benefits from activities with our business partners.  For example, the identification of all components required for the manufacture of our products with TTE, with finished goods suppliers and with contract manufacturers has allowed us to combine and leverage volume purchases.

We believe that the termination of any one of our supply contracts would not materially endanger our operations or financial condition. The principal suppliers of the Group in 2004 are of four types:

- suppliers
    of finished products for the Consumer Products division, which are primarily
    Asian-based suppliers (CCT, Chase Glory);
- contract
    manufacturers for various products such as satellite and terrestrial decoders
    (Elcoteq, Celestica
    and Solectron);

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Thomson Group

- suppliers
    of logistical services (Schneider Logistics and Geodis Logistics); and
- suppliers
    of components or primary materials (ST Microelectronics and Kodak).

C Organizational Structure

Please refer to Note 30 to our consolidated financial statements for a list of Thomsons subsidiaries.

D Property, Plants and Equipment

Industrial Facilities and Locations

In order to deliver our product and service offering to our customers, we have developed an industrial organization with important manufacturing operations.  In addition, we rely on outsourcing for the manufacturing of some of our finished products.

Our objective is to continually improve the location and the organization of our manufacturing operations to reduce our production costs, minimize our stock levels and improve our lead-times. We have implemented over the last few years an outsourcing policy for the manufacturing of some of our finished products such as audio and communication products, accessories and DVD players. We rely on third-party competencies for the manufacturing of a significant proportion of standardized products in order to focus our resources on the conception and manufacturing of high-end components and products. At the end of 2004, we had facilities involved in the production and distribution of DVDs and VHS tapes, in motion picture film processing, in the manufacturing of cathode ray tubes and components, and in the production of set-top decoders and audio products.

The table below shows our manufacturing facilities by division at the end
  of 2004. We own or lease all of these facilities, including all Chinese facilities,
  which are on a long-term lease due to local legal requirements, and the Mexicali
  plant (construction and equipment), which was financed through a synthetic lease
  until January 24, 2005. In addition, we had entered into a sale-lease back transaction
  in 2001 through our Polish subsidiary which transferred ownership of tube manufacturing
  equipment and was unwound on March 31, 2004. Pursuant to the contribution agreement
  creating TTE, we contributed certain television production plants, including
  our television manufacturing plants and businesses in Mexico, Poland and Thailand,
  as well as all television R&D centers worldwide and certain other assets
  constituting substantially our television production business, to the joint
  venture. For further information regarding our TTE, see Business
  OverviewMainstream Consumer ProductsLaunch of TTE. We
  also lease our office buildings in Boulogne, France and Indianapolis, Indiana,
  USA. For more information on these leases, see the discussion under Item 5:
  Operating and Financial Review and ProspectsLiquidity and
  Capital Resources, as well as Note 24 to our consolidated financial statements.

|Principal Manufacturing Facilities |                    |                    
|---------------------------------- | ------------------ | -------------------
|                                   |                    |                    
|Location                           | Division           | Products           
|                                  
|Americas:                          |                    |                    
|Camarillo (California, USA)        | Content & Networks | DVD services       
|Livonia (Michigan, USA)            | Content & Networks | VHS services       
|Nevada City (California, USA)      | Content & Networks | Broadcast equipment
|North Hollywood (California, USA)  | Content & Networks | Film services      
|Mirabel (Canada)                   | Content & Networks | Film services      
|                                   |                    |                    
|Juarez (Mexico) (1)                | Consumer Products  | Televisions        
|Guadalajara (Mexico)               | Content & Networks | DVD services       
|Mexicali (Mexico)                  | Components         | Tubes              
|Manaus (Brazil)                    | Content & Networks | Decoders           

49

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|Location                              | Division           | Products             
|------------------------------------- | ------------------ | ---------------------
|                                     
|Europe:                               |                    |                      
|Piaseczno (Poland)                    | Content & Networks | DVD services         
|Piaseczno (Poland)                    | Components         | Tubes                
|Zyrardow (Poland) (1)                 | Consumer Products  | Televisions          
|Anagni (Italy) (2)                    | Components         | Tubes                
|Rome (Italy)                          | Content & Networks | Film services        
|Cwmbran (UK)                          | Content & Networks | DVD services         
|West Drayton (UK)                     | Content & Networks | Film services        
|Breda (The Netherlands)               | Content & Networks | Broadcast            
|Angers (France)                       | Consumer Products  | Televisions          
|Bagneaux (France)                     | Components         | Glass panels, funnels
|Cergy (France)                        | Content & Networks | Broadcast            
|Weiterstadt (Germany)                 | Content & Networks | Broadcast            
|                                      |                    |                      
|                                      |                    |                      
|Asia:                                 |                    |                      
|Foshan (China)                        | Components         | Tubes                
|Dongguan (China) (since January 2004) | Components         | Tubes                
|Dongguan (China)                      | Consumer Products  | Audio                
|Melbourne (Australia)                 | Content & Network  | DVD services         
|Bangkok (Thailand) (1)                | Consumer Products  | Televisions          
|                                     

|(1) | Transferred from Thomson to TTE, effective July 31, 2004.            
|--- | ---------------------------------------------------------------------
|(2) | The Anagni facility was transferred to Videocon on February 28, 2005.

Our former Marion and Circleville facilities, based in the United States, are no longer operational.

Environmental Matters

As a global leader in providing a diverse range of video technologies, systems, equipment, and services to consumers and professionals in the M&E industries, Thomson seeks to establish and apply in its facilities worldwide consistent environmental standards. Such standards should not only assist each of our locations in meeting all requirements of the country in which it is located, but may also enable each to develop programs that go beyond local regulatory requirements.  To support and encourage environmental leadership, Thomson has established a number of programs and initiatives to assist the Group in achieving these standards. These programs are led and implemented by the Groups environmental department, Corporate EH&S Organization, which is based at the Groups headquarters in Boulogne, France. The four most significant of these are described below:

|1. | Corporate Environmental, Health and Safety (EH&S) Charter:The EH&S Charter, along with its appropriate supporting policies
      and guidelines, is the cornerstone of our EH&S program. It defines key
      management principles designed to protect human health and the environment,
      to help us meet our legal and corporate responsibilities, and to provide
      a measure of guidance for each of our locations activities and operations.
      The EH&S Charter has been translated into five languages and is displayed
      at each industrial site and is available on-line at all locations via an
      internal EH&S website.                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | EH&S audits:Our EH&S audits are a key part
      of Thomsons efforts to improve EH&S management and performance,
      and to prevent accidents from occurring. In addition to the establishment
      of internal audits within each manufacturing, packaging, and film lab site,
      a comprehensive corporate audit program was implemented in 1996. Auditors
      are both internal and external personnel who have been trained and are experienced
      in auditing. The aim of the audit program is to review our industrial locations
      compliance with Corporate EH&S Policies and Guidelines and specific
      applicable EH&S laws and regulations. The audit program has also been
      demonstrated to be a valuable tool for increasing awareness of personnel
      throughout the

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Thomson Group

|   | organization,
      identifying best practices, communicating successful initiatives
      among plants, creating opportunities for different approaches to problem
      solving, and exposing our EH&S personnel to other aspects of our multi-faceted
      business. In 2004, 13 locations were audited as part of our objective of
      auditing each manufacturing location at least every three years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3. | Implementation of an Environmental Management System (EMS):An EMS is a continual cycle of planning, implementing, evaluating and
      improving practices, processes and procedures to meet environmental obligations
      and to successfully integrate environmental concerns into normal business
      practices. ISO 14001 is the most widely accepted international standard
      for an EMS. To receive certification, organizations are required to develop
      detailed plans and procedures to identify, evaluate, quantify, prioritize
      and monitor environmental impacts of its activities. In 2001, Thomsons
      Executive Committee identified the facilities that would benefit the most
      by implementing an EMS and required completion of ISO 14001 certification
      by December 31, 2004. Currently, 34 locations have completed the ISO 14001
      certification process, up from 12 at the end of 2003. Two remaining significant
      industrial sites are scheduled for completion in 2005.
|4. | Annual Performance Measurement Process:A process
      was implemented in 1997 to allow for the consistent measurement and reporting
      of key management programs and requirements within each of our industrial
      locations, and their progress toward environmental, safety and resource
      conservation improvement goals. This process establishes benchmark criteria,
      helping us create consistent global focus and action on key programs, requirements
      and initiatives. Measured criteria include the establishment of internal
      EH&S audits and inspections, development of emergency preparation and
      response plans and associated training and drills, development of EH&S
      Committees, identification and completion of EH&S related employee training,
      and each locations progress toward zero work related injuries and
      lost workdays, reducing environmental impacts to air, water and land, and
      reducing the consumption of water, energy, or raw materials.   

Furthermore, Thomsons Corporate EH&S Organization monitors and responds to new governmental law and regulation on a Group-wide basis.  For example, in Europe, projects are on schedule for compliance with the EU Restriction of Hazardous Substances in Electrical and Electronic Equipment (ROHS) Directive and the EU Waste Electrical and Electronic Equipment (WEEE) Directive. Also, in the Americas, several countries, provinces, and states have introduced legislation concerning restriction of hazardous substances, landfill bans, or end-of-life recycling, and certain laws have been enacted in this area that will become effective in 2005, including in Mexico, some U.S. states and some Canadian provinces, which the Group believes will not have a material effect on our business or financial position.

A certain number of Thomsons current and previously owned manufacturing sites have an extended history of industrial use. Soil and groundwater contamination, which occurred at some sites, may occur or be discovered at other sites in the future. Industrial emissions at sites that Thomson has built or acquired expose the Group to remediation costs. The Group has identified certain sites at which chemical contamination has required or will require remedial measures.

Soil and groundwater contamination was detected near a former production facility
  acquired from General Electric and owned by Thomson from 1987 to 1992 in Taoyuan,
  Taiwan. Production activities at this site ceased after being sold by the Group.
  Thomson is currently working with the local Taoyuan Environmental Protection
  Bureau to perform an investigation and feasibility study relating to potential
  groundwater contamination issues. In accordance with an agreement for the acquisition
  of General Electric Companys consumer electronics business in 1987, General
  Electric Company has assumed or indemnified Thomson with respect to certain
  liabilities resulting from this issue, and should assume or indemnify the Group
  with respect to certain liabilities that could arise from the period prior to
  Thomsons acquisition of the property.

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The Group
  believes that the amounts reserved and the contractual guaranties provided by
  its contracts for the acquisition of certain production assets will enable it
  to reasonably cover its safety, health and environmental obligations. Potential
  problems cannot be predicted with certainty, however, and it cannot be assumed
  that these reserve amounts will be precisely adequate. In addition, future developments
  such as changes in governments or in safety and health laws or the discovery
  of new risks could result in increased costs and liabilities that could have
  a material effect on the Groups financial condition or results of operations.
  Based on current information and the provisions established for the uncertainties
  described above, the Group does not believe it is exposed to any material
  adverse effects on its business, financial condition or result of operations
  arising from its environmental,
  health and safety obligations and related risks.

Insurance

Thomson
  has insurance policies to cover its principal risks, which are purchased from
  various insurance
  companies.

Moreover,
  in partnership with its insurers, Thomson has a program of prevention and protection
  of its production sites in order to reduce its risk exposure to its assets and
  financial losses that may be caused if such risks are realized. The insurance
  policies subscribed locally by the units of the Group are protected under a
  worldwide program, that provides local insurance cover with corporate umbrella
  coverage, applying on difference in conditions and on difference in limits of
  the local coverage.

The level
  of deductibles is adapted according to the assets and the risks of the operational
  units. Property damage and consequential business interruption are covered up
  to a limit of 300
  million per occurrence. The general commercial and product liability insurance
  policy covers liability up to a limit of
  114.5
  million. The policy is all risks except standard exclusions. Due
  to the transfer of our television business to TTE, the values to be covered
  for exposed risks have been adjusted accordingly.

The insurance
  plan also covers transportation, material damage and employers liability
  insurance where
  required. Thomson also subscribes to directors and officers liability
  insurance and an environmental pollution insurance policy. Additional policies
  are maintained where necessary to comply with applicable laws or to provide
  additional coverage for particular circumstances and activities. Accordingly,
  we maintain independent automobile and personal liability policies in the jurisdictions
  in which they are required.

We intend
  to continue our practice of obtaining global insurance coverage, increasing
  coverage where necessary and reducing costs through self-insurance where appropriate.
  Currently, the Group does not have in place any captive insurance company. We
  do not anticipate any difficulty in obtaining adequate levels of insurance in
  the future.

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Thomson Group

ITEM 5 - OPERATING
  AND FINANCIAL REVIEW AND PROSPECTS

You should read these comments on our operating and financial results in
  conjunction with our audited consolidated financial statements and the related
  notes and other financial information included elsewhere herein. Our audited
  consolidated financial statements have been prepared in accordance with French
  GAAP, which differ in certain material respects from U.S. GAAP. Notes 31 and
  32 to our consolidated financial statements describe the principal differences
  between French GAAP and U.S. GAAP as they relate to us and reconcile our net
  income and shareholders equity. We also summarize these differences below
  in OverviewPrincipal Differences between French GAAP and U.S.
  GAAP. For a discussion of our adoption of International Financial Reporting
  Standards (IFRS) and the anticipated effects thereof on the presentation of
  our operating and financial results, please referbelow
  to Transition to IFRS.

Overview

Thomsons
  core business is to provide the M&E industries with the services, systems
  and equipment, and technologies they need to achieve their commercial objectives
  and to optimize their performance in a changing technology environment for video
  and imaging. We have developed leading positions at the intersection of entertainment,
  media and technology and offer complete solutions to content providers, network
  operators, manufacturers and distributors. With the implementation of our five
  strategic priorities and our Two-Year Plan, we seek to build upon these positions
  to become the preferred partner of the M&E industries. For a more detailed
  description of our strategy and objectives of our Two-Year Plan, please refer
  Item 4: Information on the CompanyOur StrategyPreferred Partner
  of the Media & Entertainment Industries.

In 2004,
  as in 2003, our activities were organized and reported on according to four
  operating divisions: Content & Networks, Components, Consumer Products and
  Licensing. Effective January 1, 2005, we reorganized our businesses in three
  divisions, Services, Systems & Equipment, and Technology, with a fourth
  activity, Displays & Consumer Electronics Partnerships. For a more detailed
  description of the reorganization of our businesses, see Item 4: Information
  on the CompanyOur OrganizationTransformation to Implement Our Strategy,
  and for a description of the products and services provided by each of our 2004
  segments, see Item 4: Information on the CompanyBusiness Overview,
  respectively.

Key
  economic drivers

Our strategic priorities and our Two-Year Plan objectives described under
  Item 4: Information on the CompanyOur OrganizationTransformation
  to Implement Our Strategy are based on our vision of how the M&E industries
  may develop by 2010. We believe the most significant long-term trends include
  the following:

- Some
    consolidation will occur in the European
    M&E industries, while significant M&E groups and markets
    will emerge
    in Asia, particularly
    China;
- Our M&E
    clients will have outsourced many of their activities;
- China
    and India will have become mainstream M&E markets;
- The transition
    to High Definition (HD) will be complete;
- Mobile
    video will be pervasive;
- Intellectual
    property will remain a key differentiator and significant source of direct
    and indirect revenues;
- Security
    technologies and services to combat piracy will have been implemented;

53

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- China
    will have become a technology standards-setter;
- Electronic
    delivery of content into the home will have emerged. Consumers will continue
    to buy pre-recorded content at retail, but will also be purchasing or renting
    content (events, etc.) directly from home;
- In addition
    to film print, digital delivery of movies to cinemas will have developed;
- Network
    operators will have largely switched to IP technologies;
- All networks
    will have triple play offerings;
- Connected
    products will be ubiquitous inside and outside the home; and
- Home
    networking will have been implemented.

These long-term trends represent the Groups vision of how the M&E industries
  may develop by 2010 and they influence how the Group is allocating and plans
  to allocate its resources. They also influenced the determination of the eight
  growth boosters and two main engines for revenue growth that the Group has
  identified in the framework of its Two-Year Plan, as described in Item 4: Information
  on the CompanyOur StrategyPreferred Partner of the Media & Entertainment Industries.
  The Two-Year Plan focuses the Group on the development and delivery of innovative
  products, services and technologies that are, and become, widely adopted in
  response to these anticipated long-term trends in the M&E industries.

It should be noted that the discussion and analysis below reflects the Groups
  financial results and operating performance both prior to and subsequent to
  the strategic decisions made over the course of 2004, described in Item 4: Information
  on the CompanyOur StrategyPreferred Partner of the Media & Entertainment Industries.

Seasonality

Our net
  sales historically tend to be higher in the second half of the year than in
  the first half, reflecting the
  increased business conducted by all our customers during the autumn selling
  season and year-end
  holidays.

The net
  sales of our Content and Networks businesses in the second half of 2004 totaled
  approximately 2.3
  billion, representing 57% of the divisions 2004 net sales, compared to
  approximately 2.0
  billion in the second half of 2003, representing 55% of the divisions
  2003 net sales.

The net
  sales of our other divisions in the second half of the year decreased to 1.8
  billion, or 45%, of these divisions 2004 net sales, compared to 56% of
  the divisions net sales in 2003. However, this substantial decrease was
  mainly due to the exit of substantially all of Thomsons television business
  from our perimeter of consolidation with the start-up of operations of TTE as
  of August 1, 2004, rather than to seasonal trends. Our television sales in the
  second half of 2004 (primarily July) amounted to 53
  million, compared to 941
  million and 1,113
  million in the second half of 2003 and 2002, respectively.

The impact
  of seasonality has historically tended to be higher at the operating income
  level, driven by the fact that fixed costs are spread relatively evenly over
  the year. Our consolidated operating income totaled
  288
  million in the second half of 2004, or 66.3% of our 2004 consolidated operating
  income, compared with 73% in the last six months of 2003. Presented separately,
  the operating income of the Content and Networks division in the second half
  of 2004 represented 68% of total year operating income
  for this division, compared to 69% in 2003 over the same period.

Geographic
  breakdown of 2004 net sales

Based on net sales by destination (classified by the location of the customer),
  our most important markets are the United States and Europe, accounting for
  45% and 34%, respectively, of net sales in 2004, compared to 45% and 35%, respectively,
  in 2003, and 51% and 31%, respectively, in 2002. Asia accounted for 14% of our
  net sales by destination in 2004 compared to 12% in 2003 and 10% in 2002.

Effect
  of exchange rate fluctuations

We estimate
  that the impact of translating revenues of operating entities that are denominated
  in currencies other than euro into euro had a negative impact of 399
  million on our net sales as expressed in euro in 2004, compared to a negative
  impact of 1,062
  million in 2003 and 445
  million in 2002. We estimate that the impact of translating revenues of operating
  entities that are denominated in
  currencies other than euro into euro had a negative impact of 5
  million in 2004 (44
  million in

54

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Thomson Group

2003) on
  our operating income as expressed in euro in 2004, or 1.2% of the Group 2004
  operating income, in spite of a 7% decrease in the euro/dollar exchange rate
  during 2004.

Summary of Results

Operating
  income in 2004 was 434
  million (5.4% of net sales in 2004), while we recorded a net loss of 636
  million due to restructuring charges recognized in 2004, including a charge
  of 742
  million related
  primarily to our Components business. In 2003, we recorded operating income
  of 508
  million (6%
  of net sales), while we recorded a net income of 26
  million in 2003 and a 217
  million restructuring
  charge.

Thomsons
  net loss per share was 2.32
  in 2004, compared to net income per share of 0.09
  in 2003.

Thomsons
  Board of Directors proposed on March 1, 2005 that Thomson pay a dividend of
  0.285
  per
  share in respect of 2004, a 10% increase on the dividend approved at shareholders
  meeting of May 7, 2004 in respect of 2003 of 0.26
  per share. This proposed dividend was approved at the shareholders meeting
  on May 10, 2005. The payment of the dividend will occur after May 27, 2005.
  For a description of the payment of dividends under French company law, please
  refer to Additional InformationMemorandum and Articles of AssociationDividends.

On April
  21, 2005, Thomson announced its revenue for the first quarter of 2005. For more
  information about our first quarter 2005 results and the full text of that announcement,
  refer to our report on Form 6-K filed with the U.S. Securities and Exchange
  Commission on April 21, 2005, certain parts of which are incorporated herein
  by reference and included as Exhibit 99.1 to this report.

In the sections entitled Results of Operations for 2004 and 2003 and Results
  of Operations for 2003 and 2002, certain net sales figures at the Group and
  segment levels are presented where indicated on a comparable basis at constant
  exchange rates and a constant scope of consolidation. To this end, the actual
  figures of the earlier financial year in the respective year-on-year comparison
  are restated to take into account certain perimeter changes, while the figures
  for the more recent year are adjusted to reflect perimeter changes and also
  to eliminate exchange rate effects by applying for the more recent year the
  average exchange rate used for the income statement for the earlier financial
  year. Regarding perimeter adjustments for acquisitions, in the 2003 and 2004
  year-on-year comparison we have excluded sales resulting (a) from significant
  acquisitions occurring in 2003 from the 2003 and 2004 sales figures and (b)
  from significant acquisitions occurring in 2004 from the 2004 sales figures.
  We applied this same methodology for the 2003 and 2002 year-on-year comparison
  in respect of acquisitions. The only significant disposal in the periods covered
  by the comparisons was the transfer of Thomsons television assets to TTE on
  July 31, 2004: we have included in the 2004 sales

55

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figures the sales generated from these assets prior to their disposal, while
  adjusting the 2003 sales figures to include only those sales generated in the
  period of 2003 corresponding to the period of ownership in 2004 (i.e., net external
  television sales for the last five months of 2003 have been excluded). We believe
  this presentation of changes in net sales, adjusted to reflect perimeter changes
  and exchange rate fluctuations, for these year-on-year comparisons are helpful
  for analyzing the performance of the Group, during a period of repositioning
  for the Group and of significant exchange rate fluctuations, particularly concerning
  the US Dollar, which affected the Groups reported numbers.

Events Subsequent to December 31, 2004

|1. | Signature of a development agreement with Funai Electric.
      On January 20, 2005, Thomson announced the closing of a partnership in the
      digital TV field with the Japanese group Funai Electric, a TV and electronic
      products manufacturer. This partnership encompasses joint developments and
      an exclusive license to Funai for some patents in digital television technology.
      In connection with a separate supply agreement, Thomsons Displays
      operation will also supply cathode ray tubes to Funai.                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | Recent Developments Relating to Our Partnership Strategy
      for the Displays Activity.
      Since December 31, 2004, Thomson has continued to advance its partnership
      project for its Displays business. At the end of February, the first phase
      of the project was completed, with multiple indications of interest from
      potential strategic and from financial partners. In addition, on February
      28, 2005, Thomsons Videocolor subsidiary comprising its Anagni tube
      production site was formally sold to the Indian company, Videocon, for 10.
      Prior to disposal, Thomson recapitalized the business with 103 million
      of cash. Estimated cash and non-cash costs related to these subsequent events
      could reach up to €365 million of which €195 million has been
      recorded in Thomsons 2004 accounts (see Notes 18 and 29 to our consolidated
      financial statements) and the rest taken into 2005.

|3. | Microsoft-Time Warner-Thomson Complete Acquisition Of
      ContentGuard.
      On March 15, 2005, Microsoft, Time Warner and Thomson announced completion
      of their three-way acquisition of ContentGuard. ContentGuard is a developer
      of digital rights management (DRM) technologies. Thomson, Microsoft
      and Time Warner will each hold a 33.3% voting position in ContentGuard and
      will each appoint two directors on the ContentGuard board. Working together
      with ContentGuard, the companys three strategic investors aim to help
      promote the development of inter-operable DRM systems, accelerate the deployment
      of consumer devices that support Digital Rights Management, and encourage
      content owners to launch new distribution channels. The partners plan to
      continue development of ContentGuards intellectual property and to
      promote innovation in electronic content distribution using DRM technologies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | Thomson and Screenvision launch digital distribution network
      in the United States.
      On March 15, 2005, Thomson and Screenvision, a world leader in cinema advertising
      and a joint venture of Thomson and ITV plc, announced the launch of the
      worlds largest digital cinema distribution network for cinema advertising
      in the United States. Technicolor Digital Cinema, part of Thomsons
      Services division, will provide technology, network operations and digital
      content management systems on an exclusive basis to Screenvision and its
      theatre advertising customers. Screenvision provides advertisement services
      to nearly 15,000 screens in the United States, of which approximately 5,000
      will be digitized during the initial deployment. Screenvision, which will
      invest over U.S.$50 million to deploy the network, will leverage the expertise
      of Thomsons post-production, media asset management, digital cinema,
      network operations and its new digital advertising management system, SkyArc.
      Through SkyArc, Thomson and its Technicolor Digital Cinema business will
      operate a national network operations center providing content preparation
      and distribution, playlist management, network operations and field services.
      The network will be capable of distributing effectively and securely via
      satellite, broadband or physical digital media.

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Thomson Group

|5.  | Acquisition of Inventel, a leader in Telecom access devices
      and wireless technologies.
      On March 29, 2005 Thomson acquired Inventel, a leading provider of innovative
      voice and data solutions to telecommunications operators and ISPs. Combining
      Inventels expertise with Thomsons world leading positions in
      DSL and video technologies and solutions will enable the Group to expand
      its customer base, market reach and ranges of multiple-play gateways. The
      acquisition price was partly paid with treasury shares of Thomson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6.  | Acquisition of MediaSec, leader in Content Security Technologies.
      On March 31, 2005, Thomson acquired MediaSec Technologies GmbH, a pioneer
      in digital watermarking and copy detection technologies. Digital watermarking
      involves secure and imperceptible marking of digital media such as video,
      images, audio and any type of digitally processed document. MediaSec, based
      in Essen, Germany, with a presence in the United States, has a strong portfolio
      of patents and software products, which Thomson expects to build upon to
      meet the Media & Entertainment industries growing need for content
      security and tracking solutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|7.  | Strategic Alliance with SingTel to Form Asian Digital
      Distribution Network.
      On April 18, 2005, Thomson and SingTel, the leading telecommunications provider
      in Asia, announced a strategic alliance to provide an Asian digital distribution
      network for Media & Entertainment clients. Thomson will manage content
      preparation, packaging, scheduling and logistics, as well as security-related
      issues on behalf of content owners. SingTel will manage the network infrastructure
      and transmission services. The strategic alliance leverages SingTels
      extensive fiber and satellite network and Thomsons global position
      as a leading content service provider in the Media & Entertainment industries
      to offer a robust digital content delivery service. Service offerings which
      will be enabled by the strategic alliance include point-to-point electronic
      file transmissions of content such as digital cinema masters for distributors,
      broadcast content for channel operators and distributors, and production/working
      files for regionalization or preparation between Hollywood (Los Angeles)
      and Asia. Within Asia, the service offerings will include point-to-point
      and point-to-multipoint distribution of content that includes digital cinema
      distribution services to theaters, TV channel playout and uplink services,
      broadcast disaster recovery services and other out-of-home video networks
      and content delivery services.
|8.  | Acquisition of Cirpack, European Leader in Softswitch
      Solutions.
      On April 21, 2005, Thomson acquired Cirpack, the leading European provider
      of softswitch platforms. Following the acquisition of Inventel on March
      29, 2005, Cirpacks softswitch technology expertise complements Thomsons
      existing offering to telecoms operators in IP telephony and triple play
      (voice, video, data). Cirpack addresses the voice management market which
      is poised to expand at a very high growth rate in the coming years. With
      a wide European customer base of over 45 telecom operators and ISPs, the
      company has secured a large share of the European softswitch market. A softswitch
      is the software platform responsible for controlling call processes in the
      network, as well as managing remotely access devices and service applications.
      It is key to helping telecom operators drive voice, data and video convergence
      in IP networks, in order to allow effective delivery of innovative communication
      and entertainment services. The acquisition price will be partly paid in
      treasury shares of Thomson.                                                                                                                                                                                                                                                                                                                                                             
|9.  | Al Jazeera International Awards Thomson Contract for First
      Full High-Definition News Channel Worldwide.
      On April 21, 2005, building on its position in providing high-definition
      (HD) solutions across the broadcast, film and network markets, Thomson announced
      that Grass Valley®(Broadcast & Networks) had been awarded
      a contract for the design and implementation of the first all-HD news channel
      worldwide. Grass Valleys Systems Group will support this turnkey project
      with engineering, design and implementation as well as professional services
      and on-site support.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10. | Intention to Transfer TV Marketing & Sales to TTE
      and Create a Dedicated Connectivity Sales Force.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

57

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| | Thomson will put in place shortly a sales force dedicated
      to its Connectivity business and accordingly TCL and Thomson announced on
      April 21, 2005, that Thomsons TV Marketing & Sales activities
      will be transferred to TTE. Thomson employees with positions related to
      TV would transfer to TTE under the plan, and employees focused on Thomsons
      Connectivity Business activities will remain with Thomson. In addition,
      Thomson and TTE will simplify their current arrangements regarding Thomsons
      manufacturing facility at Angers, France.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

Thomsons principal accounting policies are described in Note 1 to our
  consolidated financial statements included herein. Certain of Thomsons
  accounting policies require the application of judgment by management in selecting
  appropriate assumptions for calculating financial estimates which inherently
  contain some degree of uncertainty. Management bases its estimates on historical
  experience and various other assumptions that are believed to be reasonable
  under the circumstances, the results of which form the basis for making judgments
  about the reported carrying values of assets and liabilities and the reported
  amounts of revenues and expenses. Actual results may differ from these estimates
  under different assumptions or conditions. Thomsons management believes
  the following are the critical accounting policies and related judgments and
  estimates used in the preparation of its consolidated financial statements under
  French GAAP.

Thomsons management has discussed the development and the selection
  of its critical accounting policies with Thomsons Audit Committee.

> Tangible and intangible assets with finite useful lives

The Group records intangible assets with finite useful lives (mainly software
  and certain rights on intellectual property acquired) and indefinite useful
  lives (customer relationship and trademarks) relating to operations and to production
  facilities under Intangible assets, net and tangible fixed assets
  under Property, plant and equipments (PPE). Significant
  estimates and assumptions are required to decide (i) the expected useful lives
  of these assets for purposes of their depreciation and (ii) whether there is
  any impairment of their value requiring a write-down of their carrying value.
  
  Estimates that are used to determine the expected useful lives of fixed assets
  are defined in the Groups accounting policies manual and are consistently
  applied throughout the Group. Such periods range from twenty to forty years
  for buildings, from one to twelve years for plants and equipment and from four
  to ten years for other tangible assets, excluding land that has an indefinite
  useful life. Software development costs are capitalized and amortized over their
  economic useful lives, which usually do not exceed three years. Goodwill is
  amortized over a period from five to twenty years.

For the year ended December 31, 2004, the Group recognized depreciation expense
  amounting to 278 million related to tangible fixed assets and amortization
  expense of 170 million for intangible assets with finite useful lives.
  As of December 31, 2004 the net book value of PPE, intangible assets with finite
  useful lives and intangible assets with indefinite useful lives amounted to
  1,054 million, 1,555 million and 651 million, respectively.

In order to determine the carrying value of tangible and intangible assets
  having a finite useful life, the Group evaluates on a regular basis certain
  indicators that would result, if applicable, in the implementation of an impairment
  test for exceptional assets depreciation. These indicators take into consideration
  any change in market conditions, competition, technology and other similar factors
  affecting the businesses. When certain operational and/or financial factors
  indicate an impairment of value, management evaluates the underlying carrying
  value of property, plant and equipment and intangible assets with finite useful-life
  in relation to the operating performance and future cash flows of the underlying
  assets. Impairment losses, if any, are measured based on the difference between
  the estimated recoverable amount and the carrying amount of the asset. Managements
  estimates of recoverable amounts for the individual asset or, if not possible,
  the reporting unit, are based on prices

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Thomson Group

of similar assets, to the extent available in the circumstances, or the result
  of valuation techniques. These estimates take into account net present values
  of estimated future cash flows and valuations based on market transactions in
  similar circumstances. Any negative change in relation to the operating performance
  or the expected future cash flow of individual assets or of reporting units
  will change the expected recoverable amount of these assets or units and therefore
  may require a write-down of their carrying value.

On October 21, 2004, the Group announced its decision to seek partners for
  its Displays activity. The consequences of this decision on the Groups
  value of long lived assets for its Displays business are included in the Groups
  2004 consolidated financial statements. See Note 18 to our consolidated financial
  statements.

When the Group had a signed firm offer from a third party prior to the Board
  of Directors approval of the consolidated financial statements to acquire the
  assets, the Group used such agreement to value these long lived assets. For
  other long live assets of the Displays activity the Group determines their value
  using either indicators of external value known to the Group or net value of
  discounted operational cash flows when the Group does not possess external indicators.

For the year ended December 31, 2004, the Group has recognized a 530
  million impairment charge relating to assets in the Components division, which
  brings the carrying value of such assets to 218 million at year-end 2004.

As of December 31, 2004, the Group has not identified any other triggering
  events in its other divisions that would have required impairment tests on property,
  plant and equipment or intangible assets with finite useful-life, except for
  the above-mentioned Displays business.

> Warranty reserve

The Group provides for the estimated cost of product warranties at the time
  revenue is recognized in respect of the relevant products. Thomsons products
  are covered by product warranty plans of varying periods, depending on local
  practices and regulations. The evaluation of warranty provisions are based on
  the historical relationship between the costs of the warranty and sales, and
  take into account exceptional events known to the Group. Thomson accrues an
  estimate, at the time of sale, for all returns from its customers related either
  to product failures or consumer returns. Thomsons general policy is to
  only accept returns of damaged products. Thomson believes that its warranty
  provisions are adequate and that the judgment applied is appropriate. The amounts
  estimated to be due and payable in the future could, however, differ materially
  from what is recognized in the Companys consolidated financial statements.

In order
  to determine the appropriate amount of its warranty reserve and related provisions,
  the Group has established a calculation that is applied on a uniform and consistent
  basis by the Groups entities. This calculation is based on variables that
  are determined based on the Groups historical experience relating to (1)
  the product failure rates by product family and by country, (2) the most recent
  figures of sales during the most recent period and (3) the average claim cost
  per product family. When determining the appropriate year-end warranty reserve
  amount, we assume no change in product mix or in the average claim cost per
  product family.

As of December 31, 2004, the Groups warranty reserve amounted to €50
  million with net accruals amounting to €81 million and usages amounting
  to €93 million.

Thomson estimates that on a consolidated basis the financial impact on the
  warranty reserve at December 31, 2004, if the failure rates were increased/decreased
  by 1 percentage point, would have resulted in the recognition/reversal of an
  additional warranty expense/income of €8 million.

59

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> Deferred tax assets allowance

Management judgment is required in determining the Groups allowance
  provision for deferred tax assets and liabilities and the extent to which deferred
  tax assets can be recognized. Thomson recognizes deferred tax assets if (1)
  the deferred tax asset can be compensated with a deferred tax liability that
  has the comparable maturity date, or (2) if it is probable that the Group will
  have future positive taxable income, from which the temporary differences or
  the tax-loss carry forwards can be deducted in a foreseeable future. When a
  specific subsidiary has a history of recent losses, future positive taxable
  income is assumed improbable, unless the asset recognition can be supported
  for reasons such as (1) the losses having resulted from exceptional circumstances
  which will not happen again in a nearby future, and/or (2) the expectation of
  exceptional gains. We have considered tax-planning in assessing whether deferred
  tax assets should be recognized.

At December 31, 2004 the Group has recorded a 2 million deferred tax
  liability at year-end and 1,742 million of deferred tax assets, of which
  1,462 million have been reversed through valuation allowance reflecting
  managements estimates on un-recoverability of such assets.

Thomson estimates that on a consolidated basis the financial impact on the
  accumulated deferred tax assets valuation allowance at December 31, 2004, if
  future taxable income were increased by 10 percentage points, would have resulted
  in a decrease of the related accumulated valuation allowance by €26 million,
  increasing the net result of the Group by the same amount. In the case future
  taxable income were decreased by 10 percentage points, the Group would have
  recognized an additional related valuation allowance amounted to €26 million,
  resulting in an additional net loss of €26 million.

> Pension & post-retirement benefits

The Groups determination of its pension and post-retirement benefits
  obligations and expense for defined benefit pension plans is dependent on the
  use of certain assumptions used by actuaries in calculating such amounts. These
  assumptions are described in Note 17 to our consolidated financial statements
  and include, among others, the discount rate, expected long-term rate of return
  on plan assets and annual rate of increase in future compensation levels. Our
  assumptions regarding pension and post-retirement benefits obligations include,
  among others, discount rates and rates of future increase of compensation and
  are based on actual historical experience and external data.

The assumptions
  regarding the expected long-term rate of return on plan assets are determined
  by taking into account, for each country where the Group has a plan, the distribution
  of investments and the long-term rate of return expected for each of its components.
  The capital markets experience fluctuations that cause downward/upward pressure
  and higher volatility. As a result, short-term valuation of related plan assets
  are decreasing/increasing, which effect is to increase/decrease the present
  value of the pension and post-retirement obligation. While Thomsons management
  believes that
  the assumptions used are appropriate, significant differences in actual experiences
  or significant changes in the assumptions may materially affect our pension
  and post-retirement benefits obligations under such plans and related future
  expense.

As of December 31, 2004 the pension, post-retirement and termination benefits
  liability amounted to €589 million, while the present value of the obligation
  amounted to €944 million and the fair value of plan assets amounted to
  184 million. For the year ended as of December 31, 2004, the Group recognized
  37 million of expenses related to such liability.

Please find hereafter a table summarizing the estimated impact of discount
  rate variations on the benefits obligation as of year end, as well as on the
  2004 pension and post-retirement benefits expense.



60

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Thomson Group

|( in million)                 | 1pt increase     | 1pt decrease    
|------------------------------ | ---------------- | ----------------
|                               | in discount rate | in discount rate
|                               |                  |                 
|Effect on the PBO              | (87)             | 103             
|Effect on the income statement | -                | -               
|                               |                  |                 

> Capital gain on exchange of non-monetary assets

On July 31, 2004, Thomson entered into a transaction with TCL, by which Thomson
  has contributed its TV manufacturing business to a new incorporated entity,
  TTE, in exchange of a non-controlling interest in this entity. TCL had the control
  of TTE from that date.

Thomson has assessed this capital gain as being the difference between the
  fair value and the carrying value of the exchanged assets less the portion of
  that gain represented by the economic interest retained by the Group.

Although, in order to determine the fair value of the business given up, Groups
  management has used certain valuation techniques for which assumptions retained
  have impacted the fair value of the business given up and therefore the capital
  gain recognized, the Group set up a measurement process that has involved an
  external appraiser that has used several methodologies, of which one is based
  on external available information.

> Goodwill and indefinite-lived intangible assets impairment test

We review annually goodwill and other indefinite-lived intangible assets for
  impairment. Such review requires management to make material judgments and estimates
  when performing impairment tests. The impairment test for goodwill involves
  a two-step process. The first step consists of a comparison of a reporting units
  fair value to its carrying value. If the carrying value is greater than its
  fair value, then step two must also be completed. Step two requires a computation
  of the implied fair value of a reporting units goodwill in comparison
  to the carrying amount of goodwill. Any excess of the carrying amount of goodwill
  over its implied fair value must be recorded as an impairment charge.

Thomson completed the impairment test for these assets as of June 30, 2004,
  which resulted in a 5 million impairment charge recognized in the Content
  & Network segment.

As of December 31, 2004 the net book value of goodwill amounted to 1,242
  million.

The impairment test for indefinite-lived intangible assets other than goodwill
  consists of comparing the carrying amount of the intangible asset to its fair
  value. Any excess of the carrying amount over an assets fair value is
  recorded as an impairment charge.

Thomson performed its annual impairment test in 2004, which did not result
  in any impairment charge for these assets.

As of December
  31, 2004, the net book value of indefinite-lived intangible assets amounted
  to €651
  million.

Thomsons
  management believes its policies relating to such impairment testing are critical
  accounting policies involving critical accounting estimates because determining
  the fair value of reporting
  units requires (1) determining the appropriate discount rate to be used to discount
  future expected
  cash flow of the reporting unit, (2) estimating the terminal value of each free
  cash flow computed, (3) estimating the growth rate of the revenues generated
  by the assets tested for impairment and (4) estimating the operating margin
  rates of underlying assets for related future periods.

61

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Thomson used the same discount rates for these impairment tests that were used
  in planned acquisition projects taking into account the specificities of the
  businesses tested. These rates range from 8 to 15% and are specific to each
  division, reflecting their relative risk as estimated by Thomson management.
  In estimating the future revenues growth rates, operating margin rates and operational
  cash flow generated by a particular asset, the Group used its internal budget
  for each business, which is updated every six months and which models cash flow
  for the next five-year period. Finally, the perpetual growth rate used to determine
  the cash flows on a perpetual basis are based on the inflation rate. A terminal
  value is determined to model the cash flows in the sixth year and following
  years.

Based on differences observed between the book values and fair values of goodwill
  and indefinite-lived intangible assets (Tested Assets), the increase
  of one point in the discount rate or the decrease of one point in the perpetual
  growth rate would have resulted in the Group recognizing an additional loss
  of value on certain long lived assets in the Content and Networks division amounting
  to €6 million and €4 million, respectively. Conversely, the decrease
  of one point in the discount rate and/or the increase of one point in the perpetual
  growth rate would have resulted in the Group to recognize no loss in the value
  of the Tested Assets.

Transition to IFRS

Basis
  of preparation of the Groups consolidated financial statements under IFRS

In accordance
  with the Regulation 1606/2002 of the European Parliament regarding the application
  of international accounting standards, the Group is required to prepare its
  consolidated financial statements in compliance with IFRS effective as of December
  31, 2005 as adopted by the European Union.

The Group prepared its primary consolidated financial statements for 2004
  in accordance with the French GAAP as set forth in the French law on consolidation
  (Act of January 3, 1985) and in Regulation 99-02 of the Comité de
  la Réglementation Comptable(CRC), approved by the decree dated June
  22, 1999.

The Group
  will issue its first consolidated financial statements under IFRS as of December
  31, 2005, with one-year historical financial information for 2004, prepared
  in accordance with the same accounting principles, except for IAS 32, IAS 39
  and IFRS 5, which will only be applied starting from January 1, 2005 onwards.

For the
  release of these comparative consolidated financial statements for 2005 and
  in accordance with the AMF recommendation relating to the financial information
  for the transition period, the Group prepared
  the 2004 financial information on the transition to IFRS disclosing for preliminary
  information purposes the quantified impact expected from the transition to the
  IFRS on:

- The reconciliation
    from French GAAP to IFRS of the Groups consolidated shareholders
    equity as of January 1, 2004 and December 31, 2004,
- The reconciliation
    from French GAAP to IFRS of the Groups consolidated net income for the
    twelve-month period ended December 31, 2004.

The 2004
  financial information related to the expected quantified impact of the transition
  to the IFRS on the 2004 data was prepared by those IFRS standards and interpretations,
  which the Group considers to be applied for the preparation of its comparative
  Groups historical consolidated financial statements as of December 31,
  2005.

Given the
  potential evolution of the standards and interpretations effective as of December
  31, 2005 and
  the response to technical questions and projects currently discussed by the
  IASB and the IFRIC, the Group may modify some options and accounting methods
  for the preparation of its first consolidated
  financial statements under IFRS.

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Thomson Group

The information presented in this document and related to both the results
  of operations and financial position of the Group under French GAAP and IFRS
  has been reviewed by the audit committee and was subject to specific audit procedures
  by the Groups auditors.

The Groups IFRS transition project

In order to prepare the transition to IFRS, the Group set up a project with
  the following objectives:

- to ensure project achievement on time;
- to determine its accounting options;
- to inform the audit committee and management board of directors; and
- to define the objectives of the project management office (PMO) and of the
    training and technical committee.

In order to ensure a complete and consistent approach, the PMO led the whole
  process in coordination with operational business units. The training &
  technical committee worked towards defining the accounting options, designing
  the technical processes and providing the necessary training schemes or programs
  within the Group organization.

The project
  team, in coordination with business units, has appointed IFRS coordinators within
  each operational division in order to push down the process to the subsidiaries.

The IFRS
  project covers three main phases:

- Analysis of the differences between French GAAP and IFRS  identification
    of all differences has been completed.
- Assessment of impacts of changes of existing accounting principles to IFRS
     all impacts were determined, except for IAS 32, IAS 39 and IFRS 5,
    applicable starting January 1, 2005, and are summarized below in Main
    IFRS net equity adjustments as of January 1, 2004 and December 31, 2004 and
    net result adjustments for the twelve-month period ended December 31, 2004.
- Implementation
     update of the data processing system, training of the local and corporate
    teams, update of the Groups accounting manual, validation of the accounting
    of the impacts in subsidiaries.

Standards
  and interpretations applied for the IFRS consolidated financial statements

The preparation of the 2004 financial information described below in Main
  IFRS net equity adjustments as of January 1, 2004 and December 31, 2004 and
  net result adjustments for the twelve-month period ended December 31, 2004
  is based on the standards and interpretations published as of December 31, 2004
  and endorsed by the European Union, and on the options and interpretations not
  yet published nor adopted but which are mandatory as of December 31, 2005 or
  can be elected for an earlier application.

For the
  2004 financial information, the Group applied all IFRS standards and interpretations,
  which are mandatory as of December 31, 2005 except for the following standards,
  which the Group did not elect for an earlier application:

- IFRS 5  Non current assets held for sale and discontinued operations.
    The Group will apply this standard starting from January 1, 2005.
- IAS 32  Financial instruments: disclosure and presentation.
    The Group will apply this standard starting from January 1, 2005.
- IAS 39  Financial Instruments: recognition and measurement.
    The Group will apply this standard starting from January 1, 2005.
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The options adopted by the Group, for first time implementation, applied to
  the opening balance sheet at January 1, 2004 are summarized below in Description
  of the options in connection with the first time adoption of IFRS. The
  accounting standards applied by the Group are summarized below in Description
  of the main IFRS accounting policies applied by the Group.

> Description of the options in connection with the first time adoption
>     of IFRS

The 2004 IFRS financial information was prepared in compliance with IFRS 1
  First Time Adoption of the International Financial Reporting Standards.
  The general principle is the retroactive application on the opening balance
  sheet of the standards elected for the 2004 IFRS financial information. The
  relating IFRS adjustments are accounted for in the opening shareholders
  equity (see Description of the main IFRS adjustments).

The following accounting policies have been retroactively applied pursuant
  to the optional implementation provisions of IFRS 1:

> Business combinations

The Group
  elected not to apply IFRS 3 to business combinations that have occurred prior
  to January 1, 2004 (see below at Main IFRS net equity adjustments
  as of January 1, 2004 and December 31, 2004 and net result adjustments for the
  twelve-month period ended December 31, 2004Description of
  the main IFRS adjustmentsBusiness combinations).

All acquisitions
  made since January 1, 2004 have been recognized in accordance with IFRS 3.

> Translation of foreign subsidiaries accounts

In accordance
  with IFRS 1, the Group elected to recognize cumulative translation differences
  of the foreign
  subsidiaries into opening retained earnings as of January 1, 2004, after having
  accounted for the IFRS adjustments on the opening shareholders equity
  (see below at Main IFRS net equity adjustments as of January 1,
  2004 and December 31, 2004 and net result adjustments for the twelve-month period
  ended December 31, 2004Description of the main IFRS adjustmentsTranslation
  of foreign subsidiaries accounts). All cumulative translation differences
  for all foreign operations have been deemed to be zero at the IFRS transition
  date. In case of subsequent disposal of these foreign subsidiaries, the related
  income will not include the reversal of the cumulative translation differences
  prior to January 1, 2004.

> Valuation of assets at fair value

Under certain
  circumstances, the Group elected to apply IFRS 1 option, which enables the Group
  to measure several tangible assets at their fair value at the opening IFRS transition
  date (see below at Main IFRS net equity adjustments as of January
  1, 2004 and December 31, 2004 and net result adjustments for the twelve-month
  period ended December 31, 2004Description of the main IFRS adjustmentsTTE
  Transaction). This fair value corresponds to the deemed cost under IFRS
  at the IFRS transition date. This method has been used to value the TV assets
  that were transferred to TCL in July 2004.

> Employee benefits

In accordance with the IFRS 1 optional exemption, the Group elected to recognize
  all cumulative actuarial gains and losses as of January 1, 2004 into opening
  retained earnings (see below at Main IFRS net equity adjustments
  as of January 1, 2004 and December 31, 2004 and net result adjustments for the
  twelve-month period ended December 31, 2004Description of the main IFRS
  adjustments

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Thomson Group

Employee benefits). The application of this option has no impact on the
  method elected by the Group for the future accounting of the actuarial gains
  and losses on retirement benefits.

> Share-based payment

According to IFRS 1, the Group elected to apply IFRS 2 to all equity instruments
  previously granted after November 7, 2002 and for which the rights have not
  vested as of December 31, 2004 (see below at Main IFRS net equity
  adjustments as of January 1, 2004 and December 31, 2004 and net result adjustments
  for the twelve-month period ended December 31, 2004Description of the
  main IFRS adjustmentsShare-based payment).

> Description of the main IFRS accounting policies applied by the Group

The accounting policies summarized below are those applied as of January 1,
  2004 and do not take into account the adjustments related to the application
  of IFRS 1, as presented above in Description of the options in connection
  with the first time adoption of IFRS.

The 2004
  IFRS financial information has been prepared using the historical cost convention.
  This convention will also be applied for the 2005 consolidated accounts with
  some exceptions regarding several
  assets and liabilities, for which specific arrangements recommended by the IFRS
  have been retained:
  fair value of available-for-sale financial assets, and financial assets at fair
  value through profit and loss.

> Use of estimates

The preparation
  of consolidated financial statements in accordance with IFRS requires management
  to
  make estimates and assumptions that affect the reported amounts of assets and
  liabilities and the reported amounts of revenues and expenses during the reporting
  period of the consolidated financial statements.

The Board
  regularly reviews its valuations and estimates based on its past experience
  and various other factors, considered reasonable and relevant for the determination
  of the fair estimates of the assets and liabilities carrying value. The actual
  results could significantly differ from these estimates depending on different
  conditions and hypotheses.

> Business combinations

In the
  event of new acquisitions within the Groups consolidation scope, the assets
  and liabilities of the acquired company, which satisfy the IFRS accounting criteria,
  are recorded at fair value at the acquisition date. The assets held-for-sale
  by the Group are recorded at the fair value net of exit costs.

Only the
  identifiable liabilities satisfying the criteria of recognition of a liability
  for the acquired company are recorded under business combinations. Thus, a restructuring
  liability is not recognized as a liability for the acquired company if we do
  not have a current obligation to execute the restructuring plan at the acquisition
  date.

The adjustments
  of assets and liabilities values related to new acquisitions, initially recorded
  using provisional values (due to expertise work being currently carried out
  or to further analyses to be performed),
  are accounted for as retroactive adjustments to goodwill, should they occur
  within the twelve-month
  period following the acquisition date. Beyond this period, these adjustments
  are
  directly recognized into net result unless they correspond to corrections of
  errors.

Finally,
  minority interests
  are
  accounted for on the basis of the acquired assets fair value.

> 

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> Acquisitions of minority interests

The acquisitions of minority interests are not currently covered by the IFRS
  framework and the ongoing projects of the IASB. Acquisitions of minority interests
  are included within the amendments made to the IFRS 3 Business combinations.
  Moreover, without specific rules, the Group still applies the French GAAP. In
  the event the Group acquires additional interests in a subsidiary, the difference
  between the purchase price and the carrying value of these acquired minority
  interests is recorded as goodwill in the Groups consolidated financial
  statements.

> Scope and consolidation method

The subsidiaries,
  the sub-subsidiaries and the special-purpose entities controlled by the Group
  are consolidated.

The entities that are controlled by the Group and on which the Group has the
  power to govern the financial and operational policies in order to benefit from
  the arising advantages, are fully consolidated. Control is presumed to exist
  when the Group directly or indirectly owns more than half of the voting rights
  of an entity (the voting rights taken into account are the real and potential
  voting rights which are immediately exercisable) and when no other shareholder
  holds a significant right allowing veto or the blocking of ordinary decisions
  made by the Group.

Consolidation is also applied to special-purpose entities that are controlled,
  whatever their legal forms are, even where the Company holds no shares in their
  capital.

Investments
  in companies in which the Group has joint control with a limited amount of partners
  (joint-ventures) are consolidated under the proportionate consolidation method:
  the assets, liabilities, revenues and costs are consolidated in proportion to
  our investment.

Investments in companies over which the Group has significant influence are
  accounted for under the equity method. Significant influence means the right
  to participate in financial and operating policy decisions of the investee,
  without having either control or joint control over those policies. The goodwill
  arising on these entities is included in the carrying value of the investment.

> Translation of foreign subsidiaries

The consolidated
  financial statements of affiliates for which the functional currency is different
  to that of the parent company are translated as follows:

- The assets
    and liabilities, including the goodwill and the adjustments relating to the
    fair value in the
    consolidated accounts, are translated into euros at the rate effective at
    the period end.
- The revenues
    and costs are translated into euros at the average exchange rate of the period,
    as long as this rate is not impacted by significant changes.

The translation
  adjustments are directly recorded to shareholders equity.

> Translation of foreign currency transactions

Transactions in foreign currency are translated at the exchange rate effective
  at the trade date. Monetary assets and liabilities in foreign currency are translated
  at the rate of exchange prevailing at year-end, except for receivables and payables
  which are covered by exchange rate hedge instruments and for which the method
  described in section 1.b of the consolidated statements is still applied in
  2004. The Group will start to apply IAS 32 and IAS 39 as from January 1, 2005.
  The translation of foreign currency resulting from these operations will be
  recorded in the income statement as a profit or loss on exchange.

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Thomson Group

The non-monetary assets and liabilities are translated at the historical rate
  of exchange effective at the trade date. However, the recoverable value of depreciated
  tangible assets is determined by the exchange rate at the balance sheet date.

> Intangible assets

(a) Goodwill

At the
  acquisition date, goodwill is measured at the excess of the costs of the business
  combination over the Groups interest in the net fair value of the identifiable
  assets, liabilities and contingent liabilities. Goodwill is always presented
  in the currency of the acquired affiliate and measured at cost less accumulated
  impairment losses and is not amortized.

Goodwill
  is allocated to each of the cash-generating units or groups of cash-generating
  units that benefit
  from the synergies of the business combinations and corresponds to the lowest
  level within the
  entity at which the goodwill is monitored for internal management purposes.

(b) Research
  and development expenses

Research
  expenses are expensed as incurred. Development costs are expensed as incurred,
  unless they
  meet the IAS 38 capitalization criteria. Capitalized development costs correspond
  to costs of development
  projects aiming at improving new processes, which are considered as technically
  viable and
  expected to provide future economic benefits.

These capitalized
  expenses relate to direct labor costs (including pension costs and medical retiree
  benefits), costs of materials and service fees necessary for the development
  projects.

The capitalized
  costs are recorded at cost less accumulated depreciation and impairment, if
  any. They are amortized over a period ranging from one to five years starting
  from the operational starting date of the projects.

Software
  is capitalized at the production cost if used for internal purpose only. The
  subsequent expenses relating to the data processing system are capitalized if
  they increase future economic benefits of assets to which they relate and if
  this cost can be allocated to the asset reliably.

(c) Other
  intangible assets

The other
  intangible assets (rights acquired for the use of patents, licenses, brands,
  etc.) acquired from third parties as well as acquired IT software are recorded
  at their purchase price plus all associated costs relating to their acquisition
  and set-up.

All other
  costs, including those relating to the development of intangible assets internally
  produced (brands, customer files, etc.), are recorded as expenses of the period
  when they are incurred.

Intangible
  assets with indefinite useful lives are not amortized.
  The intangible assets considered to have
  a finite useful life are amortized over their estimated useful lives and their
  value is written down in the case of an impairment loss.

> Tangible assets

Tangible
  assets are
  valued at historical cost, excluding the cost of borrowings
  which are expensed as incurred. They are essentially amortized using the straight-line
  method over the useful life of the asset, which ranges from 20 to 40 years for
  buildings and from 1 to 12 years for materials and machinery.

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The assets from finance leases are capitalized at the lower of the discounted
  value of future payments and the market value. They are amortized using the
  straight-line method over the lesser of the estimated useful life of the asset
  or over the duration of the lease. The amortization costs related to the assets
  acquired through these contracts are included within the amortization allowances.

> Amortization of the tangible and intangible assets

Goodwill,
  intangible assets having an indefinite useful life and ongoing research and
  development projects are tested annually for impairment as well as when circumstances
  indicate that they might be impaired.

The tangible
  and intangible assets having a definite useful life are tested for impairment
  only if events or circumstances indicate that they might be impaired. The value
  of the assets essentially depends on significant
  changes in the operational environment of the assets or from a lower than expected
  economic
  performance of the assets.

The impairment
  test consists of comparing the net present value of the asset with the recoverable
  value. The recoverable value of the asset is the higher of its fair value less
  costs to sell and its value in use. The recoverable value of an asset is individually
  assessed, unless the asset does not generate any
  cash inflows independent of those from other assets or groups of assets. In
  this case, as for goodwill,
  the Group determines the recoverable amount of the cash-generating unit to which
  the asset belongs.

For determining
  the value in use, the Group uses estimates of future pre-tax discounted cash
  flows generated by the asset over a period of 5 years, including a residual
  value when appropriate. These flows are consistent with the most recent budgets
  approved by the Group directors. Cash flows beyond this period are estimated
  using a steady or declining growth rate for the subsequent years. Estimated
  cash flows are discounted using pre-tax long-term market rates, representing
  the time value of money and the specific risks of the assets.

The fair
  value less costs to sell corresponds to the value that could be obtained from
  the sale of the asset (or the unit), in an arms-length transaction between
  knowledgeable and willing parties, less the transaction costs.

Impairment
  loss is recognized in the operating result. Impairment of goodwill can never
  be reversed.

> Inventories

Inventories
  are valued at cost or production cost. The production costs include the direct
  costs of raw materials, labor costs and a part of the overheads representative
  of the indirect costs of production, and excludes the general administration
  costs.

The cost
  of inventory sold is determined based on the weighted average method or the
  FIFO (first in  first out) method, depending on the nature of the inventory.

When the
  net realizable value of inventories in the normal course of the business is
  lower than its carrying
  value, the inventory
  is written down by the difference.

> Financial instruments

The Group
  has elected to apply IAS 32 and IAS 39 from January 1, 2005. As of that date,
  the trading financial assets and liabilities will be recorded at their fair
  value, plus the transaction costs that are directly attributable to their acquisition.

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Thomson Group

In compliance with IAS 39, the financial assets and liabilities are to be classified
  under one of the following categories:

(a) Available-for-sale financial assets

This category
  of assets will consist of the financial assets currently classified as either
  other investments, other financial assets or marketable securities.

The changes
  in fair value will be recognized in shareholders equity until their disposal
  or the recognition of an impairment loss in the income statement.

(b) Held-to-maturity
  investments

Held-to-maturity
  investments are non-derivative financial assets with fixed or determinable payments
  and fixed maturities that the Group has the positive intention and ability to
  hold to maturity: bonds, and debtors. These investments are measured at amortized
  cost using the effective interest method.

(c) Transaction
  assets (for trading)

The standard
  defines this category as investments held for trading. Subsequent changes in
  the fair value are recognized in the profit and loss.

(d) Third
  party loans and receivables

This category
  consists of receivables from controlled entities and trade receivables. These
  receivables are measured at amortized cost using the effective interest method.

(e) Financial
  liabilities

Financial
  liabilities are composed of borrowings and other financial debts, which are
  initially measured at fair value net of transaction costs. Then they are adjusted
  to amortized cost using the effective interest method.

(f) Financial
  liabilities  hybrid/compound instruments

These liabilities
  consist of an equity component (option to exchange/convert into Thomsons
  shares), which grants an option to the holder of the instrument to convert it
  into an equity instrument of the issuer. These liabilities (bonds convertible
  into new or existing shares) are accounted for in financial debts in the Groups
  accounts under French GAAP. According to IAS 32, these specific liabilities,
  including issuing costs directly attributable to the borrowing, shall be accounted
  for separately as a liability
  and an equity component in the Groups shareholders equity.

The carrying
  amount of the liability component is measured at the fair value of a similar
  liability that does not have an associated equity component (the fair value
  is determined from the present value of future
  cash flows relating
  to a similar instrument
  without an equity component). The carrying
  value of the equity instrument represented by the option to convert the instrument
  into Thomsons shares is then determined by deducting the fair value of
  the financial liability from the fair value of the compound financial instrument
  as a whole.

(g) Trade
  receivables and payables

The trade receivables and payables are part of the current financial assets
  and liabilities. At the date of their initial recognition, they shall be measured
  at the fair value of the amount to be received or paid.

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This generally represents their nominal value because of the short time between
  the recognition of the instrument and its realization (for assets) or its settlement
  (for liabilities).

(h) Derivatives

The Group uses derivatives as hedging instruments for hedges of foreign currency
  risks and changes in interest rates. These instruments include agreements of
  interest rate swap agreements, foreign currency, options and foreign currency
  forward contracts. They shall be accounted for in accordance with hedge accounting.

(i) Derivatives
  not designated as hedging instruments

Derivatives
  not designated as hedging instruments are measured at fair value. Subsequent
  changes in
  fair value are recognized in the income statement. The draft of the amendment
  to IAS 39 regarding the use of the fair value option has not yet been officially
  adopted by the European Union.

> Treasury shares

Treasury
  shares are recorded at purchase cost and deducted from shareholders equity.
  The loss or gain on disposal of these shares is recorded in shareholders
  equity and not in the income statement.

> Deferred taxes

Deferred
  taxes result from temporary differences arising from differences between the
  tax bases of assets and liabilities and their carrying amounts. They are accounted
  for using the balance sheet liability
  method.

Deferred
  taxes for all temporary differences are calculated for each taxable entity using
  the balance sheet liability method.

All deferred
  tax liabilities are recorded:

- for all
    taxable temporary differences except when the deferred tax liability results
    from the depreciation
    of goodwill not deductible for tax purposes or from the initial recognition
    of an asset or a liability in a transaction which is not a business combination
    and, at the trade date, affects neither the net income nor the taxable income
    or loss; and
- for taxable
    temporary differences associated with investments in subsidiaries, associates
    and interests in joint ventures, except when the Group is able to control
    the timing of the reversal of the temporary differences and when it is likely
    that this temporary difference will not reverse in the foreseeable future.

Deferred
  tax assets are recorded for all deductible temporary differences, the carryforward
  of unused tax losses and unused tax credits, to the extend that it is likely
  that future taxable income will be available against which these temporary differences
  can be utilized, except when the related deferred tax asset results from the
  initial recognition of an asset or a liability in a transaction which is not
  a business combination and, at the trade date, affects neither the net income
  nor the taxable income or loss.

The carrying
  value of the deferred tax assets is reviewed at each balance sheet date and
  reduced when it is not likely that sufficient taxable profit will be available
  to allow the benefit of part or all of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are valued using the tax rate that is
  expected to apply to the period when the asset is realised or the liability
  is settled, based on tax rates (and tax laws) that have been enacted or substantively
  enacted by the balance sheet date.

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Deferred
  taxes are classified as non-current assets and liabilities.

> Leases

Leases
  which transfer substantially all risks and rewards incidental to the ownership
  of the leased asset are classified as finance leases. This transfer is based
  on different indicators analyses like (i) the existence of a bargain price option
  in the agreement, (ii) the fact that the lease term is for the major part of
  the economic life of the asset, or (iii) the present value of minimum lease
  payments amounts to
  substantially all of the fair value of the leased asset. The assets accounted
  for as finance leases are capitalized
  and a financial liability is accounted for by the lessee.

These assets
  are amortized over the shorter of their useful life and the lease term.

Leases
  which are not classified as finance leases are operating leases. The payments
  related to these contracts
  are recorded as expenses on a straight-line basis over the lease term.

> Employee benefits

The Group
  operates different pension schemes for some employees. Pension plans, retirement
  indemnities and other commitments which are defined benefits schemes (i.e.,
  where the Group commits itself to guarantee a certain level benefits) are recognized
  in the balance sheet based on an actuarial valuation of the defined benefit
  obligations at the balance sheet date less the fair value of the related plan
  assets.

The method
  used for determining employee benefits is based on the Projected Unit Credit
  Method. The discounted value of the Group benefit obligations is determined
  by attributing the benefits to employee services in accordance with the benefit
  formula of each plan. The provisions for these benefits are determined annually
  by independent qualified actuaries based on demographic and financial assumptions
  such as mortality, employee turnover, future salaries and benefit levels, discount
  rates and expected rates of return on plan assets.

Contributions
  paid related to pension plans which are defined contribution plans (plans under
  which the Group does not have any other obligations than those contributions)
  are recorded as expenses in the period to which they relate.

(a) Actuarial
  gains and losses

Net cumulative
  gains and losses that are lower than the greater of either 10% of the present
  value of the defined benefit obligation or 10% of the fair value of the plan
  assets at the beginning of the period are not recognized. Net cumulative actuarial
  gains and losses outside the 10% corridor are recognized in the income statement
  over the expected average remaining working lives of the employees.

(b) Other
  long-term benefits

The obligations
  related
  to the other long-term
  benefits of the jubilee award
  are also based on actuarial assumptions.

> Share-based payment

As required
  by IFRS 2 Share-based Payment, the service received from the employees
  for the grant of the stock options consists of an additional compensation to
  the employee. It is accounted for as an employee expense and is charged to the
  income statement over the vesting periods of the plans (usually 3 to 4 years).

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The fair
  value of instruments, and especially of options granted, is determined based
  on the Black-Scholes valuation model and take into account the number of options
  expected to be vested annually. The expense will be therefore recorded over
  the vesting period.

> Reserves

Reserves
  are recorded at the balance sheet date when the Group has a legal or constructive
  obligation as a result of a past event and when it is probable that an outflow
  of resources embodying economic benefits
  will be required to settle the obligation, and a reliable estimate can be made
  of the amount of the
  obligation.

The recorded
  reserve represents the best estimate of the expenditure required to settle the
  obligation at the balance sheet date.

Where the
  effect of the time value of money is material, the recorded amount of a provision
  should be the
  present value of the expenditures expected to be required to settle the related
  obligation. The present value is determined using pre-tax discount rates that
  reflect the assessment of the time value of money and the risks specific to
  the liabilities.

Increases
  in provisions resulting from the discounting and recorded to reflect the passage
  of time are recognized as borrowing costs in the income statement.

Reserves
  for restructuring: Reserves for restructuring costs are recognized whenever
  the Group has a constructive obligation towards third parties, which results
  from a decision made by the Group before the balance sheet date and supported
  by the following items:

- the existence
    of a detailed and finalized plan of the sites concerned, their location, the
    role and the
    approximate number of headcounts concerned, the nature of the expenses that
    are to be incurred and the effective date of the plan; and
- the announcement
    of this plan to the employees concerned.

The restructuring
  reserve only includes the expenses directly linked to the plan and which do
  not relate to the Groups continuing activities.

> Revenues

Revenue
  is measured at the fair value of the amount received or receivable, taking into
  account the amount of any trade discounts or volume rebates allowed by the entity.

(a) Sales
  of goods

Related
  revenue is recognized when the entity has transferred to the buyer the significant
  risks and rewards of ownership of the goods.

(b) Services
  agreements

The Group signs contracts for a 1 to 5 year period through its Technicolor
  subsidiary, which provide an exclusive right on the clients geographical
  area. They include provisions that establish pricing terms for services and
  volumes to be provided and other terms. For these agreements, the Group paid
  advances to the clients which are accounted for as contract advances
  and are amortized with a corresponding reduction of revenue according to the
  quantities produced or films processed.

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(c) Royalties

Revenue
  from licenses is recognized based on a formal agreement with the licensee and
  is accounted for in accordance with the terms of the agreement.

Main
  IFRS net equity adjustments as of January 1, 2004 and December 31, 2004 and
  net result adjustments for the twelve-month period ended December 31, 2004

Description
  of the main IFRS adjustments

The differences
  identified between the 2004 statements under French GAAP and IFRS are presented
  below, detailing the net opening equity reconciliation and the net result reconciliation
  for the twelve-month period ended December 31, 2004.

> Business combinations

As mentioned
  above, the Group elected to apply the IFRS 1 exemption, which allows not to
  restate business combinations that have occurred prior to January 1, 2004. All
  business combinations made after this date have been restated in accordance
  with IFRS 3 using the purchase accounting method.

(a) Customer
  relationships

Under French
  GAAP, market share acquired through business combination is capitalized separately
  from goodwill and not amortized.

Under IFRS,
  market share corresponds to customer relationships, and is classified
  as intangible assets that meet the criteria defined by IAS 38. Acquired market
  share is amortized over the expected useful life. This accounting treatment
  is the same as that applied under U.S. GAAP (as presented in the U.S. GAAP reconciliation
  at Note 31(g) to our consolidated financial statements). Customer relationships
  are amortized over useful lives ranging from 16 to 40 years.

Accumulated
  amortization costs of customer relationships had a negative impact of 58
  million on the opening net equity. The €23
  million amortization expense for 2004 was calculated on a 393
  million gross amount of intangible assets.

(b) Restructuring
  costs

Under French
  GAAP, restructuring costs of a business combination are recorded as part of
  allocating the cost of the combination when the restructuring
  plans have been clearly defined and if they have been
  announced and finalized before the end of the period subsequent to the period
  when the combination occurred.

In compliance
  with IFRS 3, a reserve related to the costs of the closures of plants and sites
  is recorded as a liability for the acquiree as part of allocating the cost of
  the combination, if and only if the restructuring
  plan meets the criteria defined by IAS 37 at the acquisition date.

Consequently, restructuring plans of the acquirees, which were accounted for
  as part of allocating the cost of the combination under French GAAP but were
  not announced at the acquisition date, have been recognized as an expense under
  IFRS. Accordingly, in 2004, €29 million of restructuring costs have been
  expensed under IFRS (of which 17 million relates to the Displays activity,
  with the remainder relating to the content services businesses operating under
  the Technicolor brand). This adjustment has been accounted for against goodwill
  arising on these acquisitions. The 7 million of related French tax effect,
  calculated on these reserves, has been reversed (as presented on Tax effect
  on IFRS adjustments line in the reconciliation table below).

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(c) Goodwill

Under French
  GAAP, goodwill was amortized on a straight-line basis over its estimated useful
  life (ranging from 5 to 20 years), based on the estimates.

In compliance
  with IFRS 3, goodwill is not amortized but is tested annually for impairment
  and when impairment indicators are present.

As the
  Group elected to apply the IFRS 1 exemption, which allows the Group to elect
  not to restate business
  combinations that have occurred prior to January 1, 2004 and not to change their
  initial recognition,
  the net carrying value of goodwill regarding these acquisitions and accounted
  for under French GAAP corresponds to the new gross value under IFRS.

In compliance
  with IFRS 3, the total goodwill amortization expense in 2004 adjusted under
  IFRS amounts to 100
  million (favorable impact on the net income). This amount does not include the
  €30
  million
  goodwill impairment related to TTE (18
  million), Zhao Wei (€7million)
  and Screenvision (5
  million). Under IFRS, the impairment remains an expense in the 2004 income statement.

> Consolidation scope

Under IFRS, according to SIC 12 interpretation, special purpose entities (SPEs)
  that are controlled in substance are consolidated even if the Group has no share
  in their capital. Under French GAAP, these SPEs were not consolidated as of
  December 31, 2003 if the Group had no share in their capital. As of January
  1, 2004, the consolidation of these entities became mandatory under French GAAP
  in accordance with the CRC 04-03 Regulation subsequent to the issuance of Article
  133 on French law on Financial Security issued on August 1, 2003. Due to the
  change in French laws, there are no more adjustments to be made as of December
  31, 2004.

As of December
  31, 2003, the Group had two special purpose entities, whose aim was to implement
  two synthetic leases for Thomson Display Mexicana S.A. de C.V. and for Thomson
  Multimedia Polska Sp.zo.o (Poland) as described under Note 24(b) to our consolidated
  financial statements.

Under IFRS,
  these entities have been consolidated for the first time as of January 1, 2004.
  The impact of this consolidation generated an adjustment of 193
  million of fixed assets, 321
  million of financial long-term debt and 85
  million of reversal of deferred income. The opening shareholders equity
  has been unfavorably impacted by 43
  million.

> Translation of foreign subsidiaries accounts

In compliance
  with IFRS 1 (see above at Description of the options in connection
  with the first time adoption of IFRSTranslation of foreign difference),
  the Group elected to apply the exemption, which allows to recognize
  cumulative translation differences
  relating
  to foreign subsidiaries into retained earnings as of January 1, 2004. These
  cumulative translation differences amounted to a €612
  million loss as of January 1, 2004 and have been charged to the opening retained
  earnings. All cumulative translation differences
  for all foreign
  operations have been deemed to be zero at the IFRS transition date. This IFRS
  adjustment has no impact on the consolidated shareholders equity as of
  January 1, 2004. In case of subsequent disposal of these foreign subsidiaries,
  the related income will not include the reversal of the cumulative translation
  differences
  prior to January 1, 2004.

> TTE transaction

The Group
  and TCL combined their respective
  TV assets in a new company, TTE, in which the Group holds a 33% interest and
  TCL holds a 67% interest. The accounting principle regarding the recognition
  of a capital gain on the share
  of the TV activity actually sold to TTE has no impact under

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Thomson Group

IFRS. As
  under French GAAP, no capital gain has been recognized on the share of the activity
  indirectly owned by the Group.

(a) Transaction
  costs

In 2003,
  the Group engaged the services of outside consultants in connection with several
  potential third party transactions, including principally the contribution of
  the manufacturing assets of its TV activity into TTE, a joint entity in which
  it would have a minority interest.

Since the
  TTE transaction was not yet finalized, at December 31, 2003, external consulting
  costs incurred
  in connection with TTE amounting to 9
  million were deferred under French GAAP.

At December
  31, 2004, 23
  million of total outside costs incurred on this transaction were allocated as
  follows:

- 11.5
    million (before tax effect) of which 7.6
    million recognized as part of allocating the costs of
    the combination, and 3.9
    million recognized as deferred tax liabilities; and
- 11.5
    million related to the disposal of the Groups TV activity and was charged
    against the capital gain arising from the transaction.

Under IFRS,
  as no transactions were completed at 2003 year-end, the 9
  million cost was expensed against the opening net equity. The 14
  million incurred in 2004 was allocated as follows:

- 6.9
    million was recognized as part of allocating the costs of the combination,
    generating a difference of €0.6
    million compared with French GAAP. These acquisition costs have been recognized
    before tax effect.
- 6.9
    million has been charged against capital gain, generating a 4.6
    million difference on capital gain between French GAAP and IFRS.

The favorable
  impact disclosed in the income statement includes the reversal of the 3.9
  million deferred tax (disclosed under the line Tax effect on IFRS adjustments
  in the reconciliation table) and the €4.6
  million related to the capital gain adjustment.

(b) Valuation
  of transferred assets at fair value

As mentioned
  above at Description of the options in connection with the first
  time adoption of IFRSValuation of assets at fair value, the IFRS
  1 application related to the valuation of the tangible assets of TV activities
  that were
  sold to TCL in July 2004. This valuation had a negative impact of 17
  million on the opening net equity, which corresponds to the difference between
  128
  million asset carrying value and 111
  million fair value. The valuation of the assets at fair value as of January
  1, 2004 led to the reversal
  of a 2
  million depreciation
  in the IFRS consolidated financial statements.

(c) Capital
  gain on transfer of the Television activities

The option
  elected to measure these assets at fair value generated a reduction of the net
  consolidated value of the transferred activity, and consequently increased the
  capital gain related to this transaction by €11
  million under IFRS.

> Revenue recognition

(a) Revenue
  recognition on licensing activities

Revenue from the Groups licensing and patents business activities results
  from licensing agreements for the non-exclusive use of patents developed or
  acquired by the Group.

75

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Under French
  GAAP, revenue is recognized as income in the related period if (1) a contract
  was signed before the date the Group consolidated financial statements have
  been approved by the board of directors and if (2) the revenue recognized is
  earned, which means it relates to licenses used during periods prior to the
  date the current year accounts were approved.

According
  to IAS 18, under IFRS (as for U.S. GAAP, refer to Note 31(t) to our consolidated
  financial statements), such revenue is recognized when it is received or earned
  based upon a formal agreement signed between the parties.

Accordingly,
  the impact on IFRS opening net equity is a negative effect of 27
  million. In 2004, the impact
  on the IFRS net result is a positive effect of 24
  million, including the reversal of the previous €27
  million (positive impact) and 3
  million (negative impact) related to revenues accounted for in 2004 under French
  GAAP but deferred to 2005 under IFRS.

(b) Rebates
  and price reductions received

Under French
  GAAP, some rebates received from suppliers were recorded as a deduction of cost
  of sales for the related period.

Under IFRS,
  when those rebates are linked to future purchases commitments, they should be
  considered upfront payments on future business and spread over that future business.
  This was accounted for in the 2004 IFRS income statement as a negative impact
  for an amount of €4
  million.

> Research and development costs

Like under French GAAP, under IFRS, research and development expenses relating
  to internal projects are expenses as incurred.

Under French
  GAAP, the Groups policy is to expense development costs (except software)
  as they are incurred. Under IFRS these costs should be capitalized when they
  meet criteria defined under IAS 38. The retroactive application of IAS 38 led
  to the recognition of an asset corresponding to the net book value of the intangible
  asset had the IAS 38 ever been applied.

This IFRS
  adjustment has a positive impact of €16
  million on opening retained earnings as of January 1, 2004. In 2004, the €14
  million of net development costs were capitalized in compliance with IAS 38,
  thus positively impacted the 2004 income statement.

> Employee benefits

The Group
  elected to apply the IFRS 1 exemption relating to the recognition of cumulative
  actuarial gains and losses in the opening balance sheet (see above at Description
  of the options in connection with the first time adoption of IFRSEmployee
  benefits).

The valuation
  and accounting method regarding pension and retirement benefits, as described
  in notes 1 and 17 to our consolidated financial statements, are
  closely related
  to U.S. GAAP.
  The main differences are as follows:

- the prior service costs resulting from plan amendments or new plan creation
    and related to vested rights are spread over the average remaining working
    lives of employees participating in the plans under French GAAP. Under IFRS,
    this cost is directly accounted for as an expense. The prior service costs
    related to non vested rights are amortized under both accounting standards;
- the
    valuation method of some early retirement benefits differs under IFRS;

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Thomson Group

- some retirement benefits obligation valued as of September 30 under French
    GAAP have been remeasured as of December 31, under IFRS;
- the impact
    of the U.S. Medicare Modernization Act passed in December 2003 related to
    post-retirement medical plans for employees in the U.S. was accounted for
    in the IFRS balance sheet assets as a reimbursement right. Under French GAAP,
    this impact has been taken into account for 2004 and recognition has been
    deferred; and
- the accounting
    method for the curtailments and amendments to benefits plans differs under
    IFRS.

As of January
  1, 2004, the effect of IFRS adoption on opening shareholders equity in
  relation to employee benefits was a negative impact of 150
  million. This impact was mainly due to the following:

- In accordance
    with the IFRS 1 optional exemption, actuarial losses as of January 1, 2004
    (248
    million)
    were recorded in shareholders equity.
- a positive
    effect on opening shareholders equity of €81
    million has been recognized on January 1,
    2004 relating to unrecognized prior service costs resulting from changes in
    medical retiree plans
    for employees in the U.S. announced prior to January 1, 2004. These amounts
    were deferred under French GAAP.
- under
    IFRS, a positive effect of 43
    million on opening shareholders equity has been recognized as a result
    of the U.S. Medicare Modernization Act as of January 1, 2004.
- the other adjustments result in a negative effect of 26 million on
    the opening shareholders equity mainly due to valuation method differences
    and to the change of the measurement date for some plans.

The IFRS impact on the 2004 income statement in relation to employee benefits
  is a negative effect of  25 million. This impact is mainly due to
  the following:

- A 40 million negative adjustment on curtailment gain relating to the
    closure of Marion and Circleville plants was recognized as opposed to French
    GAAP. This impact was already booked under IFRS in the 2004 opening balance
    sheet.
- As a consequence of the IFRS 1 option, the pension costs recognized in 2004
    under IFRS no longer includes the amortization of actuarial losses existing
    as of January 1, 2004. A positive effect of 10 million was recorded
    in the 2004 income statement.
- A positive effect of 9 million is due to valuation method differences,
    principally related to early retirement plans.
    Share-based payment

For the opening balance sheet as of January 1, 2004, the Group elected to
  apply the IFRS 1 exemption relating to the retroactive application of the rules
  related to equity instruments granted to employees. As a result of this exemption,
  only equity instruments granted after November 7, 2002 and not yet vested as
  of December 31, 2004 have been adjusted.

The equity
  instruments which have been adjusted under IFRS 2 in compliance to IFRS 1 are
  as follows:

- Bons
    dAchat et de Souscription dActions(BASA)
    for the Groups employees that were entirely vested prior to December
    31, 2004;
- Thomson shares attributed to TTE employees prior to December 31, 2004, for
    the part vested prior to December 31, 2004; and

77

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- Stock
    options granted in 2004 as a replacement of stock option rights granted prior
    to November7, 2002.

In accordance
  with the requirements of IFRS 2 Share-based payment, stock options
  granted to employees are recorded as an expense in the income statement. The
  expense corresponds to the stock options fair value recognized in the
  income statement over the vesting periods of the rights related to these plans
  (generally 3 to 4 years). The stock option fair value is determined using the
  Black-Scholes model, taking into account an annual review of the options effectively
  vested and the number
  of options expected to be exercisable.

Under French
  GAAP, unlike under IFRS, the fair value of the service of the employees is not
  recognized as an expense.

There are
  no adjustments recorded to the opening balance sheet.

The impact
  of IFRS 2 application on this years income statement regarding the plans
  not covered by the
  aforementioned exemptions was a 3
  million expense.

> Deferred tax

(a) Deferred
  tax on consolidated entities

In compliance
  with IAS 12, the Group accounts for deferred tax assets related to investments
  in subsidiaries, associates and interests in joint venture, except when the
  Group is able to control the timing of the reversal of the temporary differences
  and when the taxable income is not considered sufficient for these temporary
  differences to be utilized.

A 3 million deferred tax asset was recognized in the opening shareholders
  equity, only to the extent that the Group is not able to control the distribution
  of future profits in some entities (essentially the Screenvision Group).

In 2004,
  an additional 2
  million net deferred tax asset was recorded as deferred tax income.

(b) Deferred
  tax on entities with different operational currency to the Groups local
  currency

Under IFRS,
  a deferred tax is recorded on differences between the tax base and the carrying
  value of the non-monetary assets of the consolidated entities for which the
  functional currency differs from the local
  currency.

Consequently,
  net deferred tax liabilities amounting to 6
  million was recognized in the 2004 opening shareholders equity.

In 2004,
  an additional 4
  million net deferred tax liability has been recognized in the Groups deferred
  tax expense.

The combined
  effect of the adjustments described in the above sections (a) and (b) is a 3
  million reduction of the opening shareholders equity and a 2
  million reduction of the 2004 net income.

(c) Deferred
  tax on IFRS adjustments

The net
  deferred
  tax effect, based on IFRS adjustments, amounts to 14
  million of deferred
  tax liability
  recognized
  in the opening shareholders equity as of January 1, 2004 and 9
  million deferred
  tax
  income recognized in the 2004 income statement.

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Thomson
  Group

French
  GAAP / IFRS net equity reconciliation as of January 1, 2004 and December 31,
  2004 and net income reconciliation for the twelve-month period ended December
  31, 2004 (except for IAS 32 and IAS 39)

|                                                  | January 1, |  | Net result   | Other | Translation |  | December | 
|------------------------------------------------- | ---------- |  | ------------ | ----- | ----------- |  | -------- | 
|                                                  | 2004       |  | for the year |       | differences |  | 31, 2004 | 
|                                                  |            |  |              |       |             |  |          | 
|Shareholders' equity under French GAAP            | 3,583      |  | (636)        | (171) | (106)       |  | 2,670    | 
|Customer relationships                            | (58)       |  | (23)         |       | 6           |  | (75)     | 
|Restructuring costs for business combinations     |            |  | (29)         |       | 2           |  | (27)     | 
|Goodwill amortization                             |            |  | 100          |       | 7           |  | 107      | 
|Consolidation scope - Special purpose entities    | (43)       |  |              | 43    |             |  |          | 
|Transaction costs - TTE transaction               | (9)        |  | 4            |       |             |  | (5)      | 
|Fair value of property, plant and equipment       | (17)       |  | 2            |       |             |  | (15)     | 
|Capital gain on transferred assets                |            |  | 11           |       |             |  | 11       | 
|Revenue recognition - Patent licensing            | (27)       |  | 24           |       |             |  | (3)      | 
|Rebates received                                  |            |  | (4)          |       |             |  | (4)      | 
|Capitalization of development costs, net          | 16         |  | 14           |       |             |  | 30       | 
|Employee benefits                                 | (150)      |  | (25)         |       | 8           |  | (167)    | 
|Share-based payment                               |            |  | (3)          | 3     |             |  |          | 
|Other IFRS adjustments                            | 5          |  | (5)          |       | (1)         |  | (1)      | 
|                                                  |            |  |              |       |             |  |          | 
|Total IFRS adjustments before tax                 | (283)      |  | 66           | 46    | 22          |  | (149)    | 
|                                                  |            |  |              |       |             |  |          | 
|                                                  |            |  |              |       |             |  |          | 
|Tax effect from IAS 12 except on IFRS adjustments | (3)        |  | (2)          |       |             |  | (5)      | 
|Tax effect on IFRS adjustment                     | (14)       |  | 9            |       |             |  | (5)      | 
|                                                  |            |  |              |       |             |  |          | 
|Shareholders' equity under IFRS                   | 3,283      |  | (563)        | (125) | (84)        |  | 2,511    | 
|                                                  |            |  |              |       |             |  |          | 

The above reconciliation does not take into account the adjustments on minority
  interests, which the Group considers as immaterial. The amounts presented under
  Other IFRS adjustments are individually considered by the Group
  as not significant by the Group (under 3 million).

IFRS
  Impact on Cash-flow Statement

The IFRS cash flow statement is affected by changes related to the accounting
  treatment and classification of several cash flows resulting from the operating,
  investing and financing activities.

The cash
  and cash equivalents as determined under French GAAP are not subject to changes
  under IFRS.

Principal Differences Between French GAAP and U.S. GAAP

The principal
  differences
  between French
  GAAP and U.S. GAAP affecting
  our consolidated financial statements mainly relate to (i) the criteria and
  the timing of recording of provisions, principally for restructuring activities,
  (ii) the recording of certain amortization and impairment charges that are classified
  below operating income under French
  GAAP but within operating income under U.S. GAAP,
  (iii)
  the recognition of revenue, (iv) the accounting treatment of investment securities
  and financial instruments, (v) the amortization of certain intangible assets
  and (vi) the accounting treatment of certain
  advantages in connection with employee share offerings.

Despite
  the new accounting standard on restructuring activities (SFAS 146  Accounting
  for Costs associated with Exit or Disposal Activities), differences in
  the recognition of restructuring accruals have been reduced since the implementation
  of the new French rule on liability recognition (Regulation No. 2000-06 of the
  French Committee on Accounting Regulations applied since January 1, 2002). However,
  with respect to termination costs, U.S. GAAP remains more stringent than French
  GAAP

79

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since the former provide additional criteria in comparison with French GAAP
  to recognize a liability. As such, SFAS 146 requires that the communication
  of the benefit arrangement includes sufficient details to enable employees to
  determine the type and amount of benefits they will receive if they are terminated.
  In the case the termination benefits are provided by way of contract or by law,
  U.S. GAAP (FAS 112  Employers Accounting for Postemployment
  Benefits) requires to accrue for such costs when the liability is probable,
  whereas French GAAP requires the announcement of the restructuring plan. In
  addition, SFAS 146 requires that costs to terminate a contract be provided for
  at the date the third party is notified of such decision or at the cease-used
  date in the case of a lease agreement. By contrast, under French GAAP, the accrual
  is to be recorded at the announcement to vacate the facility. Also, SFAS 146
  requires that accruals for cost to terminate a lease be reduced by estimated
  sub-lease rentals, whereas French GAAP requires the existence of a sub-lease
  contract to reduce such liability. Finally, SFAS 146 requires the recognition
  of a restructuring liability at its present value when the difference between
  the face value of a liability and its present value is material. As a result,
  the date upon which a restructuring liability is recognized under French GAAP
  do not always correspond to that of U.S. GAAP.

Furthermore,
  the provisions of EITF 95-3 Recognition of Liabilities in Connection with
  a Purchase Business Combination do not allow costs incurred by the acquiring
  company to be recognized as a liability assumed as of the consummation date
  of the acquisition. In addition, U.S. GAAP limits the window period to a maximum
  of twelve months following the consummation date of the business combination
  whereas French GAAP extends this window period to the closing date of the fiscal
  year following the one in which the business combination occurred. Consequently,
  all differences between French and U.S. GAAP regarding restructuring are of
  temporary nature and relate to the classification of restructuring costs.

U.S. GAAP
  (FIN 45  Guarantors Accounting and Disclosure Requirements
  for Guarantees, Including Guarantees for the Indebtedness of Others) requires
  the recognition of the fair value of certain guarantees given as a liability
  at the date the guarantee is granted for their non-contingent part. Under French
  GAAP, such commitment cannot be provided for because it does not meet the present
  obligation criteria required to accrue for a liability.

In addition,
  certain early retirement plans are reserved under U.S. GAAP when rights are
  acquired by employees whereas under French GAAP such liability is accrued when
  the plan is announced.

The accounting
  treatment for derivative instruments may differ between French and U.S. GAAP.
  Under French GAAP, we defer premiums and discounts as well as gains and losses
  on forward exchange contracts that hedge the future expected commercial forecasts
  and amortize them to income
  over the life of the underlying transactions being hedged. Under U.S. GAAP,
  these transactions do not qualify as future transactions eligible for hedge
  accounting, and therefore,
  derivative
  instruments are accounted for at their market value and the corresponding unrealized
  gains or losses are recorded in financial income.

Under U.S.
  GAAP, we measure our available for sale investments at fair value and report
  temporary un-realized gains or losses as a separate component of shareholders
  equity. Under French GAAP such investments are
  carried at the lower of cost or fair market value. Under French
  GAAP, goodwill is
  amortized over its estimated useful life (which ranges from 5 to 20 years).
  Whereas under U.S. GAAP, SFAS 142 Goodwill and Other Intangible Assets
  states that goodwill is no longer amortized but should be tested for impairment
  at least annually. Any recognized
  impairment is permanent.

Purchase price allocation for our acquisitions differs from French to U.S.
  GAAP mainly due to accounting treatment differences regarding restructuring
  reserves as well as the recording, when applicable, of deferred tax assets related
  to customer relationships and trademarks. Such intangibles having a finite useful-life
  under U.S. GAAP are amortized, whereas they are not amortized under French GAAP.

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Thomson
  Group

The issuance
  by Thomson of bons
  de souscription dactions(BASA
  or warrants) are considered under French GAAP as instruments of shareholders
  equity and, as such, do not affect the consolidated net income of the Group.
  Under U.S. GAAP, the BASA granted to employees is accounted for under APB 25
  in the following manner: their intrinsic value is accounted for as an expense
  and shown as a separate reduction of shareholders equity. As the intrinsic
  value is nil, these instruments do not have an impact on the net income of the
  Group under US GAAP.

In connection with the transaction with TCL to create TTE, Thomson provided
  a call option to TCL for Thomson shares at a fixed price. Under French GAAP,
  Thomson recorded this right granted to TCL in consideration for the Groups
  33% interest in TTE with a corresponding reduction in shareholders equity
  of the Group. Under U.S. GAAP, Thomson recorded financial debt in consideration
  for the TTE shares it received. In connection with the shares granted to employees
  of TTE, French GAAP does not require Thomson to recognize the fair value of
  the benefit granted, and, as a result, the Group has not recorded a corresponding
  operational expense. However, U.S. GAAP requires that this benefit be recorded
  as an operational expense equal to the intrinsic value of these shares and reevaluated
  until the date the shares are acquired.

Our financial
  statements under U.S. GAAP are also affected by the classification as compensation
  gain or expense of the re-evaluation at fair market value of certain benefits
  granted by TSA, formerly our main shareholder, to our employees in connection
  with employee share offerings. These benefits principally consist in discounts
  on the offering price and in bonus shares.

In connection
  with the stock options issued by Thomson for the benefit of its employees, French
  GAAP does not require Thomson to recognize the fair value of the right granted,
  and, as a result, the Group has not recorded a corresponding operational expense.
  However, U.S. GAAP requires that this benefit be recorded as an operational
  expense equal to the intrinsic value of these securities. In addition, U.S.
  GAAP requires that the notes to the financial statements include the fair value
  of these benefits, as well as the effect that these benefits would have had
  on the consolidated income from operations if the fair value method had been
  applied.

The Group
  is currently evaluating the impacts of the following new U.S. accounting standards:
  (a) EITF 02-14 Whether an Investor Should Apply the Equity Method of Accounting
  to Investments Other than Common Stocks, (b) EITF 03-13 Applying
  the Conditions of Paragraph 42 of SFAS 144  Accounting for the Impairment
  or Disposal of Long-Lived Assets, (c) EITF 04-08 The Effect of Contingently
  Instruments on Diluted Earnings per Share, (d) SFAS 123R Share-based
  Payment  An Amendment of Statement 123, (e) SFAS 151 Inventory
  Costs, an Amendment of ARB 43, Chapter 4 and (f) SFAS 153 Exchange
  of Non-Monetary Assets.

For more
  detailed information regarding
  the foregoing differences between French GAAP and U.S. GAAP, as well as certain
  additional differences between French GAAP and U.S. GAAP as it applies to Thomson
  (including regarding pensions and termination benefits, stay bonus, and reversal
  of deferred tax valuation allowance), please refer
  to Note 31 and 32 to our consolidated financial statements.

Results of Operations for 2004 and 2003

Evolution
  of division structure

In 2004,
  as in 2003, our activities were organized and reported on according to four
  operating divisions: Content & Networks, Components, Consumer Products and
  Licensing. For a summary of these divisions and our subsequent reorganization
  thereof, see Item 4: Information on the CompanyOur OrganizationTransformation
  to Implement Our Strategy. For information of our 2004 net sales and operating
  income presented according to our new organization effective January 1, 2005,
  please refer to Thomsons Form 6-K, as submitted to the SEC on March 3,
  2005.

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Changes
  in scope of consolidation

- In accordance
    with the new regulation Article 133 of the French Law on Financial Security
    (Loi
    de Sécurité Financièreor
    LSF) issued on August 1, 2003, Thomson fully consolidated two
    special purpose entities (SPEs) starting on January 1, 2004. One
    of the SPEs was established in 2000 in connection with a synthetic lease transaction
    for Thomson Display Mexicana S.A. de C.V. concerning a new television tube
    manufacturing facility located in Mexicali (Mexico), which was unwound in
    January 2005. The other SPE was established in 2001 in connection with a similar
    lease transaction
    for Thomson multimedia Polska sp.zo.o (Poland), which involved the transfer
    of legal title of
    its tube manufacturing equipment. On March 31, 2004, Thomson multimedia Polska
    sp.zo.o unwound the synthetic lease transaction by repaying the debt held
    via the SPE. Consequently, legal title of the equipment was transferred back
    to Thomson multimedia Polska sp.zo.o.
- On January
    7, 2004, Thomson completed the acquisition of the tubes division of the Chinese
    company Xinyuan Highway Development (known as Fortune). We fully
    consolidated Fortune as of such date. Concurrently with this transaction,
    Thomson increased its ownership in Thomson Guangdong
    Display Co. Ltd. to 77%.
- On March
    23, 2004, Thomson signed a definitive agreement to sell to the Taiwanese company,
    Foxconn, its optical pick-up manufacturing entity located in China within
    Thomson OKMCO Shenzen Co. Ltd. Thomson will continue its research, product
    development and selling activities in this business.
- On April
    20, 2004, Thomson acquired International Recording, a Rome-based company specializing
    in creating multiple foreign language versions for theatrical and broadcast
    content, as well as for video games. We fully consolidated this company as
    of such date.
- On May
    12, 2004, Thomson acquired Command post, a leading Canadian provider of video/audio
    post-production and film services for the North American motion picture industry.
    We fully consolidated this company as of such date.
- On May
    15, 2004, Thomson acquired the video division of ParkerVision, a pioneer of
    live television production automation systems. We fully consolidated this
    company as of such date.
- On June
    11, 2004, Thomson acquired from Beijing C&W Electronics (Group) Co. Ltd.
    its 45% minority interest in Thomson Zhao Wei Multimedia Co., Ltd. (China).
    Thomson already held the other 55% and had joint control. This company then
    formed part of Thomsons television business contributed
    to TTE as of July 31, 2004.
- On June
    16, 2004, Thomson acquired from Alcatel its 25% minority interest in Nextream
    S.A. Thomson already held the other 75%, together with the management control.
    Nextream which was fully consolidated is now 100% held by the Group.
- On June
    18, 2004, Thomson acquired
    Madrid Film SL, also known as Madrid Film Group, the largest film
    and post-production operation in Spain. We fully consolidated this company
    as of such date.
- On June
    24, 2004, Thomson acquired the set-top box manufacturing assets of Hughes
    Network Systems
    (the manufacturing activity of DIRECTV Group) and signed an agreement for
    the long-term development and supply of digital satellite set-top boxes (STBs).
    We
    fully consolidated this activity as
    of that date.
- On June
    25, 2004, in order to complete the agreements signed in 2003 concerning Canal
    Plus Technologies
    and the sale of the MediaGuard business to Kudelski, Thomson sold to
    Kudelski 50% of its shares in Canal Plus Technologies to form a joint venture
    in the field of the conditional access systems patents, which is consolidated
    under the pro rata method as of such date.
- On July
    19, 2004, Thomson acquired Gyration, a Silicon Valley technology company that
    has developed a line of next-generation user-interface (UI) devices using
    proprietary technology based

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  Group

> on gyroscopes.
>     The technology is currently incorporated in a variety of hand-held UI devices,
>     mainly for personal computers (PCs). We fully consolidated this company as
>     of such date.

- On July 31, 2004, Thomson and TCL combined their respective television assets
    in a new company, TTE Corporation (TTE), of which Thomson holds 33% and TCL
    67%. Thomson contributed substantially all of its television assets mainly
    located in Mexico, Poland and Thailand as well as its R&D centres located
    in the U.S., Germany and Singapore. Thomson licenses certain intellectual
    properties (trademarks and patents) to TTE, and currently TTE exclusively
    uses Thomson services for the distribution of television sets in Europe and
    in the U.S., with Thomson acting as the sales and marketing agent. Thomson
    has neither control nor joint control of TTE and consolidates TTE under the
    equity method from August 1, 2004. The television activity before July 31,
    2004 is presented under the full consolidation method. Thomson accounted for
    the contribution to TTE of its television business as a disposal and recorded
    its 33% interest in TTE as an acquisition.
- On September 22, 2004, Thomson sold its 19.9% interest in Total Technology
    Company Limited. Prior to such date, this company was consolidated under the
    equity method.
- On October 27, 2004, Thomson acquired 77.61% in Corinthian Television Facilities
    Limited (UK) Corinthian is one of Europes leading broadcast television
    facilities companies providing live studios, graphics, video, audio production
    and post-production and transmission play-out to major international broadcasters
    through long term contracts. We fully consolidated this company as of such
    date.
- On November 4, 2004, Thomson acquired a 50% interest in Beijing Nokia CITIC
    Digital Technology Co Ltd. This company is mainly engaged in the production
    of digital multimedia terminals for reception of digital broadcasting and
    interactive services via satellite, cable, terrestrial and telecom networks
    and related products and systems for digital Internet services. The company
    is consolidated under the proportional consolidation method from that date.
- On November 18, 2004, Thomson acquired EADS DCS (Defense and Communication
    Systems) Video Over Internet Protocol (IP) activity, specialised in the integration
    of video over IP systems, which enables seamless access to voice, data and
    video content. This activity is fully consolidated from that date.
- On December 9, 2004, Thomson acquired The Moving Picture Company (MPC).
    MPC is a London (UK) provider of visual effects and post-production services
    to both the motion picture and commercial advertising industries. We fully
    consolidated this company as of such date.
- On December 10, 2004, Thomson sold its 36% interest in KeyMRO. The company,
    which had been consolidated on a proportional basis, was no longer consolidated
    as of such date.
- On December 31, 2004, Thomson sold Thomson Servicios Corporativos S.A de
    C.V, a set-top box manufacturing company in Mexico, to Elcoteq. Prior to December
    31, 2004, the activity was fully consolidated.

Please
  refer to Notes 23 and 8 to our consolidated financial statements, which present
  the cash impact of the acquisitions and disposals of our investments and the
  goodwill from
  our acquisitions.

Notification
  of threshold crossing in the share capital of French companies

Under article
  L.223-6 of the Code de Commerce,
  we disclosed that in 2004:

- In September
    2004, Thomson acquired
    an interest of 10% in the share
    capital of Nextamp;
- On January
    29, 2004, Thomson acquired 3.19% of the share capital of Nagra Thomson Licensing
    (formerly Canal+ Technologies) from Sony Venture Capital Europe. On March
    19, 2004, Thomson acquired 1.37% of the share capital of the same company
    from Sun Microsystems, increasing its

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> interest
>     in the company to 100% of its share capital. On June 25, 2004, Thomson sold
>     50% of Nagra Thomson Licensing to the Kudelski group; and

- On June
    16, 2004, the Group, which was a 75% shareholder of Nextstream S.A., acquired
    the remaining 25% from Alcatel. Thomson previously held operational control
    of the company. Nextream is currently 100% held by the Group.

Changes
  in accounting principles

> 1. Treatment of SPEs

Article 133 of the French Law on Financial Security (Loi de Sécurité
  Financière, or LSF) issued on August 1, 2003, modified
  article L233-16 of the French Commercial Code, which did not permit the consolidation
  of a company unless at least one share was owned. According to this new Article
  133 and disregarding the number of shares held, fully controlled special purpose
  entities (SPEs), are consolidated as of January 1, 2004, applying
  a retroactive method. The law did not allow an early application. Thomson has
  two such SPEs, one put in place in 2000 and the other in 2001, which are affected
  by the application of this new article in 2004. These SPEs have been consolidated
  retroactively as of December 31, 2003, increasing the net tangible fixed assets
  by 193 million, financial debt by 321 million and decreasing deferred
  income by 85 million and with the net impact booked to equity for (43)
  million. We unwound the Mexicali synthetic lease in January 2005, while Thomson
  multimedia Polska sp.zo.o unwound its synthetic lease transaction on March 31,
  2004.

Following
  the consolidation of these SPEs, as of December 31, 2004, the Group no longer
  reports off-balance
  sheet future payments related to synthetic leases.

> 2. Income Statement Presentation

Thomson
  has elected to modify its income statement presentation, as permitted by regulation
  99-02, to
  take into account upcoming changes to the presentation format of the income
  statement to take place
  over the next two years under IFRS. Thomson also believes that such a change
  provides more useful information to the users of its financial statements. Prior
  periods have been restated with the new classification and sub-total captions,
  however there is no change to previously reported income statement amounts.

Analysis
  of Net Sales

In 2004,
  consolidated net sales amounted to 7,994
  million, compared with 8,459
  million in 2003, a decrease of 5.5%, resulting primarily from negative effects
  of exchange rate fluctuations and the deconsolidation of our television business
  with the creation of TTE as of August 1, 2004, offset in part by strong sales
  growth recorded by our Content and Networks businesses. At constant 2003 exchange
  rates, consolidated net sales remained relatively stable recording a 0.5% decrease
  compared to 2003. At a constant scope of consolidation (2003 perimeter but without
  adjustment for currency movements), consolidated net sales grew by 0.6%. On
  both a constant scope of consolidation and constant 2003 exchange rate basis,
  consolidated net sales of the Group increased by 6% in 2004.

> Content and Networks

Consolidated
  net sales for the Content and Networks division totaled 4,073
  million in 2004 compared with 3,714
  million in 2003, representing an increase of 9.6%. This increase was recorded
  despite
  the negative impact of exchange rate variations of 208
  million. Consolidated net sales of the Content and Networks division increased
  by 15.2% at constant 2003 exchange rates and by 8.6% at a constant scope of
  consolidation (2003 perimeter but without adjustment for currency movements).

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On both
  a constant scope of consolidation and constant exchange rate basis, consolidated
  net sales of the Content and Networks division increased by 14% in 2004 compared
  to 2003 driven primarily by very strong revenue growth in Broadband Access Products,
  with more measured revenue growth in our Content Services and Broadcast &
  Media Solutions businesses. The effect of strong volume growth was partially
  offset by pricing pressure across many of our Content and Networks businesses.

In 2004,
  sales of our Content Services businesses were essentially unchanged compared
  to 2003 (5% growth at constant 2003 exchange rates), driven by increased volumes
  across our Content Services businesses.
  In Home Entertainment Services (DVD), the number of DVDs replicated in 2004
  amounted to
  1.3 billion in 2004, an increase of 31%, resulting primarily from a strong release
  schedule in 2004 of certain major customers. The number of VHS cassettes duplication
  continued to decline and decreased by 45% to 150 million units. Our Film Services
  business showed strong growth, increasing by 25% its volumes with approximately
  5.3 billion feet of film reel processed, compared to 4.2 billion feet in 2003.
  This increase resulted primarily from an increased number of prints required
  for major releases,
  the contribution to revenue of our acquisition of Madrid Film and the full-year
  consolidation of
  Cinecolor Lab Company, Ltd, which we acquired in October 2003. The post-production
  services industry
  also experienced general growth in 2004.

In 2004,
  we continued to invest in the installation of new DVD replication lines (33
  new lines in 2004). We also announced the building of the first studio-located
  digital intermediate facility to be located on the Sony Studios in California,
  which coupled with the expansion projects at our digital intermediate facilities
  in our London, Montreal, Toronto and New York sites, will substantially increase
  our capacity for the digital intermediate service offering. In addition, we
  expanded the offering and geographical presence of our Contents Services businesses
  with the acquisitions of Command Post in Canada, Madrid Film in Spain, The Moving
  Picture Company in the United Kingdom, and International Recording in Italy.
  In addition, as part of Thomsons strategy to develop in broadcast play-out
  services, we acquired Corinthian Television in the United Kingdom.

Sales of our Broadcast & Media Solutions and Broadband Access Products
  businesses grew by approximately 26% (32% at constant 2003 exchange rates).
  As part of this growth, the increase of our Broadband & Media Solutions
  business was due primarily to growth in our volume market share in the production
  and post-production markets, as customers accelerated their migration to the
  High Definition (HD) format in 2004 in the United States, Europe
  and Asia and chose our HD products. Although market demand for play-out and
  satellite network products was slow in early 2004 as many customers were in
  the process of developing business plans for their transition to HD formats,
  it accelerated at the end of 2004 as those customers started to implement those
  plans. In 2004, we entered into several contracts to sell our HD equipment to
  such customers as FOX Network, HBS, DIRECTV, Universal Studios, Cinefilm and
  Digimax. We expect the growth of HD technology to remain a catalyst for 2005
  spending in both play-out and satellite network products. We derive approximately
  a third of net sales from HD-based products across all our product lines, and
  we expect this proportion to increase in the coming years. 2004 was also marked
  by our acquisition of the video division of ParkerVision, which, although having
  a minimal effect on our total net sales, significantly increases our ability
  to expand our digital news productions and professional audio/video product
  offerings.

Our Broadband
  Access Products business grew strongly by selling 11.8 million decoders and
  cable modems worldwide in 2004, compared with 6.9 million units sold in 2003,
  with approximately 4.2 million within decoders shipped during the last quarter
  of 2004. This increase was primarily due to increased
  sales resulting from our 5-year agreement with DIRECTV, signed in May 2004,
  for the development and the supply of satellite decoders by Thomson to DIRECTV,
  establishing Thomson as the preferred decoder supplier to this network operator.
  While volume of sales of decoders grew substantially, sales grew at a lower
  rate due to lower sales prices. We also sold 6.4 million DSL modems in 2004,
  up from 3.2 million in 2003, although this increase in units sold was offset
  by the continued rapid decrease
  in prices for DSL modems.

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> Components

Consolidated
  net sales for the Components division increased by 95
  million to 1,167
  million in 2004 from 1,072
  million in 2003, an increase of 9.0% (14.5% at constant 2003 exchange rates).
  The increase was due to the consolidation of Fortune, which contributed 2004
  sales of 171
  million with 4.9 million units sold, and the treatment as external (i.e., non-Group)
  sales of 192
  million of sales starting August 1, 2004 to entities previously held by the
  Group (i.e., prior to their contribution to TTE). The increase was offset in
  part by the continued deterioration of the market for television manufacturing
  in the United States and Europe (both in volume and in value), with significant
  price and volume
  pressure from importers (whose market share increased relative to local manufacturers).
  The increase was also offset in part by a weak U.S. dollar and liquidations
  of inventory by certain U.S. competitors.

The Groups activities in China were strong, recording volumes that more
  than tripled compared with 2003. Following the acquisition of Fortune, our production
  of tubes in China represents 42.3% of our worldwide production of tubes by volumes.
  This growth was offset by substantial price erosion in this market worldwide.
  For more information on our partnership strategy in our Displays activity, please
  see Information on the CompanyOur StrategyPreferred Partner
  of the Media & Entertainment Industries and Events Subsequent
  to December 31, 2004Recent Developments Relating to Our Partnership Strategy
  for the Displays Activity.

> Consumer Products

Consolidated
  net sales for the Consumer Products division totaled 2,325
  million in 2004 compared with 3,198
  million in 2003, a decrease of 27.3%. At constant 2003 exchange rates, net sales
  decreased by 23.3% compared to 2003. At a constant scope of consolidation (net
  of the deconsolidation impact of the transfer of our television businesses to
  TTE starting August 1, 2004 and without adjustment for currency movements),
  net sales grew by 0.7% compared to 2003. On both a constant scope of consolidation
  and constant 2003 exchange rate basis, consolidated net sales grew by 6% in
  2004. The Mainstream business contributed slightly more than 50%
  of the divisions 2004 revenues, while the Essentials business
  contributed the remainder of the divisions revenues.

The Essentials
  portfolio of products recorded decreased sales of 10.9% compared to 2003 (a
  decrease of 4.3% at constant 2003 exchange rates). This decrease was primarily
  due to weakness in the communications industry in the NAFTA region and to pricing
  pressure caused by increasing low-cost Chinese imports on the European market.
  These factors were offset in part by the good sales performance of the consumer
  accessories solutions business within our Essentials activity, due primarily
  to its increased product range and client base of the Recoton business acquired
  in 2003.

Our Mainstream
  consumer products recorded decreased sales of 36.6% compared to 2003 (a decrease
  of 34.1% at constant 2003 exchange rates), primarily due to the deconsolidation
  of our television businesses to TTE starting
  August 1, 2004. In the first seven months of 2004, prior to the closing
  of the Combination Agreement creating TTE on July 31, 2004, our television sales
  amounted to 845
  million, compared to 834
  million over the same period in 2003, representing an increase of 6%. This increase
  reflected
  primarily improved
  sales of Digital Light Processing (DLP) televisions in the NAFTA region and
  Liquid Crystal Display (LCD) televisions in Europe, resulting from increased
  market demand for flat screen products as prices for such products decline.
  Sales of our Home Audio/Video products
  decreased
  by 16.9% from 2003 (a decrease of 13.4% at constant 2003 exchange
  rates), due mainly to aggressive price competition in this market.

Following
  the transfer of our television business to TTE, we provided
  certain products (manufactured at our plant in Angers, France) and sales and
  marketing services (as sales agent) to TTE from August to December 2004, totaling
  152
  million.

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  Group

> Licensing

Consolidated
  net sales for the Licensing division amounted to 404
  million in 2004 compared with 462
  in 2003, a decrease of 12.7%, primarily as a result of the negative impact of
  the evolution of the exchange rate of the U.S. dollar relative to the Euro,
  as most of our licensing sales are made in U.S. dollars, and to a lower amount
  of past-payment licenses compared to 2003, when we entered into certain important
  licensing contracts. At constant 2003 exchange rates, sales in 2004 decreased
  by 6% compared to 2003. Revenues related to digital-based programs represented
  approximately 70% of
  total revenues of the division, particularly MPEG2 and MP3, reflecting the growth
  of our digital licensing
  program in terms of the volumes of existing contracts and the number of new
  contracts finalized during the year. We also started new licensing programs
  in 2004 such as a program relating to digital TV, and the Group booked its first
  revenues from the commercialization of this digital TV program. In 2004, the
  agnostic licenses programs (compatible both with analog and digital
  technologies) recorded significant progress in renewal rates. In 2004, the Group
  continued to develop its
  licensing portfolio: the Group has 878 licensing contracts at year-end 2004,
  a 17% increase compared
  with year-end 2003.

Operating
  Income

Cost of
  sales amounted to 6,284
  million in 2004, or 78.6% of net sales, a decrease of 3.9% compared with cost
  of net sales of 6,536
  million in 2003, or 77.3% of net sales.

As a result,
  gross margin was 1,710
  million in 2004, or 21.4% of net sales, compared with 1,923
  million in 2003, or 22.7% of net sales.

Selling
  and marketing expenses amounted to 613
  million, or 7.7% of net sales in 2004, compared with 728
  million or 8.6% of net sales in 2003.

Administrative
  expenses amounted to 386
  million, or 4.8% of net sales in 2004, compared with 393
  million or 4.6% of net sales in 2003.

Research
  and development expenses net of external funding were 277
  million in 2004, or 3.45% of net sales in 2004, compared with 3.5% in 2003.
  External funding is comprised principally of grants from national or European
  Union (EU) government agencies and is accounted for as income based on the stage
  of completion of the project and is directly deducted from research and development
  costs. Excluding government agency subsidies of 8
  million in 2004 and 9
  million in 2003, research and development expenses were 285
  million in 2004, compared with 304
  million in 2003. Out of the total spending
  on research and development in 2004, 50
  million was allocated to core research areas.

As a result
  of the above factors, consolidated operating income reached 434
  million in 2004, or 5.4% of net sales, a decrease of 14.6% compared with 508
  million in 2003, or 6% of net sales. This decrease
  in operating income was primarily due to reduced
  operating income in our Licensing and to a
  lesser extent in our Content and Networks division, partially offset by reduced
  operating losses in our Consumer Products division.

> Content and Networks

Operating
  income for the Content and Networks division amounted to 407
  million in 2004 compared with
  436
  million in 2003, a decrease of 6.8%. The divisions profitability was negatively
  impacted by exchange rate variations of 18
  million during the year.

The divisions
  2004 operating margin
  was 10.0% compared with a 2003 operating margin of 11.7%. Operating margins
  during 2004 decreased largely as a result of a margin decline in our Content
  Services
  business, driven by sharp decline in VHS volumes, price declines in DVD and
  cost increases

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of raw
  materials, notably polycarbonate. This decrease was offset, however, in part
  by our continuing cost-control measures, continued shift of production to low-cost
  territories, economies of scale due to substantially increased DVD volumes,
  successful integration of current year and prior year acquisitions and consolidation
  of our VHS duplication facilities.

Within
  the division, the Content Services businesses maintained margins above 12%,
  while our activities in Broadband Access Products and Broadband & Media
  Solutions improved their operational margins compared to 2003, primarily as
  a result of increased sales and improved product mix,
  notably with telecommunications and cable operators.

> Components

The Components
  division recorded an operating loss of 105
  million compared with an operating loss of 101
  million in 2003. This loss resulted from the substantial erosion of prices in
  the tubes market worldwide,
  offset in part by increased volumes sold, productivity gains in our Chinese
  operations and decreased
  costs of raw materials, which declined in parallel with market prices for tubes.

> Consumer Products

The Consumer
  Products division recorded an operating loss of 64
  million in 2004, compared with an operating loss of 124
  million in 2003. This improvement is due primarily to reduced losses in our
  Mainstream businesses compared to 2003, mainly attributable to improved television
  sales in the first seven
  months of 2004 (prior to the transfer of this business to TTE as of August 1,
  2004) and the deconsolidation of our television activity, offset in part by
  decreased operating income generated by the rest of the division.

Following
  the closing of the Combination Agreement creating TTE, our sales agent service
  billings were invoiced to TTE at cost in accordance with contractual arrangements.

> Licensing

Operating
  income for the Licensing division amounted to 325
  million in 2004 compared with 411
  million in 2003, primarily as a result of lower revenue. The operating margin
  of the division reached 80.5% down from 88.8% in 2003, reflecting primarily
  a lower amount of past-payment licenses as well as increased investment in new
  licensing programs.

Operating
  income under U.S. GAAP

Under French
  GAAP,
  operating income was 434
  million in 2004, or 5.4% of net sales, a decrease of 74
  million, as compared to operating income of 508
  million in 2003. Under U.S. GAAP, we recorded in 2004 operating income of (180)
  million compared with operating income of 32
  million in 2003.

- There are material differences between French GAAP and U.S. GAAP. The difference
    in operating income as reported under U.S. GAAP versus French GAAP in 2004
    resulted mainly from reclassifications and restatements related to restructuring
    reserves, pension plans interest costs, certain intangible assets amortization
    and accruals for a number of provisions which have different classifications
    under French and U.S. GAAP.
- Reclassification and restatements due to differences in the criteria and
    the timing of recording restructuring provisions between U.S. GAAP and French
    GAAP represent (763) million in 2004, compared with (264) million
    in 2003.
- Reclassifications of pension plans interest costs related to shut-down activities,
    included in the financial result under French GAAP and classified as operating
    expenses under U.S. GAAP, amount to (25) million in 2004, compared with
    (24) million in 2003;

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  Group

- Excluding restructuring expenses and reclassifications of pension plan interests
    costs, reclassifications from Other income (expense), net under
    French GAAP to Operating income (loss) under U.S. GAAP amount
    to 200 million in 2004 and 86 million in 2003, including fixed
    asset write-offs for (36) million in 2004 (52 million in 2003).
    The positive 200 million impact on reclassification in operating income
    is mainly due to classification as discontinued operations of two operations
    in 2004 under U.S. GAAP, impacting positively the operating income in an amount
    of 280 million.
- Customer and supplier relationships having a finite useful-life are amortized
    under U.S. GAAP for an amount of (34) million and (27) million
    in 2003 and 2004, respectively, whereas they are not under French GAAP.

Please
  refer to Note 31 and 32 to our consolidated financial statements for a further
  discussion of the principal differences between French and U.S. GAAP.

Other
  Income and Expenses

> Restructuring Costs

Restructuring
  costs represent 742
  million in 2004 compared to 217
  million in 2003. The non-cash impairment charge of 530
  million related to our decision to seek a partnership for our Displays activity
  is substantially the largest element. In 2004, restructuring costs by segment
  consisted primarily of the following:

- Content and Networks:Restructuring programs include the consolidation
    and the rationalization of our VHS duplication facilities in the United States
    and Europe. Costs related to this plan amounted to 16 million. This
    plan was announced during the first half of 2004. Other restructuring costs
    relate to the downsizing of our Broadcast facilities (3 million), a
    voluntary departure plan at one of our broadband facilities (7 million),
    and to certain businesses acquired in 2002. The latter are expensed as incurred
    because they benefit the future activity of the Group (i.e., training, moving
    or integration costs).
- Components:In 2004, the Components division recorded 690 million
    restructuring costs, of which 129 million were recorded in the first
    half of 2004. The restructuring costs mainly related to:
    Thomsons decision to actively seek for partnership in the Displays
        activity. As a consequence of this decision, the Group has reassessed
        the carrying value of all Displays business fixed assets, which
        has resulted in the recognition of a non-cash impairment charge of 530
        million. For recent developments regarding our partnership strategy for
        the Displays activity, see Events Subsequent to December 31, 2004Recent
        Developments Relating to Our Partnership Strategy for the Displays Activity.
      The closure of the tube plant in Marion, Indiana, and our television
        glass plant in Circleville, Ohio, resulting in 30 million of exit
        costs and 23 million of write-off of assets for the tube plant and
        in 36 million of exit costs and 56 million of write-off for
        the closure of the glass plant. The above-mentioned exit costs are net
        of employee benefits curtailment gains that are related to these two plant
        closures, and amount to 24 million. Certain closure costs of the
        tube plant have been charged to the acquisition costs of Fortune for an
        amount of 19 million.
      Certain restructuring plans to downsize our workforce in the tube business
        in Europe, Asia and America for an amount of 11 million.
      The downsizing of our facilities in the storage digital module business
        for a restructuring charge of 5 million.
- Thomsons decision to actively seek for partnership in the Displays
        activity. As a consequence of this decision, the Group has reassessed
        the carrying value of all Displays business fixed assets, which
        has resulted in the recognition of a non-cash impairment charge of 530
        million. For recent developments regarding our partnership strategy for
        the Displays activity, see Events Subsequent to December 31, 2004Recent
        Developments Relating to Our Partnership Strategy for the Displays Activity.
- The closure of the tube plant in Marion, Indiana, and our television
        glass plant in Circleville, Ohio, resulting in 30 million of exit
        costs and 23 million of write-off of assets for the tube plant and
        in 36 million of exit costs and 56 million of write-off for
        the closure of the glass plant. The above-mentioned exit costs are net
        of employee benefits curtailment gains that are related to these two plant
        closures, and amount to 24 million. Certain closure costs of the
        tube plant have been charged to the acquisition costs of Fortune for an
        amount of 19 million.
- Certain restructuring plans to downsize our workforce in the tube business
        in Europe, Asia and America for an amount of 11 million.
- The downsizing of our facilities in the storage digital module business
        for a restructuring charge of 5 million.

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- Consumer Products:Restructuring charges amounting to 12 million,
    relating to our plan to downsize our television manufacturing factory in Angers,
    France, downsizing measures within R&D operations in Germany, the closure
    of our sales unit in Morocco, as well as restructuring of our Juarez operations
    in Mexico and sales locations in the United Kingdom.
- Holdings:Reorganization of the holding segment is mainly related
    to the reorganization/ downsizing of our corporate headquarters in Indianapolis,
    Indiana, for which expenses charged to income during the period amount to
    2 million. Other costs are related to ongoing expenses on the downsizing
    of certain research and development centers in France for 2 million
    and the re-organization of our Group headquarters in Boulogne, France for
    4 million.

For more
  information on restructuring costs as they relate to our reorganization and
  restructuring programs, please refer to Note 18 to our consolidated financial
  statements.

> Other income and expense, net

Other income
  and expense amounted to a net expense of 27
  million in 2004, compared with 32
  million in 2003. The principal components of Other income (expense), net
  in 2004 include costs of 25
  million incidental to the restructuring of our Displays activities and exceptional
  assets depreciation of 14
  million in the Content and Network division, relating to an indemnity paid in
  relation with the acquisition of the Panasonic Disc Services business in 2002.
  These and other expenses were offset in part by capital gains realized from
  the disposal of certain fixed assets and investments related to the creation
  of TTE and the sale of Thomsons interest in the company, MUSICMATCH. For
  additional information on other income and expense, please refer to Notes 3
  and 6 to our consolidated financial statements.

Financial
  Result

> Net interest income/expense

Net interest
  charges reached 24
  million in 2004, compared with net interest charges of 9
  million in 2003. Net interest expense included primarily the interest on promissory
  notes issued to Carlton (now ITV) in connection with the acquisition of the
  Technicolor businesses, the interest on the convertible/exchangeable bonds issued
  in 2000, 2002 and 2004 and due respectively in 2006, 2008 and 2010. We also
  paid interest on a U.S. private placement issue starting in June 2003.

For more information on these convertible/exchangeable bonds and on the private
  placement, please refer to Note 20 to our consolidated financial statements.
  For more information on the promissory notes, please refer to Note 22 to our
  consolidated financial statements. The change in net interest charges during
  2004 in comparison with 2003 is mainly due to a higher LIBOR (short-term U.S.
  dollar interest rates) and to a higher average net debt level.

> Other financial expense

Other financial
  expenses totaled 55
  million in 2004, compared to 70
  million in 2003. Other financial expenses in 2004 include mainly pension plan
  interest costs in Germany and the United States related to discontinued activities
  and other interest on non-financial payables which includes the amortization
  of up-front bank fees related to debt issues and foreign exchange gains and
  losses. The reduction in 2004 compared to 2003 is mainly due to the improvement
  of the foreign exchange result. Please refer to Note 5 to our consolidated financial
  statements for additional information on other financial expense.

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Amortization
  of goodwill

Goodwill
  amortization totaled 130
  million in 2004 compared with 76
  million in 2003, notably due to additional goodwill amortization related to
  TTE. Going forward, as Thomson adopts IFRS accounting standards, goodwill will
  no longer be amortized.

Income
  Tax

Pursuant
  to the provisions of the French Tax Code (article 209 quinquies) and in accordance
  with a tax
  agreement from the French Tax Authorities dated November 6, 2002, Thomson S.A.
  (the parent company)
  files a worldwide consolidated tax return. This tax agreement has been retroactively
  applied as of January 1, 2001 and will expire on December 31, 2005 unless renewed.

The Group
  tax charge amounted to 88
  million in 2004, compared with 63
  million in 2003. The tax charge
  in 2004 resulted primarily from current taxes incurred in the United Kingdom,
  Mexico, Australia and
  the Netherlands, as well as withholding taxes on income earned by our Licensing
  division, which cannot
  be credited against taxes payable in France and the United States.

In 2004,
  the Group registered a net deferred tax liability of 4
  million. This amount mainly reflects the partial recognition of accumulated
  losses in the United States to take into account the anticipated improvements
  in the result of U.S. fiscal consolidation resulting from the exit from loss-making
  activities such as the manufacturing of televisions through the creation of
  TTE and certain factories in our
  Components division. However, the Group reduced by 57
  million its deferred tax asset following the French Finance Law for 2005 (Loi
  de Finance)
  of December 2004, which has reduced the future tax rate on licensing revenues
  as well as on capital gains, making Thomsons long-term capital losses
  unusable as from January 1, 2006.

The effective
  tax rate, defined as the ratio of the tax charge to net income before tax, amortization
  of goodwill and minority interests, was 35.0% in 2003. In view of the negative
  net income in 2004, this ratio is not meaningful for this year.

For additional
  information, please refer to Note 7 to our consolidated financial statements.

Net
  Income

Income
  derived from minority interests amounted to 1
  million in 2004 compared with a minority interest income of 8
  million in 2003. The decrease of minority interest results primarily from the
  acquisition
  of the minority interest in ATLINKS (now Thomson Telecom) in early 2003 and
  in Nextream in 2004.

As a result of the factors discussed above, the Group recorded a net loss
  of 636 million in 2004, compared with net income of 26 million in
  2003. Net income as a percentage of net sales was (8.0)% in 2004, compared with
  0.3% in 2003.

Net loss
  per share
  was 2.32
  in 2004, compared
  to net income per share
  of 0.09
  in 2003.

Net
  income under U.S. GAAP

Under U.S. GAAP, we recorded net income of (567) million in 2004, compared
  with (46) million in 2003. The difference in net income under U.S. GAAP
  versus French GAAP in 2004 mainly relates to the reversal of goodwill amortization
  recorded under French GAAP. For more details see notes 31 and 32 to our consolidated
  financial statements.

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Results of
  operations for 2003 and 2002

Evolution
  of division structure

In 2003,
  we organized and reported our activities according to four operating divisions:
  Content & Networks, Components, Consumer Products and Licensing. For a summary
  of these divisions and our subsequent reorganization thereof, see Item 4: Information
  on the CompanyOur OrganizationTransformation to Implement Our Strategy.

The operations of the former New Media Services division were absorbed in
  2003 by the Consumer Products activities (principally guide-related activities)
  and Content and Networks activities (principally the screen-advertising activity).
  Figures for 2002 have been restated accordingly.

Changes
  in scope of consolidation

- Since January 1, 2003 the financial statements of all subsidiaries in which
    Thomson has a direct or indirect controlling interest have been consolidated,
    whether or not the activity is significant, except for three insignificant
    companies held for liquidation. As a result, thirty entities have been included
    in the scope of consolidation, representing an external turnover of 14.6
    million, operating income of 1.0 and total assets of 45.2 million.
- In January 2003, Screenvision Europe Group sold its 71% participation in
    a subsidiary, TWICE, which is therefore not consolidated subsequent to December
    31, 2002.
- On January 31, 2003, Thomson acquired 89% of Canal+ Technologies (Thomson
    held a small percentage of Canal+ Technologies before this agreement). The
    company acquired comprised two businesses, namely conditional access systems
    marketed under the brand name MediaGuard and middleware operating systems
    marketed under the brand name of MediaGuard. In both cases, the related
    products and services are marketed to digital TV operators. 
    During December 2003, Thomson completed the sale of the MediaHighway
    business and the MediaGuard business. The assets retained were intellectual
    property assets plus cash acquired with and retained in the business. Accordingly,
    the activity of Canal+ Technologies has been accounted for as a non-operating
    activity for 2003 and its results included in other income (expense),
    net, together with the gain on disposal, net of expected costs. More
    details of the financial consequences of the purchase (refer to Note 23 to
    our consolidated financial statements) and sale of the Canal+ Technologies
    business are in Note 6 to our consolidated financial statements. The revenue
    and the operating result of Canal+ Technologies before any impact related
    to the disposal of the activity disposed of were 90 million and (2)
    million respectively for the eleven months of the year 2003.

- On February 5, 2003, Thomson acquired from Alcatel the latters 50%
    interest in the ATLINKS joint venture for 69 million. Thomson already
    held the other 50%, together with management control. ATLINKS is now 100%
    held by the Group.
- On February 28, 2003, the Group acquired Pacifica Media Affiliates (PMA)
    assets, a leading Los Angeles-based provider of audio editorial, and mixing
    facilities for feature films and broadcast production content. PMA has been
    fully consolidated since that date.
- On March 31, 2003, an amendment to the joint venture agreement with Schneider
    concerning Easyplug was agreed, according to which Thomson lost control over
    the joint venture. Easyplug is therefore consolidated by the equity method
    at 50% since that date.
- On May 8, 2003 Screenvision Europe, a 50-50 joint venture with Carlton Communications,
    acquired 100% of RMB Slovakia and 50% of Nordic Media Link AB (NML). These
    entities are consolidated from that date using the pro rata method.

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  Group

- On June 6, 2003, Thomson acquired from Microsoft its 20.4% of minority interests
    in TAK. The Group now owns 100% of this company.
- On June 16, 2003, Screenvision Europe acquired the 50% minority interest
    in RMB Entertainment.
- On June 16, 2003, Thomson purchased the remaining 11% minority interests
    in Thomson Multimedia India Private Ltd. The Group now owns 100% of this company.
- On July 8, 2003, Thomson acquired for an amount of 50 million the
    business and assets of the Recoton accessories business, a leading provider
    of accessories and related services to the U.S. retail industry. The Recoton
    business has been fully consolidated since that date.
- On July 8, 2003, Thomson acquired additional shares in Celstream, a global
    information technology services firm with advanced expertise in product development,
    located in India. Thomson owns 38.75% of Celstream, which has been consolidated
    by the equity method since that date.
- On September 18, 2003, Thomson acquired from Qualcomm its 20% interest in
    the Technicolor Digital Cinema (TDC) joint venture, for a total amount of
    23 million (of which 15 million was paid in cash in 2003). The
    Group now owns 100% of TDC, which is fully consolidated since that date (previously,
    TDC was consolidated using the pro rata method).
- On October 21, 2003, Thomson acquired Cinecolor Lab Company, Ltd, a Thai
    company and one of the premier motion picture film laboratories and post-production
    facilities in the Austral-Asian film and post-production markets. Cinecolor
    is fully consolidated since that date.
- On November 13, 2003, Thomson completed the disposal of all of its interests
    in the business and assets of Singingfish for 7 million.
- On December 31, 2003, Thomson sold 55.1% of its participation in Total Technology
    Company, a company located in Asia.

Please
  refer to Note 23 to our consolidated financial statements, which presents the
  cash impact of the acquisitions and disposals of our investments.

Notification
  of threshold crossing in the share capital of French companies

Under article
  L.223-6 of the Code de Commerce, we disclosed that in 2003:

- Thomson increased its ownership percentage in Canal+ Technologies (Paris)
    from 3% to 95%. In December 2003, Thomson completed its sale of its Canal+
    Technologies business, while maintaining ownership of the intellectual property
    and cash of the company.
- Thomson increased its ownership in TAK SAS (Paris) from 81% to 100%.
- Thomson increased its (indirect) ownership in ATLINKS (now Thomson Telecom)
    from 50% to 100%.

Changes
  in accounting principles

No change
  in accounting principles occurred in 2003.

Article
  133 of the French Law on Financial Security (Loi
  de Sécurité Financière,
  or LSF) issued on August 1, 2003, modified article L233-16 of the
  French Commercial Code, which did not permit the consolidation of a company
  unless at least one share was owned. According to this new Article 133 and
  disregarding the number of shares held, fully controlled special purpose entities
  (SPEs), are consolidated as of January 1, 2004, applying a retroactive
  method. The law did not allow an early application. Thomson has two such SPEs,
  one put in place in 2000 and the other in 2001, which are affected by the application
  of this new article in 2004. These SPEs have been consolidated

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retroactively as of December 31, 2003, increasing the net tangible fixed assets
  by 193 million, financial debt by 321 million and decreasing deferred
  income by 85 million and with the net impact booked to equity for (43)
  million. We unwound the Mexicali synthetic lease in January 2005, while Thomson
  multimedia Polska sp.zo.o unwound its synthetic lease transaction on March 31,
  2004.

Analysis
  of Net Sales

In 2003,
  consolidated net sales amounted to 8,459
  million, compared with 10,187
  million in 2002, a decrease of 17.0%. Consolidated net sales decreased by 6.5%
  at constant 2002 exchange rates and by 19.5% at a constant scope of consolidation
  (2002 perimeter but without adjustment for currency movements). On both a constant
  scope of consolidation and constant 2002 exchange rate basis,
  consolidated net sales of the Group decreased 9.6% in 2003. This figure reflects,
  on the one hand, the stable performance of the Content and Networks and Licensing
  activities and, on the other hand, a decrease in sales in the traditional businesses
  in the Consumer Products and Components divisions.

> Content and Networks

Consolidated
  net sales for the Content and Networks division totaled 3,714
  million in 2003 compared with 3,924
  million in 2002, representing a decrease of 5.3%. The negative impact of exchange
  rate variations amounted to 491
  million. At constant 2002 exchange rates, consolidated net sales of the Content
  and Networks division increased by 7.2%. Changes in the scope of consolidation
  (2003 acquisitions and the full-year effect of 2002 acquisitions) contributed
  223
  million of sales to the Content and Networks division during 2003. On a constant
  scope of consolidation (2002 perimeter) and at constant exchange rate, consolidated
  net sales of the Content and Networks division increased 0.5% between 2002 and
  2003.

Overall,
  our activities related to the creation and distribution of content were particularly
  strong during 2003:

- The number of DVDs replicated in 2003 amounted to 955 million in 2003, an
    increase of 70%. On the other hand, the number of VHS cassettes replicated
    decreased 37% to 274 million units.
- The services provided to the film industry also recorded strong growth,
    with a 16% increase in volumes (approximately 1.3 billion meters of film reel
    were mastered). In addition, new contracts were entered into in 2003.

In 2003,
  our Content Services activity invested in the installation of new DVD duplication
  lines (48 new lines in 2003) and developed its production
  capacities in film and post-production
  activities by expanding
  its laboratory in Rome, Italy and opening a new post-production laboratory in
  New York.

Over the
  course of the year,
  Thomson pursued its strategy of targeted acquisitions in order to reinforce
  its services and geographical presence with the acquisitions of Pacifica Media
  Affiliates in the United States and Cinecolor in Thailand.

In 2003,
  sales generated from broadcasters and network operators decreased on average.
  Nevertheless, the growth of these businesses during the fourth quarter 2003
  confirmed the positive trend observed starting in the third quarter 2003. The
  broadcast equipment and integrated solutions business
  benefited from an improved market environment, particularly at the end of 2003.
  Numerous contracts were signed with new customers such as NAB, France 3, Starhub,
  Visions and CNBC. In addition, the delivery of encoders to DIRECTV in the United
  States helped increase our volume of business with this major customer. With
  respect to the Broadband Access Products business, 6.9 million decoders and
  cable modems were sold worldwide in 2003, compared with 5.4 million units sold
  in 2002. The number of DSL modems sold also increased in 2003.

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  Group

> Components

Consolidated
  net sales for the Components division amounted to 1,072
  million, compared with 1,560
  million in 2002, a decrease of 31.3%. At constant 2002 exchange rates, consolidated
  net sales decreased 22.9%. This decrease reflects the deterioration of the market
  for television manufacturing in the United States, with a significant decrease
  in market share held by local manufacturers to the benefit of importers. These
  factors translated into a significant decrease in demand and prices in the U.S.
  market for television tubes. In Europe, this business maintained a strong
  position despite the impact of a significantly weakened U.S. dollar, which rendered
  cost-competitive
  some imports of competitors from Latin America. The Groups activities
  in China were strong, recording volumes that more than doubled compared with
  2002. Following the acquisition of Fortune, our production of tubes in China
  represents 40% of our worldwide production of tubes by volumes on a run-rate
  basis. In 2003, revenues from optical modules for DVD players and from game
  modules significantly decreased compared with 2002.

> Consumer Products

Consolidated
  net sales for the Consumer Products division totaled 3,198
  million compared with 4,264
  million in 2002, a decrease of 25.0% or, at constant 2002 exchange rates, a
  decrease of 15.3%.

Mainstream Consumer Products: The decrease in sales resulted from
  weak performance in the United States and a strong erosion of prices affecting
  all product segments as a result of strong Asian competition. Revenues in Europe
  were stable despite a significant reduction in prices, which were offset by
  gains in market share in traditional products and flat screens.

Essentials
  Consumer Products: The Essentials family of products recorded good
  results, and Recotons large product range and customer base were successfully
  integrated. The Essentials segment was significantly more stable
  given the market environment compared with the decrease in the Mainstream
  consumer products business.

> Licensing

The Licensing
  division surpassed its second half and full-year objectives in 2003. Consolidated
  net sales for the Licensing division amounted to 462
  million, an increase of 7.7% compared with 2002. At constant 2002 exchange rates,
  this growth attained 14.2%. Revenues related to digital-based programs represented
  68% of total revenues of the division, reflecting the growth of our digital
  licensing
  program in terms of the volumes of existing contracts and the number of new
  contracts finalized during the year. In 2003, the Group
  continued to develop its licensing program:
  the Group
  has 750 licensing contracts at year end 2003, an 11% increase compared with
  year-end 2002.

Operating
  Income

Cost of
  sales amounted to 6,536
  million in 2003, or 77.3% of net sales, a decrease of 15.8% compared
  with cost of net sales of 7,761
  million in 2002, or 76.2% of net sales. As a result,
  gross
  margin
  was 1,923
  million in 2003, or 22.7% of net sales, compared with 2,426
  million in 2002, or 23.8% of net sales.

Selling
  and marketing expenses amounted to 728
  million, or 8.6% of net sales in 2003, compared with 916
  million or 9.0% of net sales in 2002.

Administrative
  expenses amounted to 392
  million, or 4.6% of net sales in 2003, compared with 418
  million or 4.1% of net sales in 2002.

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Research
  and development expenses net of external funding were 295
  million in 2003, or 3.5% of net sales in 2003, compared with 3.7% in 2002. At
  constant 2002 exchange rates, research and development
  expenses net of external funding amounted to 323
  million in 2003 compared with 374
  million
  in 2002. External funding is comprised principally of grants from national or
  European Union (EU) government agencies and is accounted for as income based
  on the stage of completion of the project and is directly deducted from research
  and development costs. Excluding government agency subsidies
  of 9
  million in 2003 and 12
  million in 2002, research and development expenses were  304
  million in 2003, compared with 386
  million in 2002.

As a result
  of the above factors, consolidated operating income reached 508
  million in 2003, or 6% of net sales, a decrease of 29.2% compared with 718
  million in 2002, or 7% of net sales. The strong performance
  of our Content and Networks business was offset by operating losses recorded
  in our Consumer Products and Components divisions.

> Content and Networks

Operating income for the Content and Networks division amounted to 436
  million in 2003 compared with 420 million in 2002, an increase of 3.8%.
  The divisions profitability was negatively affected by the translation
  of U.S. dollar denominated operating income into euros by 69 million during
  the year. However, the division improved its operating margin during 2003 as
  a result of cost control management, continued development of its most competitive
  manufacturing sites and the consolidation of sites that combine DVD and VHS
  duplication facilities and post-production services. These initiatives more
  than offset the reduction in prices, notably with respect to DVDs. The divisions
  2003 operating margin reached 11.7% (12.0% at constant 2002 exchange rates)
  compared with a 2002 operating margin of 10.7%. Within the division, content-related
  activities produced sustained profits, while our activities in Broadband Access
  Products and broadcast equipment and services recorded gradual improvement in
  their operational margins during the year, thus illustrating potential for growth.

> Components

The Components
  division recorded an operating loss of 101
  million compared with an operating profit
  of 84
  million in 2002. This loss derived from weak performances in optical modules
  for DVD players
  and games modules and the significant deterioration of market conditions for
  tubes in the United States.

> Consumer Products

The Consumer
  Products division recorded an operating loss of 124
  million in 2003 compared with an operating loss of 52
  million in 2002. This loss is primarily due to the deterioration of sales in
  the United States. The Essentials business, which was profitable,
  represented 38% of the divisions sales.

> Licensing

Operational
  income for the Licensing division increased 6.2% to 411
  million compared with 387
  million in 2002. The operating margin of the division reached 88.8%.

Operating
  income under U.S. GAAP

Under French
  GAAP, operating income was 508
  million in 2003, or 6.0% of net sales, a decrease of  210
  million, as compared to operating income of 718
  million in 2002. Under U.S. GAAP, we

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  Group

recorded
  in 2003 operating income of 32
  million compared with operating income of 465
  million in 2002.

There are
  material differences between French GAAP and U.S. GAAP. The difference in operating
  income as reported under U.S. GAAP versus French GAAP in 2003 resulted mainly
  from reclassifications and restatements related to restructuring reserves, pension
  plans interest costs, certain
  intangible assets amortization and accruals for a number of provisions which
  have different classifications under French and U.S. GAAP, including:

- Reclassification and restatements due to differences in the criteria and
    the timing of recording restructuring provisions between U.S. GAAP and French
    GAAP, which represent 264 million in 2003, compared with 140 million
    in 2002.
- Reclassifications of pension plans interest costs related to shut-down activities,
    included in the financial result under French GAAP and classified as operating
    expenses under U.S. GAAP, which amount to 24 million in 2003, compared
    with 26 million in 2002;
- Excluding restructuring expenses and reclassifications of pension plan interests
    costs, reclassifications from Other income (expense), net under
    French GAAP to Operating income (loss) under U.S. GAAP, which
    amount to 86 million in 2003 and 15 million in 2002, including
    fixed asset write-offs for 52 million in 2003 (15 million in 2002).
- Customer and supplier relationships with a finite useful-life being amortized
    under U.S. GAAP for an amount of 22 and 34 million in 2002 and 2003,
    respectively, whereas they are not under French GAAP.

Please
  refer to Note 31 and 32 to our consolidated financial statements for a further
  discussion of the principal differences between French and U.S. GAAP.

Other
  Income and Expenses

> Restructuring Costs

Restructuring
  costs amounted to 217
  million in 2003, compared with 141
  million in 2002. In 2003, restructuring costs consisted primarily of the following
  by segment:

- Content
    and Networks:Restructuring
    programs initiated in 2003 related to the integration of film and broadcast
    activities for an amount of 9
    million, and other restructuring plans related to businesses acquired in 2001
    and 2002, totaling 29
    million in restructuring charges.
- Components:Restructuring
    charges of 100
    million with respect to the reorganization of manufacturing capacities in
    the United States, Italy and Asia in response to market conditions.
- Consumer
    Products:
    New
        restructuring plans announced in 2003, including the Tune up and CPMax
        programs, whose objectives are to adapt the cost structure to the market
        environment for an amount of 13
        million, and the reorganization
        of certain Mexican factories in order to improve their profitability,
        which led to
        a restructuring charge of 9
        million; and
      other
        restructuring charges related to plans initiated in 2002, including a
        7
        million charge related to the closure of a factory in France, which was
        announced in 2002 but for which a restructuring charge was unavailable
        at the end of 2002.
- New
        restructuring plans announced in 2003, including the Tune up and CPMax
        programs, whose objectives are to adapt the cost structure to the market
        environment for an amount of 13
        million, and the reorganization
        of certain Mexican factories in order to improve their profitability,
        which led to
        a restructuring charge of 9
        million; and
- other
        restructuring charges related to plans initiated in 2002, including a
        7
        million charge related to the closure of a factory in France, which was
        announced in 2002 but for which a restructuring charge was unavailable
        at the end of 2002.
- Holdings:The
    reorganization of certain research facilities in France for an amount of 9
    million and changes to the cost structure at corporate headquarters for 4
    million.

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For more
  information on restructuring costs as they relate to our reorganization and
  restructuring programs, please refer to Note 18 to our consolidated financial
  statements.

> Other income and expense, net

Other income
  and expense amounted to a net expense of 32
  million in 2003, compared with net income of 45
  million in 2002. In 2003, this expense includes gains on the disposal of assets
  (mainly assets of Canal+ Technology), as well as related to the closure of production
  lines in the United States for
  19
  million and an additional 4
  million related to retirement commitments arising from Thomsons restructuring
  plans.

For additional
  information on other income and expense, please refer to Notes 3 and 6 to our
  consolidated financial statements.

Financial
  Result

> Net interest income/expense

Net interest
  charges reached 9
  million in 2003, compared with a net interest income of 9
  million in 2002. Net interest expense included primarily the interest on promissory
  notes issued to Carlton in connection with the acquisition of the Technicolor
  businesses, the interest on the convertible/exchangeable bonds issued in 2000
  and 2002 (2000 OCEANE and 2002 OCEANE) and due
  respectively in 2006 and 2008 and the interest on a U.S. private placement launched
  in June 2003.

For more
  information on these convertible/exchangeable bonds, please refer to Note 21
  to our consolidated financial statements. The change in net interest income
  during 2003 in comparison with 2002 is mainly due to lower interest rates on
  deposits. Additional interest charges due to the U.S. private placement program
  are balanced by the prepayment of part of the debt related to the purchase of
  Technicolor in March 2003.

> Other financial expense

Other financial
  expenses totaled 70
  million in 2003, compared with 137
  million in 2002. Other financial expenses in 2003 include pension plan interest
  costs in Germany and the United States related to discontinued activities. In
  2002, these expenses also included valuation allowances on other investments
  carried at the lower of cost or market value, which generally affected investments
  in
  technology companies. Please refer to Note 5 to our consolidated financial statements
  for additional information on other financial expense.

Amortization
  of goodwill

Goodwill
  amortization totaled 76
  million in 2003 compared with 78
  million in 2002.

Income
  Tax

Pursuant
  to the French Tax Code and in accordance with a tax agreement from the French
  tax authorities dated November 6, 2002, Thomson S.A. (the parent company) files
  a worldwide consolidated
  tax return.

In 2003,
  the income tax charge
  of the Group amounted to 63
  million, mainly located in Poland and in the U.K., whilst in the U.S. and in
  France, where Thomson recognized
  a tax loss, patents income bears
  withholding taxes.

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Also, the
  Group recorded a net deferred tax asset of 28
  million. This amount includes mainly the recognition of deferred tax asset on
  part of the tax losses generated in the U.S in 2003, in view of an expected
  return to profitability in the U.S. in connection with the transfer of loss-making
  activities, with regards
  to the Combination Agreement to form TTE (see Note 29 to our financial statements).

Our effective
  tax rate, defined as the ratio of income tax expense to consolidated income
  before taxes, goodwill
  amortization, minority interests and equity investments, was 35.0% in 2003,
  compared with 11.3% in 2002. For additional information, please refer to Note
  7 to our consolidated financial statements.

Net
  Income

Income
  derived from minority interests amounted to 8
  million in 2003 compared with a minority interest expense of 13
  million in 2002. The decrease of minority interest results primarily from the
  acquisition of the minority interest in ATLINKS (now Thomson Telecom) in early
  2003.

As a result
  of the factors discussed above, we recorded net income of 26
  million in 2003 compared with 373
  million in 2002. Net income as a percentage of net sales reached 0.3% compared
  with 3.7% in 2002.

Earnings
  per share amounted to 0.09
  in 2003, compared with 1.35
  in 2002.

Net
  income under U.S. GAAP

Under U.S.
  GAAP, we recorded net losses of 46
  million in 2003, compared to net income of 351
  million in 2002. The difference in net income under U.S. GAAP versus French
  GAAP in 2002 mainly relates
  to the accounting treatment of derivative instruments, the reversal of goodwill
  amortization recorded under French GAAP, and purchase price allocation and amortization
  of intangibles resulting from our recent acquisitions as well as pension and
  termination benefits.

|                                                     |                 |         |       |  |       |  |         | 
|---------------------------------------------------- | --------------- | ------- | ----- |  | ----- |  | ------- | 
|Cash Flows                                           |                 |         |       |  |       |  |         | 
|                                                     | 2002            |         | 2003  |  | 2004  |  | 2004    | 
|                                                     |                 |         |       |  |       |  |         | 
|                                                     | ( in millions) | (U.S.$) |      
|Net cash provided by operating activities            | 1,104           |         | 1,183 |  | 401   |  | 504     | 
|Net cash used by investing activities                | (1,716)         |         | (792) |  | (902) |  | (1,134) | 
|Net cash provided (used) by financing activities     | 540             |         | 511   |  | 5     |  | 6       | 
|Net increase (decrease) in cash and cash equivalents | (69)            |         | 920   |  | (477) |  | (599)   | 
|                                                     |                 |         |       |  |       |  |         | 

> Net cash provided by operating activities

The decrease
  in net cash provided by operating activities is due primarily to the negative
  cash impact of 30
  million from the increase in working capital in 2004, whereas in 2003 the working
  capital reduction generated 640
  million of operating cash flow. We seek to manage our working capital movements
  (defined as the variation of inventories plus the variation of trade and other
  receivables, net, less the variation of trade accounts, notes payable and accrued
  expenses) in an efficient manner with reference to our net sales (adjusted for
  acquisitions), and we achieved further progress towards this
  objective in 2004. We believe our working capital is sufficient to meet our
  present requirements.

In 2004,
  the cash generated from the sale of inventories to TTE did not improve our operational
  cash flow to the extent that the total effects were included in the line item
  Acquisition of investments under Net cash provided
  by operating activities in our consolidated statements of cash flow. This
  sale did, however, have a positive effect on the Groups net cash position.

99

---

Net cash
  provided by operating activities was also adversely affected by cash payments
  relating to restructuring costs of 200
  million, an increase of 27
  million from 173
  in 2003, and to a 124
  million tax expenditure, an increase of 135
  million compared to 2003, with the non recurrence of a 2003 70
  million tax refund, the increase of the tax cash disbursements for a total of
  around 45
  million in Mexico, Australia, Poland, the United Kingdom and Canada and the
  increase of withholding taxes by around 15
  million.

> Net cash used in investing activities

Net cash
  used in investing activities totaled 902
  million in 2004, compared with 792
  million in 2003.

Financial
  investments totaled 680
  million in 2004, compared with 565
  million in 2003. Our main investments were acquisitions strengthening the Content
  and Networks and Components divisions, which included cash payments in connection
  with our acquisition of the set-top box manufacturing assets
  of Hughes Network Systems (204
  million) and The Moving Picture Company (68
  million), as well
  as the Fortune acquisition (75
  million). We also paid 84
  million of principal and 8
  million of interest on debt related to the acquisition of Technicolor. Moreover,
  we incurred a negative cash flow effect of 115
  million in connection with the disposal activities of our television business
  and the creation of TTE. The Group intends to continue to proceed with selective
  acquisitions within the context of our five strategic priorities and our Two-Year
  Plan.

Capital
  expenditures amounted to 348
  million in 2004, compared with 510
  million in 2003, underlining the Groups efforts to optimize its investments.
  The principal investments were made in the Groups Content and Networks
  division primarily for installation of new DVD replication facilities and investments
  in new post-production laboratories/studios, while additional investments were
  made in the production of extra-flat tubes in the Components division.

Proceeds
  from fixed asset disposals totaled 49
  million in 2004, compared with 34
  million in 2003.

> Net cash provided by financing activities

Net cash
  provided by financing activities was 5
  million in 2004, compared with 511
  million in 2003. In 2004, the proceeds from new debt issues were offset primarily
  by the early reimbursement of other debt, as well as the payment of dividends
  and share buy-backs. In particular, in order to finance the Groups expansion
  and to lengthen the average maturity of its debt, the Group issued convertible
  bonds for U.S.$500 million (366
  million) due 2010 to Silver Lake, repurchased 182
  million (including 11
  million of accrued interests and premium) of convertible bonds maturing in 2006,
  and unwound and
  paid off a 138
  million capital lease also maturing in 2006. In addition, in January 2005, the
  Group repurchased
  587
  million (excluding interest) of convertible
  bonds maturing in 2008 following the exercise
  by the bondholders of their right of early redemption. We also unwound our synthetic
  lease in January 2005 relating to our factory in Mexicali, Mexico for an amount
  of U.S.$227 million.

In 2003,
  net cash provided by financing activities primarily reflected the issuance of
  Senior Notes, privately placed with institutional investors, for an amount of
  369
  million (in two issuances of U.S.$406 million and GBP 34 million), maturing
  in 7, 10 and 12 years. The notes were
  issued to finance
  the development of our activities, including through acquisitions, as well as
  to extend the average maturity of our debt.

Financial
  resources

At the
  end of 2004, we had a net debt position (financial debt plus debt related to
  the Technicolor
  acquisition
  minus cash and cash equivalents) of 679
  million (including a synthetic lease for 165
  million, consolidated in 2004 which was unwound and paid off in 2005), compared
  with a net deposit

100

---

Thomson
  Group

position
  of 77
  million (excluding two off-balance sheet synthetic leases for 321
  million) at the end of 2003. On a comparable basis, at year-end 2003, Thomson
  would have reported a net debt of 244
  million
  including 321
  million of lease debt, as lease debt was not consolidated in 2003 but is now
  consolidated
  in 2004.

Financial debt totaled 2,501 million at the end of 2004 (including convertible/exchangeable
  bonds for 1,638 million, including 48 million in accrued premium
  and 12 million in accrued interest), compared with 2,128 million
  at the end of 2003. Financial debt does not include promissory notes of U.S.$115
  million (including accrued interest) which are included in Debt related
  to Technicolor acquisition in our consolidated financial statements. We
  have the option of partially repaying these notes in Thomson shares. For all
  four of the installment payments of the promissory notes in March 2002, 2003,
  2004 and 2005, respectively, we paid the entire amounts in cash. Cash and cash
  equivalents were 1,906 million at the end of 2004, compared with 2,383
  million at the end of 2003.

At the end of 2004, we had committed undrawn credit facilities of 1,750
  million with a consortium of banks, and committed credit facilities of 51
  million with two banks which were fully drawn. Furthermore, we have negotiated
  uncommitted credit lines from unaffiliated third-party lenders amounting to
  945 million, of which 178 million were used as of December 31, 2004
  for borrowings.

Moreover,
  we had in 2004 a securitization program in the United States. The program, established
  in December 2002, allowed for the sale of our U.S. commercial receivables up
  to a maximum of U.S.$200
  million (147
  million at the December 31, 2004 closing rate). As of December 31, 2004, we
  had no outstanding receivable sales under this securitization program. This
  program was cancelled in March 2005.

We expect to fund the continued active development of the Group using our
  available cash and our cash flow from operating activities and to the extent
  appropriate, through borrowings from our available credit facilities or by accessing
  the capital markets.

Contractual Obligations and Commercial Commitments including
  Off-Balance Sheet Arrangements

Unconditional Contractual Obligations and Commercial Commitments

The table presented below provides information regarding contractual obligations
  and commercial commitments as of December 31, 2004, for which we are obliged
  to make future cash payments. Some of these commitments are not included in
  our balance sheet as indicated in the table. This table does not include contingent
  liabilities or commitments. These are, however, described below under the heading
  Conditional Contractual Obligations and Commercial Commitments and in Note
  24 to our consolidated financial statements. When an obligation leading to future
  payments can be cancelled through a penalty payment, the future payments included
  in the tables are those that management has determined most likely to occur
  given the two alternatives.

Guarantees given by entities of the Group securing debt, capital leases, operating
  leases or any other obligations or commitments of other entities of the Group
  are not disclosed as the related obligations are already included in the table
  below. These may, however, be disclosed under U.S. GAAP in accordance with the
  requirements of FIN 45 (please refer to Note 31(w) to our consolidated financial
  statements).

101

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|Unconditional Commitments                                                     |                 |  | Amount of commitments expiring
      per period |  |           | 
|----------------------------------------------------------------------------- | --------------- |  | ----------------------------------------------- |  | --------- | 
|                                                                              |                 |  |                                                 |  |           | 
|                                                                              | 2003            |  | 2004                                            |  | Less than | 
|                                                                              | Total           |  | Total                                           |  | 1 year    | 
|                                                                              |                 |  |                                                 |  |           | 
|                                                                              | ( in millions) | 
|Financial debt (1)                                                            | 2,128           |  | 2,501                                           |  | 904       | 
|Of which: Capital lease obligations (2)                                       | 61              |  | 51                                              |  | 14        | 
|Debt related to Technicolor acquisition (1)                                   | 178             |  | 84                                              |  | 84        | 
|                                                                              |                 |  |                                                 |  |           | 
|Unconditional Future Payments  not included in our balance
      sheet       |                 |  |                                                 |  |           | 
|                                                                              |                 |  |                                                 |  |           | 
|Operating leases (3)                                                          | 485             |  | 425                                             |  | 83        | 
|Other (4)                                                                     | 137             |  | 68                                              |  | 20        | 
|Royalties (5)                                                                 | 2               |  | 1                                               |  | 1         | 
|                                                                              |                 |  |                                                 |  |           | 
|Unconditional Purchase Obligations:  not included in our
      balance sheet |                 |  |                                                 |  |           | 
|                                                                              |                 |  |                                                 |  |           | 
|- Financial investments (6)                                                   | 28              |  | 16                                              |  | 15        | 
|- Property, plant & equipment (7)                                             | 73              |  | 9                                               |  | 9         | 
|- Commercial purchase obligations (8)                                         | 123             |  | 165                                             |  | 106       | 
|                                                                              |                 |  |                                                 |  |           | 
|TOTAL                                                                         | 3,154           |  | 3,269                                           |  | 1,222     | 
|                                                                              |                 |  |                                                 |  |           | 

|(1) | Financial debt (see Note 20 of our consolidated financial
      statements) and debt related to Technicolor acquisition (see Note 22 of
      our consolidated financial statements) are reported for their principal
      amounts and accrued interest as of December 31, 2004. Future interest expense
      and the impact of interest rate swaps are not reported in this table. Currency
      swaps, hedging operations and foreign exchange options are described below
      in a separate table. The balance of the debt related to the Technicolor
      acquisition was paid off in March 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Our capital lease related to our tube manufacturing plant
      in Mexicali, Mexico, was paid off in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | For more information on our operating leases, see Note 24(a)
      of our consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(4) | Other unconditional future payments relate to information
      technology service agreements and general sponsoring agreements entered
      into in the U.S., and other contractual advances.                                                                                                                                                                                                                                                                                                                                                                                                            
|(5) | Royalties to be paid for which future amounts are fixed.
      Royalties to be paid for which the amount is based on a per unit basis are
      not included, except if a fixed minimum amount will be charged. These are
      mainly related to licensing fee agreements.                                                                                                                                                                                                                                                                                                                                
|(6) | In November 2004, Thomson agreed to acquire an 8% stake in
      the Chinese television and mobile phone manufacturer Konka (of which 4.8%
      was subject to approval by the relevant Chinese authorities), corresponding
      to a financial investment of 14 million as of December 31, 2004.                                                                                                                                                                                                                                                                                                       
|(7) | Unconditional purchase obligations comprise DVD plant expansions
      in the U.S. as well as certain equipments following the acquisition of Fortune.
      See below for a more detailed description of the off-balance arrangement
      related to the acquisition of the tubes business of Fortune.                                                                                                                                                                                                                                                                                                   
|(8) | Commercial purchase obligations include commitments to buy
      advertising space for 69 million in its cinema sales house screen
      advertising activity, and 72 million of commercial purchase obligations
      in the Content & Network segment.                                                                                                                                                                                                                                                                                                                                                 

In 2003,
  a significant off-balance sheet arrangement relates to the Groups purchase
  of a picture tubes business in China. On July 18, 2003, Thomson and its affiliated
  company, Thomson Guangdong Displays Company Limited, entered into a sales and
  purchase agreement by which they agreed under certain conditions to acquire
  the production equipment which previously belonged to the Chinese tube manufacturer
  Fortune located in Dongguan (Guangdong province) China. The equipment consisted
  of three CPT production lines with an annual capacity of 4.3 million tubes (21,
  25 and 29 inch) as well as electron gun manufacturing equipment and related
  assets. The acquisition was valued at 668 million Chinese yuan (approximately
  U.S.$80 million) for the fixed assets plus an additional amount for working
  capital. The acquisition closed as planned in January 2004 and was financed
  out of the Groups existing cash, which was partly lent to and partly injected
  as capital in Thomson Guangdong Displays Company Limited. The activity is expected
  to generate additional revenue of approximately
  U.S.$210 million per year and positive cash flow from the beginning of the operations,
  before taking into account investments for line upgrades. In 2004, this off-balance
  sheet commitment amounted to 4
  million.

102

---

Thomson
  Group

Conditional Contractual Obligations and Commercial Commitments

The table below includes only contingent liabilities or commitments, all of
  which are not included in our balance sheet. These are disclosed in detail in
  Note 24 to our consolidated financial statements.

|Conditional Commitments                   |                 |  | Amount of commitments expiring
      per period |  |           | 
|----------------------------------------- | --------------- |  | ----------------------------------------------- |  | --------- | 
|                                          |                 |  |                                                 |  |           | 
|                                          | 2003            |  | 2004                                            |  | Less than | 
|                                          | Total           |  | Total                                           |  | 1 year    | 
|                                          |                 |  |                                                 |  |           | 
|                                          | ( in millions) | 
|Guarantees given                          |                 |  |                                                 |  |           | 
|                                          |                 |  |                                                 |  |           | 
|- to suppliers                            | 5               |  | 25                                              |  | 9         | 
|- for legal court proceedings and customs |                 |  |                                                 |  |           | 
|duties (1)                                | 62              |  | 65                                              |  | 22        | 
|- other (2)                               | 84              |  | 200                                             |  | 43        | 
|                                          |                 |  |                                                 |  |           | 
|Standby letters of credit (3)             | 110             |  | 68                                              |  | 68        | 
|Other conditional commitments (4)         | 73              |  | 81                                              |  | 19        | 
|                                          |                 |  |                                                 |  |           | 
|TOTAL                                     | 334             |  | 439                                             |  | 161       | 
|                                          |                 |  |                                                 |  |           | 

|(1) | These guarantees comprise:                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | Includes guarantees given for assets disposal
      (181 million in 2004 compared with 65 million in 2003). Moreover,
      under the terms of many of its long-term contracts, the Group must provide
      to its clients performance guarantees issued by banks. As of December 31,
      2004 and 2003, these guarantees amount to 9 million and 14 million,
      respectively, mainly related to long-term contract in its broadcast activities.
|(3) | Standby letters of credit relate mainly to guarantees
      in favor of suppliers.                                                                                                                                                                                                                                                                                                                                                                        
|(4) | Conditional obligations include contingent earn-out
      payment related to the purchase of 20% of Technicolor Digital Cinema L.L.C.
      and other obligations.                                                                                                                                                                                                                                                                                        

There is no known event, demand, commitment, trend or uncertainty that is reasonably
  likely to result in the termination, or material reduction in availability to
  the Company, of the off-balance sheet arrangements described above in Unconditional
  Contractual Obligations and Commercial Commitments and Conditional Contractual
  Obligations and Commercial Commitments.



103

---

ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A Directors and Senior Management

Preparation and organization of the Board of Directors activities

The Group has implemented the principal recommendations regarding corporate
  governance for French companies, most notably as outlined in the Viénot
  Reports of 1995 and 1999 and in the Bouton Report of September 2002. These recommendations
  focus primarily on the composition of the Board of Directors and their committees,
  which should combine director independence and expertise in the companys
  businesses. They also focus on the functioning of the Board of Directors and
  provide on-going and timely information in advance of board meetings. These
  recommendations were incorporated in the Internal Board Regulations
  (Réglement Intérieur) of the Board of Directors.

Following an amendment to the Companys by-laws (statuts) as approved
  by its shareholders on May 7, 2004, the number of Company shares required to
  be held by each director has increased. Each director now personally holds at
  least 2,000 shares of the Company.

Composition of the Board of Directors and its Committees

The Board of Directors consisted of 16 members as of December 31, 2004. The composition of the Board of Directors changed during 2004 with the appointment of two directors:  Didier Lombard appointed by the shareholders meeting held on May 7, 2004 and David Roux appointed by the shareholders meeting held on September 15, 2004, in connection with our shareholders approval of the Five Point Plan, including the investment by Silver Lake in Thomson.

Didier Lombard, who held the position of Senior Executive Vice President of France Telecom, responsible for Technologies, Strategic Partnerships and New Usages in 2004, is now Chairman and Chief Executive Officer of France Telecom, effective February 27, 2005.

David Roux is the Managing Director of Silver Lake, a leading investment company specializing in equity participation in technology corporations. In connection with the Silver Lake investment, Silver Lake has the right to propose to the shareholders meeting the nomination of one member on the board of directors of Thomson. David Roux was appointed director of Thomson by the shareholders meeting of September 15, 2004 pursuant to this arrangement. So long as Silver Lake holds at least 25% of the excess of the convertible/exchangeable bonds (or the underlying shares) originally issued to it over the number of such securities it has transferred with Thomsons consent, if a Silver Lake nominee fails to be elected or reelected to Thomsons board of directors, the holders of the majority of the outstanding bonds have the right to require the reimbursement of all but not part of the bonds.

In application of governance principles regarding the length of board service, Pierre Cabanes was not put forward for reelection at the shareholders meeting of May 2004.

Following the resignation of Thierry Breton on February 27, 2005 due to his appointment as the French Minister of Economy, Finance and Industry, the Board of Directors now comprises 15 members.

As of December 31, 2004, the Board of Directors comprised ten independent directors (Christian Blanc, Eric Bourdais de Charbonnière, Eddy Hartenstein, Igor Landau, Pierre Lescure, Didier Lombard, Paul Murray, Marcel Roulet, Henry Vigil and David Roux).  The independence of the directors is evaluated according to the criteria and definition outlined in the Bouton Report: a director is independent when he or she has no relationship of any kind whatsoever with the company, its Group, or the management of either, that is such as to color his or her judgment.  Due to their prior professional experience, these directors have considerable knowledge of the Groups businesses and markets. Three of these directors have extended financial experience in multinational groups. Four

104

---

Thomson
  Group

directors are Group employees: two were elected by Group employees as employee
  representatives on the Board of Directors (Jean de Rotalier and Catherine Cavallari),
  and two were elected as representatives of employee shareholders (Loïc
  Desmouceaux and Gérard Meymarian). Four Directors are of non-French nationalities:
  three are North American and one is British.

The following table lists the members of the Board of Directors, their main
  occupations, date of their initial appointment and the expiration date of their
  current term.

|Name                         | Principal Occupation                                                                         | Appointed to                                                                   | Term    | Other business activities                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             | or Employment                                                                                | Board                                                                          | Expires | outside Thomson                                                                                                                                                                                                                                                                                                                                                                                     
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Frank E. Dangeard (3)        | Chairman and Chief 
      Executive Officer of 
      Thomson since
      September 15, 2004 | Chairman since
      October 2002
      (Board member 
      since March 1999) | 2008*   | Board member of Orange,
      Equant, and EDF                                                                                                                                                                                                                                                                                                                                                       
|                             |                                                                                             
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                               
|                             |                                                                                             
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Christian Blanc (1)(2)(4)(8) | Member of the French
      Parliament                                                        | June 2001                                                                      | 2009*   | Board member of Cap
      Gemini, Coface, JC
      Decaux and Carrefour
      (until February 3, 2005)                                                                                                                                                                                                                                                                                              
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Eric Bourdais de             | Chairman of the
      Supervisory Board of
      Michelin                                    | December 2003                                                                  | 2007*   | Member of Supervisory
      Board of Oddo & Cie and
      ING Group, Board
      member of Associés en
      Finance                                                                                                                                                                                                                                                                                
|Charbonnière (1)(5)          |                                                                                              |                                                                               
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Catherine Cavallari          | Controlling Technology
      Operations, Thomson                                             | June 2002                                                                      | June    |                                                                                                                                                                                                                                                                                                                                                                                                     
|                             |                                                                                              | 2007                                                                           |        
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Loic Desmouceaux             | Prospective Marketing
      Manager and Strategic
      Development, Thomson                 | May 2003                                                                       | 2008*   | Permanent representative of
      Sovemarco Europe SA,
      Company board member
      of Sellenium SA                                                                                                                                                                                                                                                                                             
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Eddy W. Hartenstein          | Former Vice Chairman
      and Board member of
      the DirecTV Group                       | September 2002
      (member of Board
      since March 1999)                  | 2008*   | Until January 2005, Board
      member and Chairman of
      DIRECTV Enterprises Inc.,
      DIRECTV International,
      Inc., DIRECTV
      Merchandising, Inc., and
      DIRECTV Operations, Inc.,
      Board member of
      DIRECTV Latin America                                                                                                                                            
|(1)(4)(8)                    |                                                                                             
|                             |                                                                                             
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Igor Landau (1)(6)           | Former Chairman of 
      the Executive Board of
      Management of Aventis                 | September 2002                                                                 | 2008*   | Board member of Sanofi-
      Aventis, Essilor
      International, CCF, Aventis
      Pharma (UK) Investments,
      LTD (until June 30, 2004)
      and Fisons Limited (until
      June 30, 2004), Member of
      Advisory Committee of
      Banque de France,
      Member of Supervisory
      Board of Dresdner Bank
      AG, Adidas-Salomon AG
      and Allianz since Dec. 20,
      2004
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                               
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        
|                             |                                                                                              |                                                                                |        



105


---

|Name                       | Principal Occupation    | Appointed to   | Term    | Other business activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------- | ----------------------- | -------------- | ------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                           | or Employment           | Board          | Expires | outside Thomson                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Pierre Lescure (1)(4)      | Producer  Former       | September 2002 | 2008*   | Board member of Havas,
      Kudelski and Chabalier &
      Associates Press Agency
      S.A., Chairman of
      AnnaRose Production SAS
      and Le Monde Press SAS,
      Member of Supervisory
      Board of Le Monde and
      Société Editrice du Monde                                                                                                                                                                                                                                         
|                           | Chairman and CEO of     |                |        
|                           | Canal Plus              |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
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|                           |                         |                |        
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Didier Lombard (1)(4)      | Chairman and CEO of     | May 2004       | 2008*   | Chairman of the Board of
      Orange, Member of
      Supervisory Board of
      Radiall and ST
      Microelectronics                                                                                                                                                                                                                                                                                                                                                                                 
|                           | France Telecom          |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Gerard Meymarian           | Vice President Business | May 2003       | 2008*   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           | Development             |                |        
|                           | Connectivity, Thomson   |                |        
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Paul Murray (1)(6)         | Partner of Tangent      | June 2003      | 2006*   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           | Industries Ltd.         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Jean de Rotalier           | Marketing Manager       | June 2002      | June    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           | Italy, Thomson          |                | 2007    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Marcel Roulet (1)(2)(6)(7) | Former Chairman and     | February 1999  | 2009*   | Representative member of
      TSA for Board of Thales,
      Board member of France
      Telecom and CCF,
      President of Supervisory
      Board of Gimar Finances
      SCA, Member of
      Supervisory Board of
      Eurazeo                                                                                                                                                                                                                                                                  
|                           | CEO of TSA, France      |                |        
|                           | Telecom and Thales      |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
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|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|David Roux (1)(4)          | Managing Director of    | September 2004 | 2008*   | Executive Director of Silver
      Lake Technology
      Management, LLC, Silver
      Lake Management
      Company, LLC, Silver
      Lake Technology
      Associates, LLC, Silver
      Lake Technology
      Associates II, LLC, Board
      member of VERITAS
      Software Corporation,
      Business Objects SA,
      UGS Capital Corporation,
      UGS Capital Corporation
      II, UGS Holdings, Inc.,
      UGS Corp., Silver Lake,
      AIV GP Ltd and Silver
      Lake New York Inc.
|                           | Silver Lake Partners    |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
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|                           |                         |                |        
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|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        
|                           |                         |                |        

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  Group

|Name                                                              | Principal Occupation                                                                                                                                                              | Appointed to                                                 | Term                   | Other business activities                                                                                                                                                                          
|----------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                  | or Employment                                                                                                                                                                     | Board                                                        | Expires                | outside Thomson                                                                                                                                                                                    
|                                                                  |                                                                                                                                                                                   |                                                              |                        |                                                                                                                                                                                                    
|Henry P. Vigil (1)(4)(8)                                          | Senior Vice President
      Strategy and
      Partnerships of
      Microsoft Corporation                                                                                      | October 2003                                                 | 2008*                  |                                                                                                                                                                                                    
|                                                                  |                                                                                                                                                                                   |                                                              |                       
|                                                                  |                                                                                                                                                                                   |                                                              |                       
|                                                                  |                                                                                                                                                                                   |                                                              |                       
|                                                                  |                                                                                                                                                                                   |                                                              |                        |                                                                                                                                                                                                    
|Thierry Breton (Board
      member until February
      27, 2005) | Former Chairman and
      CEO of France Telecom
      until February 27, 2005,
      date of his nomination
      as French Minister of
      Economy, Finance and
      Industry | June 15, 1999
      (Member of Board
      since March 1997) |                        | Until February 27, 2005:
      Chairman of Board of TSA
      and Orange, Board
      member of Schneider
      Electric SA and Dexia
      (Belgian law), member of
      Supervisory Board of AXA
|                                                                 
|                                                                 
|                                                                  |                                                                                                                                                                                   |                                                             
|                                                                  |                                                                                                                                                                                   |                                                             
|                                                                  |                                                                                                                                                                                   |                                                             
|                                                                  |                                                                                                                                                                                   |                                                             
|                                                                  |                                                                                                                                                                                   |                                                              |                        |                                                                                                                                                                                                    
|Pierre Cabanes (1)(8)(Board member until
      May 7, 2004)       | Chairman of Antée SAS                                                                                                                                                             | June 1998                                                    |                        | Manager of Groupement                                                                                                                                                                              
|                                                                  |                                                                                                                                                                                   |                                                              | Foncier Agricole (GFA)
|                                                                  |                                                                                                                                                                                   |                                                              |                       
|                                                                  |                                                                                                                                                                                   |                                                              |                        |                                                                                                                                                                                                    

|(1) | Independent Director                                                              
|--- | ----------------------------------------------------------------------------------
|(2) | Director whose term was renewed at the shareholders
      meeting on May 10, 2005
|(3) | Chairman of the Strategy Committee                                                
|(4) | Member of the Strategy Committee                                                  
|(5) | Chairman of the Audit Committee                                                   
|(6) | Member of the Audit Committee                                                     
|(7) | Chairman of the Nomination, Remuneration and Governance Committee                 
|(8) | Member of the Nomination, Remuneration and Governance Committee                   
|*   | Annual Ordinary Shareholders Meeting                                             

Structure of the Board of Directors Work

The preparation and organization of the Board of Directors work is detailed in the Internal Board Regulations, adopted by the Board of Directors in early 2003. These regulations are updated regularly to take into account evolution of the Company and in the law, including the provisions of the French law on financial security (Loi de sécurité financière)of August 1, 2003 and those of the French ordinance No. 2004-604 dated June 24, 2004 reforming securities regulation.  The Internal Board Regulations describe in particular the conditions by which the Board of Directors defines the Groups strategic objectives and its powers of oversight and verification.

The Board of Directors is supported in the performance of its work by the
  three committees: the Audit Committee, the Strategy Committee, and the Nomination,
  Remuneration and Governance Committee (formerly the Employee and Organization
  Committee). The Audit Committee, chaired by Eric Bourdais de Charbonnière,
  comprises four directors, all of whom are independent. The Strategy Committee
  was led until February 27, 2005 by Thierry Breton and comprises eight members.
  Frank E. Dangeard now chairs this Committee, which comprises seven members,
  but he is not a member of any other committee of the Board. The Nomination,
  Remuneration and Governance Committee, led by Marcel Roulet, is comprised of
  four members, all independent.

Each committee develops proposals, recommendations and opinions, as the case may be, within its respective field of competence. Each committee may accordingly initiate any study which may assist the Boards deliberations.

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The Chairman of each committee sets the agenda of the meetings and communicates this agenda to the Chairman and Chief Executive Officer.

Proposals, recommendations and opinions issued by the committees are included in the minutes communicated by the Chairman of the Board of Directors to the Board members.

The role of the Audit Committee is described in its charter, which was established when the Audit Committee was first created and was amended in 2003 and 2005 to take into account legislative and regulatory changes in France and the United States.

Work of the Board of Directors in 2004

Each year, the Board of Directors fixes a calendar of its meetings, as proposed by its Chairman, for the coming year. This calendar sets the dates of the regular Board meetings (e.g., for the revenue results of the first and third quarters, for the six-month earnings and the meeting prior to the general shareholders meeting), and on a tentative basis, the dates which directors should reserve for additional Board meetings.

In 2004, the Board of Directors met 15 times with a participation rate of 83%. In particular, the Board reviewed the financial and strategic issues relating to the Group.

With respect to financial issues, the Board of Directors reviewed the 2004 annual budget, the Chairmans report from 2003, the Groups statutory and consolidated financial accounts for fiscal year 2003 and the first half of 2004, quarterly revenue figures of the first and third quarters 2004, changes in the Groups debt profile, a new syndicated credit facility and short-term financing operations. In addition, each month the Board receives a document describing the general status of the Companys business.

With respect to strategic issues, the Board of Directors reviewed and approved different acquisition and joint venture proposals, including the creation of TTE, the corporation in conjunction with TCL, the acquisition of the Moving Picture Company and an ownership interest in ContentGuard, and the repositioning of our Displays activity.

The Board also decided to accelerate the implementation of the Groups
  strategy. First, in July 2004, the Board of Directors approved the Five Point
  Plan (comprising the issuance of OCEANEs to investment funds affiliated with
  Silver Lake, the issuance of Bons dAcquisition ou de Souscription dActions(or BASA) on behalf of individual long-term shareholders in
  Thomson, the establishment of a share buyback program of 400 million over
  an 18 month period, the establishment of a stock option plan to substitute in
  part for existing plans, and the merging of the functions of the Chairman and
  the Chief Executive Officer), which was validated by the Combined Shareholders
  meeting held on September 15, 2004. Second, the Board of Directors approved
  in October 2004 the five strategic priorities and at the end of November our
  Two-Year Plan.

The Board of Directors also appointed Didier Lombard to establish and chair a Scientific Committee in charge of carrying out analyses and recommendations concerning the technological orientation and R&D of the Group. This Scientific Committee, comprised of individuals of diverse but complementary backgrounds in the scientific world, formulated its recommendations for the Board of Directors, which focused mostly on technologies necessary for M&E clients of the Group.

In addition, during 2004, the Board of Directors was requested to approve certain regulated transactions in accordance with the French Commercial Code, in particular regarding entering into a new syndicated credit line, as certain credit institutions participating in this transaction had members on their own boards of directors who were also Board members of Thomson.

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  Group

For 2004, the Board of Directors proceeded with a self-evaluation of itself and an evaluation of its Committees through a detailed questionnaire addressed to all Board members. This evaluation was comprised of questions on the following subjects: the structure of the Board of Directors, the missions and workings of the Board, the Board meetings, the functioning of the Board, communication outside of Board meetings, the organization and function of the Committees. The results of this questionnaire led to the conclusion that Board members had a positive opinion of the organization and function of the Board of Directors and its Committees.

The various Board Committees provide advice and recommendations to the Board
  of Directors.

Work of the Board Committees in 2004

> Audit Committee

The Audit Committee, which is comprised of Eric Bourdais de Charbonnière
  (Chairman), Paul Murray, Igor Landau and Marcel Roulet, met six times during
  2004. They reviewed the 2003 results, the first half 2004 results and the sales
  figures of the first and third quarters 2004 during its meetings in February,
  April, July and October 2004, respectively. During these meetings, the 2003
  consolidated financial statements and notes were discussed with the Groups
  Chief Financial Officer. The statutory auditors attended these meetings and
  raised their comments on the financial statements. The Committee also decided,
  after reviewing offers made by various statutory audit groups, to renew Mazars
  & Guérard as statutory auditors.

The Audit Committee also reviewed the internal audit program for 2004, the conclusions of the internal audit teams in 2004, the Groups financial documentation and the application of the French Loi de sécurité financière and the U.S. Sarbanes Oxley Act, as well as the implementation of the COMPASS program (Controls Over Methods Processes, Applications, Systems and Strategy). To evaluate and respond to most of the risks identified in the COMPASS study, horizontal programs were implemented, in particular the Process Transformation initiative whose objective is to accelerate the reform of the Groups processes and to optimize operational efficiency.

The work of the Committee also focused on the financial documentation of the Group and on the implementation of a new system of financial reporting (FIRST) using the Magnitude software designed by Cartesis.

The Audit Committee pre-approved the proposed audit and non-audit services entrusted to the Companys statutory auditors.

> Strategy Committee

At the end of 2004, the Strategy Committee consisted of Thierry Breton (Chairman),
  Christian Blanc, Frank E. Dangeard, Eddy Hartenstein, Pierre Lescure, Didier
  Lombard, Henry Vigil and David Roux. Following Thierry Bretons resignation
  on February 27, 2005, the Committee is now chaired by Frank E. Dangeard as of
  March 1, 2005.

The Committee met seven times during 2004. It examined at the beginning of the year the major focuses for investment for the year. Many meetings were devoted to the finalization of the creation of TTE and to the growth initiatives of the Group.

In the Fall of 2004, following the shareholders approval of the Five Point Plan of July 22, 2004, the Strategy Committee approved the five strategic priorities presented by the Executive Board (broadening of our M&E client offerings, focus and reinforcement of our R&D program towards media technologies, positioning the Group in the electronic content distribution sector, development of IP devices and solutions and actively pursuing a strategic relationship for the Displays activity), and

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approved the Two-Year Plan for the implementation of the Groups strategy. The plan was announced on November 30, 2004.

The Strategy Committee met also several times to evaluate the status of the Companys Displays activity and partnership strategy, which was communicated to investors and shareholders at the end of October 2004.

> Nomination, Remuneration and Governance Committee

The Nomination, Remuneration and Governance Committee consists of Marcel Roulet
  (Chairman), Christian Blanc, Eddy Hartenstein and Henry Vigil. The Committee
  met seven times in 2004. In particular, it reviewed the compensation policy
  for the Groups 400 principal managers and the criteria used to determine
  the variable portion of such compensation. It advises on the compensation of
  the Chairman and Chief Executive Officer. It also recommended the merging of
  the functions of the Chairman and Chief Executive Officer.

The Committee also rendered its opinion on the nomination of a new Board member, the update of the Internal Board Regulations and the implementation of a stock option program, which was approved by the Board of Directors on September 22, 2004.

Powers of the Chief Executive Officer

Until September 15, 2004, the functions of the Chairman of the Board of Directors and the Chief Executive Officer were separate. In accordance with applicable law, the general management of the Company was then the responsibility of the Chief Executive Officer.

The Board of Directors, on the recommendation of the Nomination, Remuneration and Governance Committee, and following the approval of the shareholders meeting on September 15, 2004 of the Five Point Plan, decided to aggregate the functions of Chairman of the Board of Directors and Chief Executive Officer. Frank E. Dangeard was appointed to the position of Chairman and Chief Executive Officer.

The Internal Board Regulations, until then, defined the respective roles of the Board of Directors, the Chairman and the Chief Executive Officer. The Internal Board Regulations have been amended and now define the respective roles of the Board of Directors and of the Chairman and Chief Executive Officer.

The Internal Board Regulations provide certain limitations on the powers of the Chairman and Chief Executive Officer, who must obtain the approval of the Board of Directors prior to committing the Company to investments exceeding specified amounts.

These limitations on the powers of the Chairman and Chief Executive Officer are established internally and, if not complied with, would not affect the rights of third parties in accordance with Article L. 225-56 I paragraph 3 of the French Commercial Code.

Internal control procedures implemented by the Company

> Objectives of Internal Control Procedures

The internal control procedures implemented by the Company have two overall objectives:

- to verify that the actions undertaken by the Group and its employees are in
    conformity with applicable regulations and the Groups values and are
    consistent with the framework defined by the Groups management bodies;
    and

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  Group

- to verify that the accounting and financial information communicated to the
    management bodies and to shareholders accurately reflects the Companys
    operations and financial situation.

Building upon the application of the Sarbanes-Oxley Act and regulations thereunder, the Group has undertaken to implement the internal control framework proposed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Within this framework, the Group seeks to achieve reasonable assurance regarding:

- the effectiveness and efficiency of operations;
- the reliability of financial reporting; and
- the compliance with applicable laws and regulations.

One of the objectives of the internal control system is to prevent and control risks arising from the Companys businesses and risks of error or fraud, in particular in areas of accounting and finance. As with every control system, it cannot provide an absolute guarantee that these risks are totally eliminated.

To attain these objectives, the internal controls must be implemented at the level of legal entities and of different categories of operations and transactions carried out by the Group. To this end, the Group is implementing Company-wide programs such as the programs PTI (Process Transformation Initiative), and COMPASS (Controls Over Methods, Processes, Applications, Systems, and Strategy).

The TQS (Thomson Quality System) program was launched at the end of 2002 in order to ensure the constant improvement of the quality of processes and the monitoring of risks to which the Group may be exposed. In order to accelerate the reshaping of Group processes and to optimize operational efficiency, a new Company-wide program, the PTI, was launched in October 2004. PTI is organized around five key concepts:  innovation, manufacturing, inventory supply chain, logistical and services, and support functions. Two accompanying initiatives are Key Account Management and Industrial Partnerships.

Project COMPASS was launched in November 2003. As part of project COMPASS, the Group has documented and tested a majority of the Groups financial processes and related controls as the Group prepares to comply with the provisions of Section 404 of the Sarbanes-Oxley Act. The project also included a Company-wide control self-assessment, and assessment and testing of entity-level controls. Project COMPASS continues in 2005 with the Group internalizing all aspects of the project, hiring additional control experts and implementing project software.

A Risk Committee was created in September 2004 with the objective of evaluating the existing operational risks and identifying potential strategic risks that could derail different activities within the entities of the Group. This Committee is under the responsibility of a senior officer of the Group and special advisor to the Chairman and Chief Executive Officer.  This Committee supervises the implementation of recommendations to reduce these risks.

General control environment

> Ethical values and principles of conduct for the Groups
>     managers

The ethical values and principles of conduct for the Groups managers
  are defined in two of the Groups principal internal documents:

(1) The Groups Ethics Charter

The Groups Ethics Charter, which was signed in 2000 by the Groups 471 principal managers, provides for the adherence to ten fundamental rules: tolerate no discrimination; promote best working conditions; use no child or forced labor; support employees development; value the companys

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interest above ones personal interest; avoid potential conflicts of
  interest; protect peoples health, safety and the environment; respect
  consumer and personal privacy; respect fair market competition; strive to be
  a good corporate citizen wherever we operate; and respect and protect shareholder
  value. 
  The Group's Ethics Charter is periodically re-affirmed by the senior management
  of Thomson.

In addition to this charter, there are ethical rules with respect to the Groups suppliers in the context of the Process Transformation Initiative.

(2) Thomsons Principles of Excellence Rules

The Groups principles of excellence and procedures are listed in a booklet available on the Groups intranet site.

In addition to these two sets of principles and rules, the Group has implemented
  specific policies in order to regulate the conduct of its employees, for example,
  with respect to trading in Thomson shares. These procedures apply equally to
  directors. Furthermore, in accordance with Article 222-14 of the General Regulations
  of the Autorité des Marchés Financiers(AMF),
  the Group files with the AMF declarations of transactions undertaken by directors
  in the Companys shares.

The alert procedure, the so-called whistle-blowing procedure, is another specific mechanism which allows employees who believe that violations of accounting principles applicable to the Group have been committed to contact the Audit Committee and/or the Chief Audit Executive on a confidential basis.

> Group management and decision-making process

During the year 2004, the Group management was organized around two main bodies, under the control of the Board of Directors:

- The Executive
    Committee (in September 2004, the Management Board was merged with the Executive
    Committee as part of the reinforcement of the management team announced in
    the Five Point Plan); and
- Management
    network (Thomson Leadership Network).

Under the authority of the Groups Chairman and Chief Executive Officer, the Executive Committee currently consists of 15 members (nine French, five American and one British). It consists of executive managers responsible for the large operating divisions and managers in charge of the principal central functions (finance, legal, human resources, sourcing, etc.)  The committee meets every week.  It reviews the evolution of financial performance (sales, operating results and cash flow) of the different Group divisions in relation to the budget and the Groups principal events (commercial contracts, partnerships, investments, acquisitions, etc.).

The work of the Executive Committee is performed through two committees: the Investment Committee, in charge of studying and approving investments contemplated by the different business units of the Group, and the Risk Committee, which evaluates existing operational risks and identifies the potential strategic risks which could follow from the activities performed by the Group entities.

The Groups managers also depend on a management network, the Thomson Leadership Network (350 managers), that meets twice a year.

> Internal audit

The Groups internal audit department consists of 16 auditors located in three key sites for the Group (Paris, Indianapolis (Indiana) and Camarillo (California)). It is managed by a director of U.S. nationality

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  Group

who is a certified public accountant (CPA) as recognized by the American Institute of Certified Public Accountants. He joined the Group in mid-2003 after having served as the lead internal audit executive of several publicly traded multi-national companies.

In 2004, the internal audit department completed 40 audits, and several projects for management that covered the following domains: operational processes, financial audit of subsidiaries, and compliance audits. The principal conclusions and recommendations of these operations were reviewed by the Audit and the Risk Committees. Moreover, the internal audit department actively contributes to the implementation of obligations under the Sarbanes-Oxley Act.

> Information technology security procedures

The information technology (IT) department has developed and implemented an Information Technology Security Plan which defines rules of access and use of the Groups data, programs and IT tools, monitoring the application of its rules via a Group-wide network of security administrators.

The level of protection of the company was improved in 2004, focusing in particular on:

- the reinforcement
    of certain security practices, such as the administration of passwords and
    modifications;
- improvement
    of the process of administration of internal alerts;
- implementation
    of state of the art antivirus and firewall system solutions; and
- more generally,
    the reinforcement of computer technology standards and associated security
    solutions.

At the same time, the Information Technology Department carried out an evaluation of IT risks to the Groups activities as related to an interruption of service, and defined plans of action which aim to align the level of IT protection with the expectations and needs of the operation departments. This study takes into consideration the basics of a post-disaster recovery plan, physical protection of the systems, standardization of the level of technical support, saving and archiving, as well as the traceability of modifications.

> Internal control procedures relating to the preparation and treatment
>     of accounting and financial information

The reliability of published accounting and financial information is based on a variety of financial procedures and controls organized around the following elements:

- the budgetary process;
- the Groups accounting and management organization;
- accounting standards and methods within the Group; and
- accounting and management reporting and closing period work at the Group
    level.
    Budgetary process

The budgetary
  process is mandatory
  for all of the Groups divisions and profit centers. The principal stages
  in the budgetary process are the following:

- in October, preparation by each entity of a budget for the first and second
    six-month periods for the following year, based on market projections and
    analyses of suppliers;

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- in November and December, review and approval by the Group general management
    and the finance department of proposed budgets prepared at the business unit
    level;
- in January, approval of revised budgets by the Board of Directors;
- in June/July, updating of the second semesters budget as a function
    of the results of the first semester and expected market environment through
    the end of the year; and
- in November, the updating of the current year (preview of the year-end).

In the context of the budgetary procedure, performance measurement indicators are calculated by the divisions and analyzed. The budget is divided into monthly period budgets to serve as a reference for the Groups monthly reporting.

> The Groups accounting and management organization

Under the authority of the Groups Chief Financial Officer, the Management
  and Accounting Control (Contrôle de Gestion et de la Comptabilité)team is responsible for:

- the establishment of the Groups consolidated financial statements and
    Thomson S.A.s statutory accounts;
- the preparation of the budget and the follow-up of developments and monthly
    management reporting; and
- the implementation of the Groups accounting and management methods,
    procedures and standards and adaptation thereof in accordance with changes
    to standards.

The Groups local financial organization follows its operational organization, which was subdivided in 2005 into four divisions (Services, Systems & Equipment, Technology, Displays & Consumer Electronics Partnerships), which includes 13 business units and 18 profit centers.  Each of these business units and profit centers is under the supervision of a Controller, assisted by an accounting and management team, responsible for tracking the budget and reporting, on the one hand, and for the accounting treatment of transactions within the local legal entities, on the other hand.

> The Groups accounting standards and methods

The accounting principles used by the Group are defined in a document entitled Thomson Accounting Principles and Methods, which is available on the Companys intranet site and which is provided to the Groups entire finance department. This document covers the accounting treatment of such items as tangible and intangible assets, inventories, provisions, intragroup transactions and acquisitions.

In addition to this procedural document, the Group has a controllers manual, which is updated regularly and which reviews the procedures that accountants and corporate controllers must respect in terms of purchasing, management of inventories, sales, payments, cash flow or taxes.

> Management reporting and closing period work

The Group accounting and financial data are consolidated into one reporting system, called MAGNITUDE.  At the end of each month, the Groups entities report their financial data into this system.  The Group uses a common accounting charter.  The principal accounting and financial figures of the operational and functional departments consolidated at the Group level are analyzed by the Groups management control team and reviewed by the Groups Executive Committee.

The closing process for the half-year and annual consolidated financial statements occurs in two steps. The first step consists of a hard close completed in May and November, which is initiated by

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  Group

the circulation of closing instructions prepared by the Groups accounting department. The controllers manual defines the controls and actions which must be undertaken at the entity level (entries in accounting books, reconciliations, etc.) and the persons authorized to implement them.

This stage leads to first review by the statutory auditors, completed initially at the subsidiary level within a majority of the Groups legal entities, then at the parent company level. This hard close allows for the identification of the most complex issues. The second step occurs in July and in January and involves the finalization of half-year and annual consolidated financial statements under French standards. The Group then proceeds once a year with a reconciliation of these results in accordance with U.S. GAAP. The 2004 consolidated accounts are published under French GAAP for the last time, accompanied also by a reconciliation to IFRS for shareholders equity and income statement for 2004.

> Preparation of financial statements

The financial statements are prepared jointly by the finance department and the General Secretary of the Company. They are based on information reported through the annual reporting and accounting consolidation processes and on operational and market information, which is specifically centralized for the preparation of the Companys Document de Reference in France and the submission of this Form 20-F in the United States.

Half-year and annual financial information is reviewed by the Groups Audit Committee.

Summary of Significant Differences Between French Corporate Governance Practices and the NYSEs Corporate Governance Standards

> Overview

The following paragraphs provide a brief, general summary of significant difference between the corporate governance standards followed by Thomson under French law and guidelines and those required by the listing standards of the New York Stock Exchange (the NYSE) of U.S. companies that have common stock listed on the NYSE.

The principal sources of corporate governance standards in France are the French Commercial Code (Code de Commerce)and the French Financial and Monetary Code (Code monétaire et financier), both as amended in August 2003 by the French Financial Security Act (Loi de sécurité financière), as well as a number of general recommendations and guidelines on corporate governance, most notably the Bouton Report of September 2002. The Bouton Report includes, among others, recommendations relating to the role and operation of the board of directors (creation, composition and evaluation of the board of directors and the audit, compensation and nominating committees) and the independence criteria for board members and statutory auditors.

The NYSE listing standards are available on the NYSEs website at http://www.nyse.com.

> Composition of Board of Directors; Independence.

The NYSE listing standards provide that the board of directors of a U.S. listed company must consist of a majority of independent directors and that certain committees must consist solely of independent directors.  A director qualifies as independent only if the board affirmatively determines that the director has no material relationship with the company, either directly or indirectly. In addition, the listing standards enumerate a number of relationships that preclude independence.

French law does not contain any independence requirement for the members of the board of directors of a French company and the functions of board chairman and chief executive officer are frequently

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performed by the same person. The Bouton Report recommends, however, that at least half of the members of the board of directors be independent in companies that have a dispersed ownership structure and no controlling shareholder. The report states that a director is independent when he or she has no relationship of any kind whatsoever with the corporation, its group or the management of either, that is such as to color his or her judgment. The report also enumerates specific criteria for determining independence, which are on the whole consistent with the goals of the NYSEs rules although the specific tests under the two standards may vary on some points.

Based on the Bouton Reports independence criteria, the Company considers that ten of fifteen of its directors are independent.

> Board Committees

Overview.The NYSE listing standards require that a U.S. listed company must have an audit committee, a nominating/corporate governance committee and a compensation committee. Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards.

French law requires neither the establishment of board committees nor the adoption of written charters.  The Bouton Report recommends, however, that the board of directors set up an audit committee, a nominating and compensation committee, indicating that the nominating and compensation committee may form one committee. The report also recommends that at least two-thirds of the audit committee members and a majority of the members of each of the compensation committee and the nomination committee should be independent directors.

Thomson has established an Audit Committee and a combined nomination and a compensation committee called the Nomination, Remuneration and Governance Committee and considers that all of the members of these committees at the end of 2004 are independent. For the membership of each committee, see Composition of the Board of Directors and its Committees above.  Moreover, Thomson has adopted Internal Board Regulations, which define the responsibilities and operation of both committees.

Audit committee.The NYSE listing standards contain detailed requirements for the audit committees of U.S. listed companies. Starting on July 31, 2005, some, but not all, of these requirements will also apply to non-U.S. listed companies, such as Thomson. For the time being, however, the NYSE listing standards do not require that non-U.S. listed companies, such as Thomson, have an audit committee.

The Bouton Report recommends that French public companies establish an audit committee that is responsible for, among other things, regularly interviewing statutory auditors without executive management present, calling upon outside experts if necessary, examining the companys risk exposures and material off-balance sheet commitments and the scope of consolidation, reviewing the financial statements, managing the process of selecting the statutory auditors and expressing an opinion on the amount of their fees and monitoring compliance with the rules designated to ensure auditor independence.

Although the audit committee recommendations of the Bouton Report are less detailed than those contained in the NYSE listing standards, the NYSE listing standards and the report share the goal of establishing a system for overseeing the companys accounting that is independent from management and of ensuring the auditors independence. As a result, they address similar topics, and there is some overlap.

For the activities performed by the Audit Committee of Thomson in 2004, see Work of the Board Committees in 2004Audit Committee.

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Thomson
  Group

One structural difference between the legal status of the audit committee of a U.S. company and that of a French company listed on the NYSE concerns the degree of the committees involvement in managing the relationship between the company and its auditors. French law requires French public companies that publish consolidated financial statements, such as Thomson, to have two co-auditors. While the NYSE listing standards require the audit committee of a U.S. listed company to have direct responsibility for the appointment, compensation, retention, and oversight of the work of the auditor, French law provides that the election and dismissal of the co-auditors is the sole responsibility of the shareholders meeting.  In making its decision, the shareholders meeting may rely on proposals submitted to it by the board of directors. The shareholders meeting elects the auditors for an audit period of six fiscal years. The auditors may only be dismissed by a court and only on grounds of professional negligence or the incapacity to perform their mission.

> Disclosure

The NYSE listing standards require U.S. listed companies to adopt, and post on their websites, a set of corporate governance guidelines.  The guidelines must address, among other things:  director qualification standards, director responsibilities, director access to management and independent advisers, director compensation, director orientation and continuing education, management succession, and an annual performance evaluation. In addition, the chief executive officer of a U.S. listed company must certify to the NYSE annually that he or she is not aware of any violations by the company of the NYSEs corporate governance listing standards. The certification must be disclosed in the companys annual report to shareholders.

French law requires neither the adoption of such guidelines nor the provision and publication of such certification. The Bouton Report recommends, however, that the board of directors of a French public company perform annual self-evaluations and that a formal evaluation by an outside consultant be undertaken every three years.

In the Chairman of the Boards report required under French law since 2003, the works performed by the Board of the Directors and its committees are commented upon.

> Code of Business Conduct and Ethics

The NYSE listing standards require each U.S. listed company to adopt, and
  post on its website, a code of business conduct and ethics for its directors,
  officers and employees. There is no similar requirement or recommendation under
  French law. However, under the SECs rules and regulations, all companies
  required to submit periodic reports to the SEC, including Thomson, must disclose
  in their annual reports whether they have adopted a code of ethics for their
  senior financial officers. In addition, they must file a copy of the code with
  the SEC, post the text of the code on their website or undertake to provide
  a copy upon request to any person without charge. There is significant, though
  not complete, overlap between the code of ethics required by the NYSE listing
  standards and the code of ethics for senior financial officers required by the
  SECs rules. For a discussion of Thomsons plans to adopt a code of
  ethics, which satisfies the definition of code of ethics in Item
  16B of Form 20-F, see Item 16B: Code of Ethics.

Executive Committee

On September 15, 2004, the Board of Directors approved Thomsons strategic plan that included strengthening management with the appointment of Frank E. Dangeard to the reunified function of Chairman and CEO.

The Executive Committee is the central management body of the Company.  It encompasses 15 members (Chairman and CEO, Senior Executive Vice Presidents, and Executive Vice Presidents),

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representing Thomson business units and support functions.  The Executive Committee generally meets on a weekly basis to analyze and evaluate Group performance, make decisions and supervise operations.

Two operating committees of the Executive Committee have also been established
  to contribute to an effective decision-making process. The Investment Committee
  meets on an ad hoc basis to review and recommend all financial commitments to
  the Executive Committee for final approval. The Risk Committee generally meets
  every six weeks to aid the Executive Committee in the identification, anticipation,
  prevention and mitigation of financial, operational, and strategic risk to the
  business. Further, it serves as the vehicle through which results and findings
  of the Internal Audit Team are communicated to Senior Management.

Both committees submit all their conclusions and recommendations to the Executive
  Committee. The Investment Committee is chaired by the Chief Financial Officer,
  Julian Waldron, and the Risk Committee by John Neville, a senior officer of
  the Group and special advisor to the Chairman and Chief Executive Officer.

|Name of Executive     | Responsibility                                                        | Appointed | 
|--------------------- | --------------------------------------------------------------------- | --------- | 
|Committee Member      |                                                                       |           | 
|                      |                                                                       |           | 
|                      |                                                                       |           | 
|Frank E. Dangeard     | Chairman and Chief Executive Officer                                  | 2004      | 
|                      |                                                                       |           | 
|Jean-Charles Hourcade | Senior Executive Vice President, Chief Technology Officer, Technology |           | 
|                      | Division, in charge of the Technologies program                     | 2000      | 
|                      |                                                                       |           | 
|Lanny Raimondo        | Senior Executive Vice President, Services Division, in charge         |           | 
|                      | of the Clients program                                              | 2001      | 
|                      |                                                                       |           | 
|Didier Trutt          | Senior Executive Vice President, Displays activity, in charge         |           | 
|                      | of the Process Transformation Initiative                              | 2003      | 
|                      |                                                                       |           | 
|Julian Waldron        | Senior Executive Vice President, Chief Financial Officer, in charge   |           | 
|                      | of the Value Creation" program                                       | 2001      | 
|                      |                                                                       |           | 
|Tom Carson            | Executive Vice President, in charge of the Program Office,            |           | 
|                      | as well as Marketing & Sales for Connectivity                         | 2002      | 
|                      |                                                                       |           | 
|Marie-Ange Debon      | Executive Vice President, Corporate Secretary and General Counsel     | 2003      | 
|                      |                                                                       |           | 
|Brad Kendall          | Executive Vice President, Human Resources                             | 2004      | 
|                      |                                                                       |           | 
|Ghislain Lescuyer     | Executive Vice President, Access Platforms & Gateways                 | 2003      | 
|                      |                                                                       |           | 
|Guy Léonard           | Executive Vice President, Business Performance                        | 2003      | 
|                      |                                                                       |           | 
|Quentin Lilly         | Executive Vice President, Home Entertainment Services (DVD)           | 2003      | 
|                      |                                                                       |           | 
|Jean-Georges Micol    | Executive Vice President, Communications & Public Affairs             | 2004      | 
|                      |                                                                       |           | 
|Mike D. OHara        | Executive Vice President, Connectivity                                | 1999      | 
|                      |                                                                       |           | 
|Béatrix de Russé      | Executive Vice President, Intellectual Property and Licensing         | 2004      | 
|                      |                                                                       |           | 
|Marc Valentin         | Executive Vice President, Broadcast & Networks
      (Grass Valley)   | 2004      | 
|                      |                                                                       |           | 

|(1) | The divisions mentioned in this table indicate
      the position of each current Executive Committee member under the divisional
      structure effective January 1, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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  Group

Biographies of Executive Committee Members

Frank E. Dangeardwas appointed Chairman and CEO of Thomson on September
  15, 2004. From September 2002 to September 2004, he was Senior Executive Vice
  President of France Telecom, and non-executive Chairman of Thomson. Mr. Dangeard
  joined Thomson in April 1997 as Senior Executive Vice President. He became a
  member of the Thomson Board in March 1999, and Vice-Chairman of the Board in
  July 2001. From September 1989 to April 1997, he was Managing Director of SG
  Warburg & Co. Ltd (later SBC Warburg) and from 1995, he was also Chairman
  of the Board of SBC Warburg (France). From September 1986 to June 1989, he was
  a lawyer at Sullivan & Cromwell in New York and London. Mr. Dangeard is
  a Board member of Orange and Equant (two companies in the France Telecom Group).
  He is also a Board Member of French Electricity Company Electricité
  de France (EDF). He graduated from the école des Hautes
  Etudes Commerciales(H.E.C.), the Paris Institut dÉtudes Politiques
  and from Harvard Law School. He is a member of the New York Bar.

Jean-Charles Hourcadeis Senior Executive Vice President in charge of the Technology division and has been Chief Technology Officer since 2001. He is also in charge of the Technologies program. In 2000, Jean-Charles Hourcade was appointed Senior Vice President, Research and Innovation. Jean-Charles Hourcade served from 1995 to 2000 as Vice President Strategic Planning, Thomson-CSF, where he was in charge of Corporate Strategy, Strategic Alliances and Merger and acquisitions activities. He joined the Thomson CSF Group in February 1986, coming from the National Institute for Audiovisual where he worked as R&D engineer in computer graphics and special effects. During the following years, he served as Chairman and CEO of Thomson Digital Image (TDI), a company specialized in 3D Computer Graphics software and systems. Jean-Charles Hourcade is a graduate of the École Polytechniqueand École Nationale Supérieure des Télécommunicationsin Paris. Mr. Hourcade is President of the RIAM, the French Network for Audiovisual and Multimedia Research.

Lanny Raimondois Senior Executive Vice President, Services division, and in charge of the Clients program. From March to September 2001, he was Executive Vice President for Technicolor and has been responsible for our Technicolor business since then as Senior Executive Vice President. He is also responsible for overseeing Thomsons growth initiatives in digital imaging, screen advertising and digital cinema. Mr. Raimondo has worked at Technicolor since 1994 and was appointed President and Chief Executive Officer of Technicolor Group in 1998, after having served as President of the companys Home Entertainment business.  Prior to that, Mr. Raimondo spent 16 years with Pirelli Cable Corporation where he managed large subsidiary companies in Great Britain, Canada and the U.S., holding the position of President and Chief Executive Officer of the North American Group from 1985 to 1994. Mr. Raimondo is a graduate of Purdue University with a degree in electrical engineering.

Didier Trutt,Senior Executive Vice President, Displays, is in charge
  of the Process Transformation Initiative. He was appointed Executive
  Vice President in September 2003. He was previously Tubes Operations Vice
  President in charge of the whole industrial and sales activities for Europe,
  Asia and North America. From 1996 to 1999, as - Vice President of Manufacturing
  Operations for Television and Video in Europe, he was in charge of all manufacturing
  activities for the Television and Video European branch. In 1994, as General
  Manager DVBS, he launched the Digital Operations business in Europe. From 1987
  to 1994, based in Asia, he was responsible for Thomson Television Thailand,
  and General Manager of Television and Video activities for all industrial sites
  in South East Asia. From 1984 to 1987, he was in charge of implementing Production
  Processes and coordinating manufacturing activities for Thomson Television Components
  France. Since 1992, Mr. Trutt has been Foreign Trade Adviser of France.

Julian Waldronwas appointed Senior Executive Vice President, Chief Financial Officer in October 2002. He is also in charge of the Value Creation program. He joined Thomson in June 2001 as Senior Vice President, Chief Financial Officer. Prior to joining Thomson at his current position, he was Managing Director of UBS Warburg in London where he was co-Head of the European Equity Markets

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Group, coordinating this business for all Europe. Mr. Waldron has spent over fourteen years with UBS Warburg where he occupied several positions of increasing responsibility.  He is a graduate of Cambridge University.

Tom Carsonwas appointed Executive Vice President, Marketing &
  Sales for Connectivity in February 2004 and is in charge of the Program Office.
  From October 2002 to February 2004, he was Executive Vice President of Patents
  & Licensing. Prior to this, Mr. Carson held the position of Vice President
  Sales & Marketing Coordination and Americas Representative for Thomsons
  Displays and Components SBU. From 1998 to 2001, he managed Thomsons North
  American display operations as Vice President Americas Picture Tube Operations.
  From 1992 to 1998, Mr. Carson was General Manager Sales, Marketing and New Business
  Development for Thomsons North America Picture Tube Division. Prior to
  this, Mr. Carson held various positions of increasing responsibility in sales,
  marketing and international with Thomson. Mr. Carson has a Bachelor of Science
  degree in Business Administration from Villanova University and also holds an
  MBA from the same university

Marie-Ange Debonwas appointed Executive Vice President, Corporate Secretary and General Counsel in July 2003. Prior to this appointment, she was Thomsons Deputy Chief Financial Officer. From 1994 to 1998, she held the positions of Financial Director and then Senior Executive Vice President in charge of Resources (Finance, Legal, IT, Production, Equipment) at France 3 (French Television Broadcaster). From 1990 to 1994, she was Magistrate at the Cour des Comptes. Ms. Debon is a graduate of the école des Hautes Etudes Commerciales(H.E.C.), the École Nationale dAdministrationand has a Masters Degree in Law.

Brad Kendallwas appointed Executive Vice President, Human Resources, in February 2004. In 1983 he joined RCA Consumer Electronics, which later became part of Thomson. From 2002 to 2004, Mr. Kendall was based in Camarillo, California, as Vice President, Human Resources, for the newly created Digital Media Solutions businesses. From 1997 to 2002, he was based in Paris, France, as Vice President, Worldwide Human Resources Programs & Incentives for the global Thomson group; as well supporting the Broadband Access Products & Services business unit. From 1995 to 1997, in Indianapolis, Indiana, Mr. Kendall was responsible for all Americas region-based Management Development activities, and additionally managed Human Resources for all corporate functions. From 1991 to 1995 he was based in Juarez, Mexico, where he was responsible for Human Resources for all manufacturing operations in Mexico.  From 1983 to 1991 he held several positions in Human Resources at Indianapolis. Mr. Kendall graduated from Ball State University in 1982 with a Bachelor of Science degree in Personnel Management and received his Masters in Business Administration degree from the University of Indianapolis in 1988.

Ghislain Lescuyerwas appointed Executive Vice President, Access Platforms
  & Gateways (formerly Broadband Access Products), in July 2002. Prior to
  joining Thomson, Mr. Lescuyer served as CEO at Europatweb from 2000 to 2002
  (a private equity firm focusing on Internet and high technologies), President
  of Divisions at Bull from 1994-2000, Consultant at McKinsey (1988-1994) and
  Sales Manager at Hewlett Packard. Mr. Lescuyer is a graduate from lÉcole
  Nationale Supérieure des Télécommunicationsand holds an MBA from INSEAD.

Guy Léonardwas appointed Executive Vice President, Business Performance, in July 2003. Prior to this position, he has been successively Vice President TV/Video manufacturing Europe from 1993 to 1996, Vice President Worldwide Sourcing from 1996 to 1999 and Chief Information Officer from 1999 to 2003. Before he joined Thomson in 1993, he held several positions: from 1979 to 1984, he worked for Texas Instruments in controlling and planning jobs (France and Portugal). From 1984 to 1990, he held strategic planning and plant management positions (France and Morocco) at ST Microelectronics. Then, he was in charge of strategic planning for Nokia Consumer Electronics in Switzerland from 1990 to 1993. Mr. Léonard is a graduate from the École Supérieure de Commercede Parisand has a MBA in Finance.

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  Group

Quentin Lillywas appointed to the Executive Committee in February
  2004 as Executive Vice President, Home Entertainment Services (DVD), a part
  of the Services division. He joined Thomson in March 2001 when Thomson acquired
  Technicolor. Quentin Lilly joined Technicolor in 1994 serving in his present
  capacity since 1999, and has held a number of positions including serving as
  Vice President and then Senior Vice President of Corporate Development from
  1994 to 1997, and Chief Operating Officer from 1997 to 1999. Prior to joining
  Technicolor, Quentin Lilly spent approximately 10 years, respectively, as a
  member of the Investment Banking Groups for 7 years at Smith Barney then for
  3 years at Crowell, Weedon & Co. Mr. Lilly holds a Bachelor of Science from
  California Polytechnic University.

Jean-Georges Micolwas appointed as Executive Vice President, Communications
  and Public Affairs, in January 2004. From 1997 until he joined Thomson he held
  various positions in ALSTOM: as Chief Communications Officer for ALSTOM Power,
  then Marketing Director for Hydro Activities before being appointed Director
  of Communications for the ALSTOM Group He began his career as a Financial Analyst
  at the CCF Bank before joining the Danone Group in 1989, where he held the position
  of External Communications Director. Jean-Georges Micol is a graduate of École
  Nationale Supérieure des Industries Agricoles et Alimentaires(ENSIA)
  and also holds a degree from École Supérieure des Sciences
  Economiques et Commerciales(ESSEC).

Mike OHarawas appointed Executive Vice President, Consumer Products
  marketing and Sales in July 2001. He assumed responsibility for the newly constituted
  Connectivity business in 2004. From July 1999 to July 2001, he was Executive
  Vice President, Americas, responsible for Sales, Logistics, Production Management
  and Brand Management in both North America and Latin America. From November
  1997 to July 1999, he was Vice President, Worldwide Digital Multimedia Products.
  From December 1996 to November 1997, he was Vice President, Core Business Product
  Management and from September 1996 to December 1996, he was Vice President,
  DBS and DVD Product Management. Since 1987, Mr. OHara has held various
  marketing and sales positions within Thomson. Mr. OHara holds Bachelors
  degrees in Management and Marketing from Montclair (NJ) State College and received
  his Masters degree in Finance from Fairleigh Dickinson University in Rutherford,
  NJ.

Béatrix de Russéwas appointed Executive Vice President,
  Intellectual Property and Licensing in February 2004. She was, since 1999, Vice
  President Worldwide Licensing. From 1993 to 1999 she was successively Vice President
  Licensing, then Vice President Patents and Licensing for Thomson. From 1984
  to 1992, Mrs. de Russé was in charge of international contracts and Intellectual
  Property at Thomson Components and STMicroelectronics, where she specialized
  in Intellectual Property matters. From 1976 to 1983, she worked as an international
  attorney at the international division of Thalès (former Thomson CSF).
  Mrs. de Russé holds a Masters degree in law and DESS in International
  Trade law as well as a Masters degree in English and a CDCI diploma.

Marc Valentinwas appointed Executive Vice President, in charge of Broadcast & Networks (Grass Valley) activity, a part of the Systems & Equipment division, in November 2004. Since 2001, Marc Valentin has managed the Thomson Broadcast & Media Solutions activity, including the integration of the former Philips Broadcast business and the Grass Valley Group into Thomson. Previously, Marc Valentin managed Thomsons European digital decoders division after having served as Chief of Staff to the Chairman and CEO. Before joining Thomson in 1995, Marc Valentin worked for the French Ministry of Finance for six years. During two of those years he served as an expatriate in Islamabad, Pakistan on bilateral financial relations. Marc Valentin holds an engineering degree from the École Polytechniqueand is a graduate of the École Nationale dAdministration(ENA).

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B Compensation of Directors and Principal Executive Officers

The following table sets forth the compensation and benefits in kind (excluding stock options) paid in 2004 by Thomson and its subsidiaries to its directors and other principal executive officers (excluding those paid to Directors representing the employees):

|(In euros)                        | Position                   |  | Director Fees(12) |  | Gross |              | Employer |        
|--------------------------------- | -------------------------- |  | ----------------- |  | ----- | ------------ | -------- | -------
|                                  |                            |  |                   |  |       | Compensation |          | Charges
|                                  |                            |  |                   |  |       |              |          |        
|Frank E. Dangeard (1)             | Chairman and CEO           |  | 30,000            |  |       | 456,923(13)  |          |        
|Christian Blanc                   | Director                   |  | 24,000            |  |       |             |          |        
|Eric Bourdais de Charbonnière (2) | Director                   |  | 2,575             |  |       |             |          |        
|Catherine Cavallari (3)           | Director, Employee         |  |                   |  |       |              |          |        
|                                  | Representative             |  |                  |  |       |             |          |        
|Loïc Desmouceaux                  | Director, Employee         |  |                   |  |       |              |          |        
|                                  | Shareholder Representative |  | 14,575            |  |       |             |          |        
|Eddy W. Hartenstein               | Director                   |  | 18,000            |  |       |             |          |        
|Igor Landau                       | Director                   |  | 20,000            |  |       |             |          |        
|Pierre Lescure                    | Director                   |  | 29,000            |  |       |             |          |        
|Didier Lombard (4)                | Director                   |  |                  |  |       |             |          |        
|Gérard Meymarian                  | Director, Employee         |  |                   |  |       |              |          |        
|                                  | Shareholder Representative |  | 10,931            |  |       |             |          |        
|Paul Murray (5)                   | Director                   |  | 10,170            |  |       |             |          |        
|Jean de Rotalier (3)              | Director, Employee         |  |                   |  |       |              |          |        
|                                  | Representative             |  |                  |  |       |             |          |        
|Marcel Roulet                     | Director                   |  | 30,000            |  |       |             |          |        
|David Roux (6)                    | Director                   |  |                  |  |       |             |          |        
|Henry P. Vigil (7)                | Director                   |  |                  |  |       |             |          |        
|Charles Dehelly (8)               | Chief Executive Officer    |  |                  |  |       | 1,127,400    |          |        
|Thierry Breton (9)                | Director                   |  | 30,000            |  |       |             |          |        
|Pierre Cabanes (10)               | Director                   |  | 30,000            |  |       |             |          |        
|Michael Green (11)                | Director                   |  | 3,328             |  |       |             |          |        
|                                  |                            |  |                   |  |       |              |          |        

|(1)  | Frank E. Dangeard was appointed Chairman and CEO of the Company
      on September 15, 2004                                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Eric Bourdais de Charbonnière was appointed director
      on December 11, 2003                                                                                                                                                                                                                                     
|(3)  | The director fees of directors representing employees were
      paid to their labor organizations                                                                                                                                                                                                                  
|(4)  | Didier Lombard was appointed director on May 7, 2004                                                                                                                                                                                                                                                                
|(5)  | Paul Murray was appointed director on June 12, 2003 as a
      replacement for Michael Green                                                                                                                                                                                                                        
|(6)  | David Roux was appointed director on September 15, 2004                                                                                                                                                                                                                                                             
|(7)  | Henry P. Vigil renounced the payment of his director fees                                                                                                                                                                                                                                                           
|(8)  | Charles Dehelly was Chief Executive Officer until September
      15, 2004                                                                                                                                                                                                                                          
|(9)  | Thierry Breton resigned from the Board of Directors on February
      27, 2005                                                                                                                                                                                                                                      
|(10) | Pierre Cabanes was director until May 7, 2004                                                                                                                                                                                                                                                                       
|(11) | Michael Green was replaced by Paul Murray in 2003                                                                                                                                                                                                                                                                   
|(12) | Paid in 2004 for the 2003 fiscal year                                                                                                                                                                                                                                                                               
|(13) | In 2004, Frank E. Dangeard also received 435,000 stock options
      as part of Plan 3 in consideration for his renunciation of the options granted
      to him as part of Plans 1 and 2. See Item 7: Major Shareholders and Related
      Party TransactionsDistribution of Share CapitalStock Option Plans.

The general shareholders meeting of Thomson held on May 7, 2004 set the
  annual amount of total directors fees at 450,000. As decided by
  the Board of Directors, directors fees are distributed among the directors,
  depending on the directors participation in the meetings of the Board
  of Directors and the Board Committees, of which they are members.

None of Thomsons directors have service contracts which provide for benefits upon termination of employment.

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Thomson
  Group

In 2004, the total compensation paid by the Company and by all companies of
  the Group to the members of the Executive Committee (see section Composition
  of the Executive Committee) increased to 8.08 million (excluding
  compensation related to a specific plan for certain managers of the Content
  and Networks division and including the variable component which has increased
  to 2.65 million). In 2003, the total paid to the managers of the Executive
  Committee had been 7.9 million (excluding compensation related to a specific
  plan for certain managers of the Content and Networks division and including
  the variable component of 2.38 million).

The total provided by the Group for the pensions and retirement and other similar benefits granted to these same principal managers amounted to 1.7 million in 2004 and 1.6 million in 2003.

In case of departure from the Company, Frank E. Dangeard, in the role of Chief
  Executive Officer, can receive an indemnity equal to fifteen months of compensation,
  depending on the decision of the Board of Directors, with a six months notice
  period.

On October
  8, 2002, Thomsons Board of Directors approved an agreement to indemnify
  Charles Dehelly, in the event of involuntary departure from the Company, equal
  to twenty-one months of his annual compensation. In connection with this agreement,
  Thomson has incurred a charge of  2,048,711
  in its 2004 consolidated financial statements.

In 2002 or 2003, no director or officer of the Company was granted or exercised stock options.

C Employees

Thomsons workforce

At December 31, 2004, we employed approximately 49,000 people (temporary employees and trainees excluded), compared to approximately 58,400 employees in 2003, a decrease of 16%. The table below shows the total number of employees of our subsidiaries for the years indicated and provides a break-down by region.

|                                                                       | 2002   |  | 2003   |  | 2004       | 
|---------------------------------------------------------------------- | ------ |  | ------ |  | ---------- | 
|                                                                       |        |  |        |  |            | 
|Europe (1)                                                             | 17,464 |  | 17,277 |  | 16,609     | 
|North America                                                          | 14,405 |  | 13,073 |  | 12,992     | 
|Asia-Oceania (2)                                                       | 20,268 |  | 17,015 |  | 12,842     | 
|Other countries (3)                                                    | 12,967 |  | 11,034 |  | 6,636      | 
|                                                                       |        |  |        |  |            | 
|Number of employees in consolidated subsidiaries                       | 65,104 |  | 58,399 |  | 49,079     | 
|                                                                       |        |  |        |  |            | 
|Number of employees in companies accounted for using the equity method | 383    |  | 664    |  | 32,354 (4) | 

|                                            |        |  |        |  |        | 
|------------------------------------------- | ------ |  | ------ |  | ------ | 
|(1) Including employees based in Poland of: | 5,256  |  | 5,697  |  | 5,416  | 
|(2) Including employees based in China of:  | 17,195 |  | 13,454 |  | 10,609 | 
|(3) Including employees based in Mexico of: | 11,974 |  | 10,048 |  | 5,647  | 
|(4) Reflects essentially employees of TTE.  |        |  |        |  |        | 

The above table includes all of our executives, non-executives and workers, including hourly employee. Temporary employees and trainees are excluded. We had 7,554 temporary employees as of December 31, 2004.

The decrease of employees in Thomsons consolidated subsidiaries employees from 2003 to 2004 resulted primarily from strategic business decisions (e.g., the creation of TTE and the relationship with Foxconn, both leading to the transfer of several production and development sites) and to certain restructuring activities. This decrease was offset in part by growth initiatives through acquisitions and expansions, as described below.

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The decrease in Europe is mainly the result of the transfer of our European-based television assets to TTE in July 2004 (Poland, Germany and France), the transfer of the Financial Shared Services Center to Accenture (mainly in France and Poland), restructuring activities conducted in Italy, France and United Kingdom, and the closure of the VHS production lines in Milan, Italy and Madrid, Spain. Offsetting in part these developments, we acquired International Recording (Italy), Madrid Film (Spain), EADS DCS (France), Corinthian Television (U.K.) and the Moving Picture Company (U.K.) in 2004.

In the United States, the decrease is due to the closure of Marion and Circleville tube plants, the transfer of our U.S.-based television assets to TTE and the restructuring in Beaverton, Nevada City and Salt Lake City, which were offset in part by the acquisition of the video division of ParkerVision (Jacksonville), Gyration (Saratoga), and the expansion of the Memphis DVD distribution facility.

In the rest of the Americas, the decrease is mainly related to the transfer
  of the Mexican television production sites to TTE, the transfer of the Financial
  Shared Services Center to Accenture (Mexico), the closing of Juarez Servicentro
  (Mexico) and the sale of the Juarez decoder production site to Elcotec (Mexico),
  which were offset in part by an inflow of employees resulting from the acquisition
  of Hughes Network Systems STB manufacturing assets in Tijuana (Mexico) and Command
  Post (Canada), and the expansion of Guadalajara DVD replication facility in
  Mexico.

The headcount in our Asian operations decreased in 2004 following the transfer
  of our television businesses to TTE and the relationship entered into with Foxconn,
  which resulted in the transfer of the optical pick-up production sites of Longhua
  and Nantou to Foxconn. This decrease was offset in part by our acquisition of
  color picture tube production lines from Fortune (Dongguan, China), launch of
  post-production operations in Tokyo (Japan) and creation of a joint venture
  based in Beijing engaged in the production of digital multimedia terminals for
  reception of digital broadcasting and interactive services.

For more detailed description of our 2004 acquisitions and joint ventures mentioned above, please refer to Item 5: Operating and Financial Review of the CompanyResults of Operations for 2004 and 2003 Changes in scope of consolidation.

Employee profit-sharing

Currently, there is no employee profit-sharing plan (accord de participation) or incentive plan (accord dintéressement) based on the Companys results at the Group level in France.  However, seven French subsidiaries of the Company offer employees incentive plans based on the related subsidiarys results.

The total annual bonuses distributed to employees in connection with these incentive plans over the three fiscal years amount to the following:

> Amounts distributed in 2002 for year 2001: 1.8 million; 
>     Amounts distributed in 2003 for year 2002: 1.0 million; and
>     Amounts distributed in 2004 for year 2003: 1.8 million

Also, several of our plants in France and in the United States offer their employees profit sharing based on company results and/or achievement of individual objectives. Our Executive Committee and our Strategic Leadership Committee are incentivized with plans based on Group and business unit results and the achievement of individual performance objectives.

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Employee shareholding and stock options plans

With Thomsons IPO and the sales of our shares by the French State, our
  employees have been associated with the different changes in the share capital
  of their company. As of March 31, 2005, we estimate that approximately 23,000
  of Thomsons employees or former employees hold approximately 3.5% of our
  share capital. The Groups employees have subscribed for shares offered
  by the French State in February 1999, October 1999, September 2000, March 2002
  and December 2003, in accordance with the French Privatization law of August
  6, 1986.

Moreover, since the end of 2000, Thomson has implemented an incentive policy related to the Companys earnings and share price for members of our management through stock options programs.

For a description of our stock option plans, please refer below to Item 7:
  Major Shareholders and Related Party TransactionsDistribution of
  Share CapitalStock Option Plans.

Group management and decision-making process

The Groups streamlined management structure focuses on operational management, and is supervised by a light corporate structure. In addition to their operational responsibilities, selected Thomson managers in the field often assume corporate responsibilities for particular project-oriented missions, in such areas as quality, cost management or productivity enhancements.

The varied backgrounds and expertise of the Groups senior management reflect the rich diversity and global reach of Thomson activities.

The Group management is organized around two main bodies, under the control of the Board of Directors:

- The Executive
    Committee (15 members)
- The Leadership Network (about 350 members)

Under the authority of the Groups Chairman and Chief Executive Officer,
  the Executive Committee currently consists of 15 members (nine French, five
  North American and one British). It represents the Groups strategic business
  units and support functions. The committee analyzes and evaluates Group performances
  and results and reviews the evolution of the financial performance of the different
  Group divisions in relation to the budget and the Groups principal events.
  It also decides actions required to achieve Group objectives, and supervises
  operations (commercial contracts, partnerships, investments, acquisitions, etc.).
  For a description of our Executive Committee members, see above at ADirectors
  and Senior ManagementExecutive Committee.

The Thomson Leadership Network members provide the impetus for Thomsons constant quest for innovative management ideas and programs.  They are chosen for their leadership qualities, their ability to conceive and implement projects, their contribution to the Groups performance, and their commitment to the Groups transversal programs. They cover such areas as the Groups medium and long term strategies and the expansion of Thomsons products and services portfolio. An invaluable lever for mobilizing people, the Thomson Leadership Network enables the company to react quickly to growth opportunities and reinforces sharing of the Groups vast pool of know-how and experience.

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Skill management

Skill management is considered as a key element to manage processes and monitor risks. The Human Resources policies and practices of Thomson are aligned with business goals and strategy. This means identifying the skills and experience required to serve clients in the M&E industries.

Skill management is based on different methods such as:

- Contracts
    of progress: semi-annual ongoing dialogue during which short and long-term
    goals are established and reviewed,
- Talent
    reviews: designed to identify and recognize exemplary performance and
    strong potential.

At the same time, management remains committed to decentralized, networked management organization to ensure that skills and know-how are developed according to the operational needs of each specific business unit.

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ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A Distribution of Share Capital

Current Shareholding

The table below shows the evolution of our shareholding structure, to the best of our knowledge, up to March 31, 2005.

|                         | At February 28, 2003 |  | At March 1, 2004 |  | At March 31, 2005 | 
|------------------------ | -------------------- |  | ---------------- |  | ----------------- | 
|                         |                      |  |                  |  |                   | 
|Shareholders             | Number of            |  | % of shares      |  | Number of         | 
|                         | shares held          |  | held             |  | shares held       | 
|                         |                      |  |                  |  |                   | 
|Public                   | 179,266,609          |  | 63.89%           |  | 238,701,112       | 
|Employees                | 11,506,063           |  | 4.10%            |  | 11,650,821        | 
|ITV (previously Carlton) | 15,500,000           |  | 5.52%            |  | 15,500,000        | 
|TSA (ex-Thomson SA) (1)  | 58,400,922           |  | 20.81%           |  | 5,692,884         | 
|Microsoft                | 9,566,744            |  | 3.41%            |  | 2,659,621         | 
|NEC                      | 3,000,100            |  | 1.07%            |  |                  | 
|Thomson                  | 3,373,070            |  | 1.20%            |  | 6,373,070         | 
|                         |                      |  |                  |  |                   | 
|TOTAL                    | 280,613,508          |  | 100%             |  | 280,613,508       | 
|                         |                      |  |                  |  |                   | 

|(1) | On May 23, 2005, TSA granted common shares on
      a gratuitous basis to employees according to the terms of the employee offering
      of March 2002 amounting to 465,099 shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

To the best of our knowledge, on March 31, 2005, no shareholder holds more than 5% of our share capital.

As it does on an annual basis, Thomson conducted a shareholding survey, known in France as a TPI (Titres au Porteur Identifiable), to determine its shareholder base as of December 31, 2004. Based on the shareholding thresholds used in the TPI and its focus on major institutions, Thomson can thus identify its main shareholders (374 major funds were identified). Following this TPI at year-end 2004, the Group estimates that approximately 39 institutions each hold more than 0.5% of our share capital.

To the best of our knowledge, the members of the Board of Directors and the Executive Committee hold less than 1% of the share capital or voting rights of the Company.

Call Option Agreement in Connection with the Formation of TTE

In connection with the transaction that led to the formation of TTE, Thomson granted to TCL a call option to purchase 2.5 million Thomson shares at an exercise price of 18.12 per share. The exercise period runs to October 31, 2006.

Share Repurchase Program

Pursuant to the authorization of May 7, 2004 and following the September 15,
  2004 shareholders meeting during which the Five Point Plan was validated,
  the Group repurchased 4,157,010 treasury shares until December 2004 for a cost
  of 73 million. See Item 16E  Purchases of Equity Securities
  by the Issuer and Affiliated Purchasers.

Between January 1, 2005 and May 9, 2005, 4,006,733 additional shares have
  been repurchased for a cost of 77 million.

The authorization of the share repurchase program was renewed at the annual
  shareholders meeting held on May 10, 2005. A prospectus (Note dinformation)
  in connection with the share repurchase programs authorized by our annual shareholders
  meeting on May 10, 2005 was approved by the AMF under visa No. 05-422 on May
  19, 2005.

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Shareholders Agreements

To the best of our knowledge, there are no shareholders agreements among any of our major shareholders.

Modifications in the Distribution of Share Capital over the Past Three Years

> Changes to our share capital in 2002

In 2002, several strategic partners reduced their interest in Thomson as a percentage of outstanding share capital pursuant to stock market transactions and private placements:

- On March 7, 2002, TSA sold 36,160,000 Thomson shares through a placement
    to institutional investors.
- On March 16, 2002, Thomson issued 15.5 million shares to Carlton, representing
    5.52% of Thomsons share capital at that date in connection with its
    issuance of bonds redeemable in shares in March 2001. In November 2001, Carlton
    issued bonds exchangeable into 15.5 million shares to institutional investors.
- On March 28, 2002, in conjunction with the March 7, 2002 placement, and
    in accordance with the French privatization laws of August 6, 1986, TSA conducted
    an employee share offering, in which 2,538,076 shares were subscribed.
- On June 5, 2002, NEC sold 10.9 million ordinary shares to institutional
    investors.
- On July 25, 2002, Alcatel sold its remaining stake in Thomson, representing
    8.2 million shares, having previously sold 1.4 million shares during the 2002
    fiscal year.
- On August 21, 2002, DIRECTV sold its remaining stake in Thomson to institutional
    investors, representing 8,818,388 shares.
- Between January 1, 2002 and February 28, 2003, Microsoft sold 3.3 million
    of Thomsons shares.
    Changes to our share capital in 2003

In 2003, several strategic partners reduced their interest in Thomson as a percentage of outstanding share capital pursuant to stock market transactions and private placements:

- In June 2003, NEC sold its remaining stake in Thomson, representing 3,000,100
    shares. Following this transaction, NEC ceased to be a shareholder in Thomson.
- On November 4, 2003, TSA sold 51,982,941 of our shares through a placement
    to institutional investors. Thomson repurchased 3,000,000 of its shares in
    connection with TSAs placement. Following this placement, Thomson is
    no longer subject to the French privatization laws and is now a fully publicly-held
    company.
- From December 12, 2003 to December 19, 2003, in conjunction with the November
    4, 2003 placement, and in accordance with the French privatization laws, TSA
    conducted an employee offering, in which 581,933 shares were subscribed.
- Between February 28, 2003 and December 31, 2003, Microsoft sold 6,871,123
    of our shares.
    Changes to our share capital in 2004
- On September 22, 2004, ITV (principal shareholder of Carlton Communication
    Plc) successfully carried out the sale of its entire shareholding in Thomson,
    a total of 15 million shares. As a consequence of the sale, ITV is no longer
    shareholder of Thomson.
- In October 2004, in line with the Groups commitments, Thomsons
      Board of Directors cancelled a total of 7,305,476 shares.
- At March 31, 2005, the Group held a total of 2,544,116 shares as treasury
      shares purchased for a total of 48 million.

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  Group

- As of March 31, 2005, TSA held 2.1% of Thomsons outstanding shares.

Outstanding Dilutive Securities

Our share capital may be further diluted upon the conversion into new shares of our outstanding convertible/exchangeable bonds, our outstanding warrants (Bons dacquisition dactions existantes ou de souscription dactions, or BASA) attributed in October 2004 to shareholders meeting certain conditions as approved by the shareholders meeting held on September 15, 2004, as well as our stock option Plans 2 and 3.

Assuming (i) all of the outstanding 2000 OCEANE and 2002 OCEANE as well as the convertible/exchangeable subordinated bonds issued to Silver Lake are converted into newly issued shares, (ii) all outstanding BASA offer are exercised for newly issued shares and (iii) all outstanding stock options issued under our stock option Plans 2 and 3 are exercised, our share capital would increase to 325,596,913, a 19% increase compared to the number of outstanding shares as of March 31, 2005.

This calculation does not take into account the expected further reduction of outstanding shares as a result of the ongoing 400 million share buy back program.

For additional information regarding shareholders voting rights and
  related matters, please refer to Item 10: Additional InformationMemorandum
  and Articles of Association.

> Convertible/exchangeable bonds

Our 2000 OCEANE due 2006 are convertible into, or exchangeable for, 8,411,832 of our shares (following the buy-back and cancellation during 2002 of 413,000 OCEANE as well as 2,350,553 OCEANE during 2004) and have a nominal value of 72.67 each and a conversion ratio of one bond to one share.

Our 2002 OCEANE due 2008 were convertible into, or exchangeable for, 14,814,815 of our shares and had a nominal value of 40.50 each. They were also redeemable at the option of the bondholders on January 1, 2005 at a price corresponding to the nominal value plus interest for the period January 1, 2004 to December 31, 2004. Of the original 14,814,815 bonds, 14,493,324 bonds were redeemed on January 1, 2005 at the option of the bondholders. The remaining outstanding 2002 OCEANE due 2008 are now convertible into, or exchangeable for, 321,491 Thomson shares.

In September 16, 2004, Thomson issued 23,084 convertible/exchangeable subordinated bonds to Silver Lake, with a nominal value of U.S.$21,660 each, for an aggregate amount of U.S.$499,999,440. The bonds bear interest at a rate of 3% per annum in arrears on January 1 and June 30 of each year except the first interest payment which was due and paid December 31, 2004. The bonds will mature and become due at a price of 21,660 per bond on September 16, 2010, unless previously converted, exchanged, redeemed or cancelled. The bonds are subject to certain transfer restrictions.

Holders of these convertible/exchangeable subordinated bonds have the option
  from the earlier of March 31, 2006 or the date Thomson publishes its audited
  financial results for 2005 or the date of certain other exceptional events to
  convert or exchange any or all bonds held at a conversion ratio of 1,000 shares
  per bond. This conversion ratio is subject to adjustment under certain conditions.
  The shares issued upon conversion or granted upon exchange are subject to certain
  transfer restrictions.

These convertible/exchangeable subordinated bonds are redeemable in cash plus
  accrued interest at Thomsons option at any time if less than 10% of the
  bonds remain outstanding or at any time after September 16, 2007 if the average
  of the closing share price for 10 consecutive days within the 20 days before
  the redemption notice as well as the closing share price on the redemption notice
  date

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times the number of shares into which a bond would be convertible, both exceed
  150% of the par value of a bond.

Any or all of these convertible/exchangeable subordinated bonds are redeemable in cash plus accrued interest or in shares at the option of the holder from September 16, 2008 upon written notice to Thomson.

> Bons dAcquisition ou de Souscription dActions (BASA)

On September 15, 2004, the shareholders meeting of Thomson approved a subscription plan for all individual shareholders meeting the two following conditions:

- Having
    purchased or subscribed shares before June 30, 2002; and
- Still owning
    80% of such shares as of July 21, 2004.

Each eligible
  shareholder had the right to subscribe one Thomson BASA for each share so held
  at 1
  each. The number of BASA subscribed amounts to 12,471,368 at 1
  each. Each BASA will be exercisable after the issuance of 2005 annual consolidated
  financial Statement of Thomson from March 1, 2006 until June 30, 2006 for one
  share at an exercise price of 16
  per share. Thomson may choose to deliver new Thomson shares or existing treasury
  shares.

> Stock Option Plans

At December 31, 2004, Thomsons stock option plans established in accordance with the authorization provided at the shareholders meeting of November 10, 2000, were as follows:

|                                 | Plan 1            | Plan 2               | Plan 3              
|-------------------------------- | ----------------- | -------------------- | --------------------
|                                 | Purchase options  | Subscription options | Subscription options
|                                 |                   |                      |                     
|Boards decision                 | December 18, 2000 | October 12, 2001     | September 22, 2004  
|                                 | March 16, 2001    |                      |                     
|                                 | July 23, 2001     |                      |                     
|                                 |                   |                      |                     
|Number of Beneficiaries          | 463               | 556                  | 574                 
|                                 |                   |                      |                     
|Number of options granted        | 4,018,500         | 3,540,300            | 7,366,590           
|                                 |                   |                      |                     
|Exercise period                  | 50% as of         | 50% as of            | 50% as of           
|                                 | December 18, 2003 | October 12, 2004     | September 22, 2007  
|                                 |                   |                      |                     
|                                 | 50% as of         | 50% as of            | 50% as of           
|                                 | December 18, 2004 | October 12, 2005     | September 22, 2008  
|                                 |                   |                      |                     
|Plan life                        | 10 years          | 10 years             | 10 years            
|                                 |                   |                      |                     
|Exercise price                   | 55.90            | 31.50               | 16.00              
|                                 |                   |                      |                     
|Number of options cancelled      | 3,045,300         | 2,888,700            | 18,000              
|since the beginning of the plan  |                   |                      |                     
|                                 |                   |                      |                     
|Number of remaining participants | 74                | 58                   | 569                 
|                                 |                   |                      |                     
|Number of options outstanding    | 973,200           | 651,600              | 7,348,590           

The Board of Directors approved on September 22, 2004, the Plan 3 for 574
  beneficiaries, including 358 beneficiaries of former stock option plans who
  accepted to cancel the options they were granted under Plan 1 and Plan 2 for
  a total number of 3,972,000 stocks options in exchange and for the granting
  of new options under Plan 3. Under this plan, 852,700 options were granted to
  216 employees who did not benefit from Plan 1 and 2. The exercise price for
  these options was 16. Former employees and retired employees were not
  eligible.

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  Group

Under Plan 3, the number of options granted to the ten most highly compensated employees of the Company amounted to 2,438,000 options.

As of December 31, 2004, no stock options have been exercised from these plans.

On April 19, 2005, the Board of Directors approved an additional stock option plan (Plan 4) for a total number of 721,400 options, which were granted to 94 beneficiaries.  The exercise price of these options was 20.82.

B Related Party Transactions

 TSA and its subsidiaries (TSA)

Although TSA significantly reduced its share capital in Thomson in November 2003, TSA remains a related party of Thomson as of December 31, 2004 as Thierry Breton (former member of the Board of Directors of Thomson) was chairman of the Board of TSA until February 27, 2005.  Therefore, transactions with TSA through December 31, 2004 are disclosed hereafter. TSA is wholly owned by the French State.

Thomson and TSA entered into an agreement on July 1997 defining the relations between Thomson, TSA and Thales S.A. (formerly Thomson-CSF), with respect to the management and the use of certain intellectual property rights. By amendments signed in 2000 and 2002, the parties have agreed to clarify and simplify the use of such intellectual property rights.

By the amendment effective in December 2000 and expiring in July 2006, Thales S.A. and TSA have granted to Thomson Licensing S.A. (a wholly-owned subsidiary of Thomson) an exclusive right to grant licenses to third parties on their patents covering optical disk technologies and have also authorized Thomson Licensing S.A. to negotiate and sign such licensing agreements.

In addition in June 2002 backdated to July 1, 2001, TSA agreed to transfer all of the patents covered by the contract signed in July 1997 to Thomson Licensing S.A., which was already the beneficiary of all revenues driven by such rights.

 Alcatel and its subsidiaries (Alcatel)

Until July 2002, Alcatel was a shareholder of Thomson, holding up to 3.4% of Thomsons share capital, and had one representative on the Board of Directors of Thomson. As a result, until July 2002, Alcatel was a related party of Thomson, and transactions with Alcatel up to June 30, 2002 are disclosed hereafter.

In the normal course of its business and based on market conditions, Thomson entered into the following transactions with Alcatel.

Thomson purchased from Alcatel different services and products, primarily communication products, and paid trademark royalties totaling 26 million for the six-month period ended June 30, 2002.

Also, the Group sold products (mainly modems) to Alcatel for 97 million
  for the six-month period ended June 30, 2002.

Thomsons trade account liabilities to Alcatel amounted to 5 million
  at June 30, 2002. At the same date, the Group had receivables from Alcatel amounting
  to 25 million.

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Since the creation of the ATLINKS joint venture, Alcatel and Thomson have, consistent with the terms of the joint venture agreement entered into in 1999, shared equally in financing its operations. On a consolidated basis, the debt due to Alcatel by ATLINKS amounted to 14 million at June 30, 2002.

Furthermore, Alcatel had an option to sell its interest in the ATLINKS joint venture, exercisable from October 2002. Thomson and Alcatel reached an agreement in February 2003 on the conditions of the exercise of this option, which involved a cash payment by Thomson of 68 million in consideration for the 50% interest in ATLINKS held by Alcatel.

 NEC Corporation and its subsidiaries (NEC)

Until June 2002, NEC was a shareholder of Thomson, holding up to 5% of its share capital, and had one representative on the Board of Directors of Thomson. Until June 2002, NEC was a related party of Thomson, and, therefore, the transactions with NEC up to June 30, 2002 are disclosed hereafter.

In the normal course of its business and based on market conditions Thomson entered into the following transactions with NEC.

The Group purchased from NEC components for DVD drives and Plasma displays
  in the amounts of  1 million for the six-month period ended June
  30, 2002.

The Group sold products (mainly DVD drives) and services (notably patent licenses), to NEC in the amounts of 18 million over the first six months of 2002.

At June 30, 2002, receivables from NEC to Thomson amounted to 1 million. As of the same date, amounts due to NEC were negligible.

In 2001, the Group acquired certain patents relating to plasma screen technology and the related know-how for U.S.$50 million (57 million), including U.S.$5 million (6 million) in withholding taxes paid to the French Treasury, with the objective of setting up a joint venture dedicated to plasma screen manufacturing. At the end of 2002, the parties renounced the original agreement and cancelled the related commercial agreements. As a consequence, NEC paid the Group 47.2 million.

 DIRECTV and its subsidiaries (DIRECTV)

DIRECTV was a shareholder of Thomson until August 21, 2002.

Eddy Hartenstein, Vice-Chairman of the Board of Directors of DIRECTV Inc., is a member of the Board of Directors of Thomson.

In the normal course of its business and based on market conditions, Thomson entered into the following transactions with DIRECTV.

The Group sold digital decoders and satellite receivers, as well as services to DIRECTV for amounts of 374 million, 67 million and 40 million during the years ended December 31, 2004, 2003 and 2002, respectively.

Thomson also sells to retailers a significant number of digital decoders and
  satellite receivers, which are designed for prospective DIRECTV subscribers.

At December 31, 2004, 2003 and 2002, receivables from DIRECTV amounted to 35
  million, 15 million and 83 million, respectively.

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  Group

Moreover:

- On April 14, 2003 Thomson signed a contract to supply DIRECTV with a significant number of encoders and control systems.
- On June 13, 2003, Canal+ Technologies, a subsidiary of the Group (see Note 2 to our consolidated financial statements) and DIRECTV signed a contract involving the supply byCanal+ Technologies to DIRECTV of its Media HighwayTM interactivity system. Thomson has guaranteed the performance of the contract.
- On June 24, 2004, Thomson acquired the HNS set-top box manufacturing
    business of Hughes Network Systems (the manufacturing activity of DIRECTV
    Group) and signed concurrently an agreement for the long-term development
    and supply of digital satellite set-top boxes. See Item 4: Information
    on the CompanyBusiness OverviewContent and NetworksBroadband
    Access Products and Note 2 to our consolidated financial statements.

 Microsoft and its subsidiaries (Microsoft)

Hank Vigil, Senior Vice President of Microsoft, is a member of the Board of
  Directors of Thomson.

In the course of its business and based on market conditions, Thomson sells products and services to Microsoft, including, mainly, duplication and distribution services and promotional services, optical kits and royalties. These sales amounted to 77 million, 119 million and 303 million for the years ended December 31, 2004, 2003 and 2002, respectively.

At December 31, 2004, 2003 and 2002, Thomson had accounts receivable from Microsoft amounting to 10 million, 6 million and 0 million, respectively.

 Carlton Communications Plc and its subsidiaries (Carlton)

From March 16, 2002 until September 22, 2004 Carlton held a 5.5% interest in the share capital of Thomson.  As a consequence and for practical reasons, Carlton is considered a related party of Thomson until December 31, 2004.

In March 2001, Thomson partially financed the Technicolor acquisition by issuing promissory notes to Carlton in the amount of 669 million (USD 600 million, based on the historical exchange rate). The notes were payable in four equal installments on the first, second, third and fourth anniversaries of the transaction. In March 2004, 2003 and 2002, Thomson repaid Carlton the annual installments of the Notes, in amounts of 92 million, 149 million and 178 million, respectively.  These amounts include, respectively, 8 million, 10 million and 7 million of accrued interests.  In addition, on September 16, 2003, Thomson repaid 84 million in nominal value and 7 million of accrued interest prior to maturity.  Thus, at December 31, 2004, 2003 and 2002, the outstanding amounts of promissory notes debt relating to the Technicolor acquisition were 84 million, 178 million and 459 million, respectively. Thomson incurred interest charges related to this debt of 3 million, 6 million and 10 million for the 2004, 2003 and 2002 periods, respectively. On March 16, 2005 Thomson repaid the final promissory notes in a total amount of 86 million of which 10 million was accrued interest. See Note 22 to our consolidated financial statements.

On May 7, 2002, the Group created a new joint venture with Carlton, Screenvision
  Europe, in order to purchase and operate the cinema screen advertising businesses
  in UGC and RTBF theatres in Europe.

During 2004, 2003 and 2002, Carlton and Thomson shared equally in the financing
  of Screenvision Europes business. The debt due to Carlton by Screenvision
  Europe, consolidated by the proportional method in the Groups financial
  statements, amounted to 18 million, 18 million and 14 million
  at December 31, 2004, 2003 and 2002, respectively.

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These loans bore interest at market rates, with Screenvision Europe incurring interest expense amounting to 0.5 million, 0.5 million, 0.5 million for the years ended December 31, 2004, 2003 and 2002, respectively.

 France Telecom and its subsidiaries (FT)

From October 2, 2002 until February 27, 2005, Thierry Breton was chairman
  and CEO of FT. Following these appointments, he resigned from his position as
  Chairman and CEO of Thomson but was appointed a member of the Board of Directors
  of Thomson and Chairman of Thomsons Strategy Committee. As a consequence,
  FT has been considered as a related party and transactions between Thomson and
  FT since October 2, 2002 are disclosed hereafter.

In the normal course of its business and based on market conditions Thomson entered into the following transactions with FT.

In December 2000, Thomson entered into a telecommunications outsourcing agreement with FT (Equant), pursuant to which FT will provide all of the Groups telecommunications requirements, including voice, data and videoconferencing.  The agreement is known as Thomson Infrastructure Network Operations Services (TINOS). On November 7, 2002, with effect as of September 1, 2002, Thomson and FT amended the TINOS agreement in order to include within its scope all of the Groups recent acquisitions. For the year ended December 31, 2004 and 2003 and the three-month period ended December 31, 2002, Thomson recorded, respectively, 34 million, 22 million and 6 million in operating expenses related to the TINOS contract (as amended in November 2002).

In the normal course of business, Thomson is a supplier of ADSL set top boxes
  and other telephone products to FT. For the year ended December 31, 2004 and
  2003 and the three-month period ended December 31, 2002, such sales amounted
  to 41 million, 23 million and 10 million, respectively. At
  December 31, 2004, 2003 and 2002, amounts due from FT to Thomson amounted to
  9 million, 5 million and 13 million, respectively.

 A Novo Comlink Espana (A NOVO)

As of December 31, 2002, Thomson is no longer a shareholder of A NOVO (see note 2). Prior to the exit of A NOVO from the Groups scope of consolidation in the second half of 2002, the Group accounted for its interest in A NOVO using the equity method.

In the normal course of its business and based on market conditions, the Group purchased equipment, spare parts and raw materials from A NOVO, with such purchases amounting to 62 million for the year ended December 31, 2002. The Group owed 15 million to A NOVO at December 31, 2002.

 TTE Corporation and its subsidiaries (TTE)

On July 31, 2004, Thomson and TCL formed TTE (see note 2). Since this date,
  Thomson accounts for its investment in TTE using the equity method. As a consequence,
  TTE is considered a related party of Thomson since August 1, 2004.

Pursuant to the agreements in connection with the formation of TTE, Thomson
  is a supplier of CRT tubes of TTE. In addition, Thomson licenses to TTE certain
  intellectual property and provides exclusive services to TTE. For the 5-month
  period ended December 31, 2004, such sales amounted to 365 million. As
  of December 31, 2004, amounts due from TTE to Thomson amounted to 106
  million.

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In addition, Thomson and TTE enter into a Receivable Purchase and Sale agreement by which Thomson purchases TTEs receivables and collects these receivables. As of December 31, 2004, Thomson loaned 99 million in respect of such TTE receivables and recognized an amount of 4 million as financial income over the 5-month period closing as of December 31, 2004.

 Silver Lake Partners (Silver Lake)

Silver Lake has a representative on the Board of Directors of Thomson since
  September 15, 2004 and is therefore considered as a related party of Thomson
  since that date.

On September 16, 2004, Thomson issued convertible/exchangeable subordinated
  bonds to Silver Lake. See Distribution of Share CapitalOutstanding
  Dilutive Securities Convertible/Exchangeable Bonds and Note 20 to our
  consolidated financial statements. As of December 31, 2004, Thomson has financial
  debt toward Silver Lake amounting to 366 million. Over the year 2004,
  Thomson recognized interest expenses and certain other charges in an amount
  of 4 million toward Silver Lake.

> Loans made by Thomson

We have an outstanding loan with Brian Kelly, Deputy CFO of Thomson and President of our Network Operations Services activity within the new Services division, for the purchase of real estate in the amount of U.S.$276,000. This loan, which was granted in April 14, 2000, began bearing interest on April 15, 2005 at a rate equal to the interest rate of the underlying mortgage loan taken out by Mr. Kelly on the property. The interest rate on this mortgage was 4.625% on April 15, 2005. As of this date, the full amount of the loan was outstanding.

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ITEM 8 - FINANCIAL INFORMATION

A Consolidated Financial Statements and Other Financial Information

Please refer to the consolidated financial statements and the notes and exhibits thereto in Part III hereof and incorporated herein by reference.

B Legal Proceedings

In the normal course of the business, the Group is involved in legal proceedings and is subject to tax, customs and administrative regulation. The Groups general policy is to accrue a reserve when a risk of an obligation to a third-party is identified, the outcome of which may result in a potential liability that can be reasonably estimated.

> U.S. customs

In January 1998, a grand jury investigation was initiated by the U.S. Attorneys Office in Baltimore, Maryland. This investigation was conducted by the U.S. Department of Justice relating to the transfer pricing used in the importation of picture tubes by Thomson, Inc. from an Italian subsidiary of the Group between 1993 and June 1998. In October 2002, the U.S. government informed the Company that it has declined to prosecute the grand jury case.

A civil investigation was also initiated by the U.S. Customs Service, which
  issued pre-penalty notices on December 21, 1998. A pre-penalty notice means
  that a claim is being contemplated, and is typically a precursor to the issuance
  of a formal penalty notice. The pre-penalty notices alleged that certain subsidiaries
  of the Group and five of its employees intentionally undervalued television
  tubes imported by the Group from the Italian affiliate. The pre-penalty notices
  were later withdrawn against two of the individual employees. According to the
  original pre-penalty notices, the tubes at issue had an appraised domestic value
  of approximately USD 419 million (307 million at December 31, 2004). On
  December 28, 2000, the Customs Service amended the pre-penalty notices and alleged
  an appraised domestic value of approximately USD 425 million (312 million
  at December 31, 2004). In an agreement reached with the Customs Service in January
  1999, all actions with respect to the pre-penalty notices were suspended for
  a period of one year in exchange for waivers of the statute of limitations through
  January 2001. In July 2000, all of the parties who previously received pre-penalty
  notices agreed to waive the statute of limitations defense for an additional
  period of time in order to allow the U.S. government to complete its investigation
  and to seek resolution of the matter through administrative proceedings. The
  waivers were again extended in November 2001, October 2002, March 2003 and July
  2004 and are now effective through September 6, 2005.

The amended pre-penalty notices estimated the loss of custom revenues at approximately USD 12.5 million. Under applicable statutes, penalties could be levied in an amount equal to the appraised domestic value of the merchandise and against each of the five employees concerned in an amount up to eight times the loss of revenue.

In addition, the Group indemnified the five employees for the monetary penalties. On May 30, 2003 the parties, including the Company, which received the pre-penalty notices submitted a joint Petition for Cancellation or Remission of Penalties (the Petition) to the Customs Service.  Since this submission, the Companys counsel held various meetings with Customs officials advocating in particular the arguments made in the May 30, 2003 Petition.

On December 21, 2004 a Penalty notice was issued by the US Customs which withdraws allegations of fraud and any action on years 1997 and 1998 and which indicates that no penalty should be issued against individual officers and employees of Thomson. The Penalty notice lowers the loss of revenue

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from USD 12.5 million to USD 7.1 million and proposes a monetary penalty of USD 28.4 million. On January 21, 2005, Thomson submitted a petition for cancellation or remission of penalties. The Group intends to continue to defend itself vigorously against any allegations of wrongdoing, while cooperating with Customs in an effort to resolve the matter.

> Italian tax litigation

The Italian Guardia di Finanza tax police conducted a tax verification
  of the Italian subsidiary of the Group, Videocolor S.p.A, which had exported
  picture tubes to Thomson, Inc. during the years 1993 through 1998. In its report
  transmitted to the Italian Direct Taxes Local Office in December 1999, the Guardia
  di Finanza recommended increasing the prices of the tubes exported to Thomson,
  Inc., and, as a consequence, increasing the taxable income of Videocolor S.p.A.
  The taxable income increase, as proposed for the years 1993 through 1998, with
  regard to picture tube prices, amounts to 31 million. On December 28,
  1999, the Direct Taxes Local Office formally advised that an assessment would
  be due with regard to 1993 amounting to 5.6 million taxable income, resulting
  in (i) reversal of tax-loss carry-forwards and (ii) additional tax penalties
  and interest amounting to approximately 2.1 million. On March 21, 2000,
  Videocolor S.p.A. challenged this assessment before the competent tax jurisdiction
  of Frosinone in Italy.

On February 13, 2001, the Court of Frosinone rendered its decision regarding the 1993 tax assessment, it maintained part of the assessment based on 1993 elements, yet it invalidated the valuation method of the exported tubes applied by the Italian Direct Taxes Local Office.

On November 23, 2000, the Direct Taxes Local Office gave notice of an assessment with regard to 1994 amounting to 9.7 million taxable income. In February 2001, Videocolor S.p.A challenged this assessment before the Local Tax County Commission. As for 1993, the Group has challenged this assessment before the competent tax jurisdiction of Latina Frosinone which confirmed in March 2003 the initial judgment but without applying penalties.

On May 16, 2003 Videocolor S.p.A elected to apply for the new tax amnesty, enacted by the Italian Parliament in 2003. Videocolor applied for the years 1993 and 1994 and not for the following years and paid a total amount of 1.35 million following this amnesty application. Videocolor is able to use all the tax losses originating from 1993 and the previous years.

With regard to the year 1995, the Direct Taxes Local Office gave notice in 2001 of an assessment resulting in (i) additional taxes amounting to 4.2 million and (ii) tax penalties amounting to 4.2 million (before interest). The taxable income increase, as proposed for 1995, also mainly relates to picture tube prices. Videocolor S.p.A. appealed this assessment on October 25, 2001, before the competent tax jurisdiction of Frosinone in Italy, which made a decision on March 17, 2003 to reject almost all of the assessment of the Italian Tax authorities. Tax office appealed, on October 30, 2003 and before the court of Latina, this decision and Videocolor S.p.A. is now challenging this appeal.

On September 2002, the Direct Taxes Local Office gave notices of two assessments with regard to 1996 and 1997 fiscal years resulting in (i) additional taxes amounting to 3.5 million and 1.8 million, respectively and (ii) tax penalties amounting to 3.5 million and 1.8 million, respectively. Videocolor S.p.A. challenged the assessments before the competent tax jurisdiction of Frosinone on December 9, 2002, which decided, on November 15th, 2004 to reject almost all of the assessments of the Italian Tax authorities.

On December 17, 2003, the Direct Taxes Local Office gave notice of an assessment
  with regard to 1998 fiscal year resulting in (i) additional taxes amounting
  to 127,000 and (ii) penalties amounting to 127,000. Videocolor S.p.A.
  appealed this assessment on March 2nd, 2004 before the competent tax jurisdiction
  of Frosinone in Italy.

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> Taoyuan County Former RCA Employees Solicitude Association (the
>     Association)

In April 2004, the Association filed a purported class action under Article 41 of the Taiwan Code of Civil Procedure in the Taipei District Court, Taiwan, Republic of China against TCE Television Taiwan Ltd. and General Electric International, Inc.  The complaint alleges that the defendants failed to provide employees with necessary instruction on how to protect themselves and failed to take measures to store or dispose of chemicals used in the operation of the Taoyuan electronics plant. The Association claims damages in the amount of TWD 2.4 billion (59 million at May 26, 2004 noon buying rate) to compensate the members of the Association for the alleged higher-than-normal incidents of cancer and disease suffered by the former plant employees who worked at the facility during the period 1970-1992.  Based on the information currently available, the Group is not in a position to estimate the liability and intends to vigorously defend the allegations set forth in the complaint.

> Morris Reese

In May, 2004 Morris Reese filed suit against ATLINKS USA, Inc. (a wholly owned subsidiary of Thomson) and numerous other manufacturers and distributors of telephone equipment in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging infringement of a U.S. patent n° 6,427,009 which relates to call waiting caller ID technology. In January, 2005, the parties entered into a settlement, providing for a dismissal of the lawsuit and a past and future worldwide license in the field of caller ID technology.

> Superguide Corporation

In June 2000, Superguide Corporation filed suit in the U.S. District Court
  for the Western District of North Carolina against DIRECTV Enterprises, Inc.
  et al., Thomson, Inc. and Echostar Communications Corporation et al. alleging
  infringement with respect to three patents relating to program guide data retrieval,
  display, and program recordation. Gemstar Development Corporation was added
  as a defendant in March 2001. In July 2002, the U.S. District Court for the
  Western District of North Carolina granted summary judgment in favor of Thomson,
  DIRECTV and Echostar, finding that none of the three patents owned by Superguide
  Corporation were infringed. Superguide Corporation and its licensee, Gemstar
  Development Corporation, have appealed the District Courts decision with
  the U.S. Court of Appeals for the Federal Circuit in Washington D.C. Oral argument
  of the appeal was heard on July 10, 2003 in the U.S. Court of Appeals for the
  Federal Circuit. On February 12, 2004, the Court of Appeals issued a decision
  affirming in part and reversing in part the District Courts claim construction
  of the patents at issue. As a result, the Court of Appeals vacated the summary
  judgment ruling issued by the District Court in favor of the defendants. On
  February 26, 2004, Thomson Inc., joined by the other Appellees, filed a petition
  for Rehearing En Banc with the Court of Appeals. In April 2004, the Court of
  Appeals denied the petition and remanded the case back to the District Court
  for further proceedings.

> Jack Beery

On June 28, 2000 Jack Beery filed a complaint against Thomson in the U.S. District
  Court for the Southern District of Ohio alleging that various Thomson products
  infringe Beerys 952' patent. Thomson is vigorously defending the case, and
  has instituted a section 291 interference action asserting the existence of
  prior art which the Company alleges invalidates the Beery patent.

> Pegasus Development Corporation and Personalized Media Communications,
>     L.L.C.

In December 2000, Pegasus Development Corporation and Personalized Media Communications,
  L.L.C. filed suit in the U.S. District Court for the District of Delaware against
  Thomson, Inc., DIRECTV,

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  Group

Inc., Hughes Electronics Corporation, and Philips Electronics North America
  Corporation alleging infringement with respect to seven patents relating to
  digital satellite signal processing. In November 2001, StarSight Telecast, Inc.,
  TVG-PMC, Inc., and Gemstar-TV Guide International, Inc. (Gemstar)
  were added as third-party defendants and filed a counterclaim.

Subsequently, Thomson Inc. filed a Revised Second Amended Counterclaim and
  Amended Third-Party Complaint claiming violation of antitrust laws and unfair
  competition. Upon Thomson Inc.s motion, the antitrust and unfair competition
  claims were transferred to the U.S. District Court for the Northern District
  of Georgia by the Judicial Panel on Multi-District Litigation for inclusion
  in the coordinated or consolidated MDL-1274 pretrial proceedings occurring there
  involving Gemstar, Scientific Atlanta Inc., Pioneer Corp., EchoStar Communications
  Corp. and other parties. In June 2003, as part of a new commercial arrangement
  with Gemstar, the Company dismissed with prejudice its antitrust and unfair
  competition claims against Gemstar and Gemstar agreed to provide the Company
  with a limited indemnity with respect to the PMC patent litigation. In March
  2004, the U.S. District Court for the Northern District of Georgia remanded
  the antitrust and unfair competition claims back to the U.S. District Court
  for the District of Delaware, where, pursuant to an order of the U.S. District
  Court for the District of Delaware in May, 2003, the case is subject to an indefinite
  stay pending the reexamination of the patents at issue by the U.S. Patent and
  Trademark Office.

> Parental Guide of Texas

In December 2000, Parental Guide of Texas, Inc. filed suit against Thomson
  Inc. and numerous other consumer electronics manufacturers in the U.S. District
  Court for the Eastern District of Texas, Marshall Division, alleging infringement
  of a patent, which relates to inhibiting the intelligible output of possibly
  undesirable sound and visual events of a television program. In October 2002,
  Thomson Inc. entered into a Release and License Agreement with Parental Guide
  of Texas Inc. whereby the Company agreed to license Parental Guides V-Chip
  patents. The amount to be paid by Thomson was contingent upon the amount, if
  any, of the litigation royalty established by Parental Guide in the lawsuit.
  Thomson Inc. contended that all of the other defendants settled prior to trial
  and that it did not owe Parental Guide any further license payments. On February
  7, 2003, Parental Guide filed suit in the U.S. District Court for the Eastern
  District of Texas alleging that Thomson Inc. was in breach of the Release and
  License Agreement. In March 2004, Parental Guide and Thomson Inc. each filed
  summary judgment motions contending respectively that as a matter of law it
  should prevail in the lawsuit. On January 20, 2005, the Court issued an Order
  and Final Judgment in favor of Thomson Inc. On February 18, 2005, Parental Guide
  billed a notice of appeal.

> James Stalcup and Mary Gick Class Action

On February 15, 2002, Mr. James Stalcup and Mrs. Mary Gick, filed a purported class action in the Third Judicial District, Madison County, Illinois pursuant to Section 5/2-801 of the Illinois Code of Civil Procedure on behalf of U.S. consumers who acquired certain television sets manufactured by Thomson, Inc. during the period between 1998 and 2001. The complaint alleged a defect in certain televisions which have a software-like integrated chip, which can cause temporary audio failure. The Company does not believe that the alleged televisions or the ICs, which it procures from third parties are defective.

Yet, the Company entered into a Settlement Agreement on December 17, 2003
  to resolve all of the alleged claims on a nationwide basis. On December 18,
  2003, the Third Judicial Circuit Court in Madison County, Illinois signed an
  Order preliminarily approving the proposed settlement and conditionally certifying
  a nationwide class consisting of U.S. residents who acquired one of the Companys
  televisions (with a CTC 195, 197 or 203 chassis) manufactured between November
  1, 1996 and March 31, 2001.

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The proposed settlement provides for two alternative remedies: (i) cash reimbursement
  for any documented out-of-pocket costs paid to a qualified service company to
  repair or diagnose the alleged audio loss problem, or (ii) a Rebate Certificate
  applicable to the purchase of a new Thomson-branded television. The Company
  has agreed to pay the plaintiffs attorneys fees and costs, and the
  administrative costs of the settlement. On May 24, 2004 the Court conducted
  a fairness hearing which resulted in an Order from the Court granting final
  approval of the settlement and a judgment of dismissal with respect to Thomson
  Inc. Also, on May 2004, the court made an interim award of attorneys fees
  to plaintiffs counsel which was confirmed in a final order on January
  31, 2005.

> IP Innovation and Technology Licensing Corp.

On January 14, 2003, IP Innovation LLC and Technology Licensing Corp. filed a complaint against Thomson Inc. in the U.S. District Court for the Northern District of Illinois, Eastern District, alleging infringement of four patents which cover the fields of video noise reduction, audio video synchronization, and audio in video technologies. The Court, after reviewing the complaint, dismissed it without prejudice for failure to establish jurisdiction or appropriate venue. On February 14, 2003, IP Innovation LLC and Technology Licensing Corp. filed a new complaint alleging infringement of the above described patents in the U.S. District court for the Southern District of Indiana. The Company has filed an answer contesting the allegations. In May 2004, IP Innovation, TLC and Thomson Inc. entered into a settlement and license agreement resolving the Indiana case. The resolution provides for a past and future license to Thomson in the field of consumer electronics.

On June 20, 2003, Technology Licensing Corp. (TLC) filed a lawsuit in the
  U.S. District Court for the Eastern District of California alleging that certain
  Grass Valley Group products infringe four of its patents. The Company is vigorously
  defending the case, which is scheduled to commerce trial on August 16, 2005.

> Fisher v. Thomson, Inc.

In February 2004, Randy Fisher filed an individual and purported class action in the Twentieth Judicial Circuit, St. Clair County, Illinois alleging that Thomson Inc. failed to disclose to purchasers of certain models of Thomson High Definition Televisions that those televisions would develop numerous latent defects. In January 2005, the parties resolved the dispute whereby the allegations were withdrawn.

> UGC Arbitration

Screenvision Holdings (Europe) Limited (Screenvision), a joint venture between Thomson and Carlton Communications Ltd, in which the Thomson group holds 50%, has filed an arbitration claim at the ICC Court in May 2003 against UGC S.A., RMB International S.A. (RMB) and Regie Media Belge S.A.  The claim was filed on the basis that UGC and RMB failed to comply with certain obligations under the agreement for the sale of a 51% stake in an Italian cinema advertising business to Screenvision. The claim amounts to 25 million. Hearings took place in October 2004 and parties submitted their final position in January 2005. Screenvision has been advised that it has a strong case for recovery of all or parts of this amount. However, the ultimate outcome cannot be predicted with certainty and no asset has been recorded in respect of the outcome of this claim.

> Anti-dumping on televisions manufactured by Thomsons Thailand unit

Customs authorities in seven European countries are assessing imports into
  the European Union by Thomson subsidiaries of televisions manufactured by Thomson
  in Thailand. These proceedings relate to different periods according to the
  different rules in each country, beginning at the earliest in 1997 and ending
  at the latest in August 2002. In accordance with the relevant procedures, Thomson
  received in May 2004, January and February 2005 various re-assessment notices
  relating to anti-

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  Group

dumping duties, excluding interest and any penalties applicable, in the United
  Kingdom, Germany, France, Italy, Spain, Denmark and Sweden in an aggregate amount
  of around 15.7 million. On March 23, 2005, the Provincial Tax Court of
  Milan (Italy) rendered a decision and maintained the assessment; Thomson will
  appeal. Thomson believes that it has correctly declared and paid duty on the
  imported televisions concerned and accordingly strongly disputes the grounds
  of these re-assessments.

> Metabyte, Inc., versus Canal Plus Technologies, S.A.

In 2001, Metabyte, Inc. and Vivek Mehta (the plaintiffs) and Canal
  Plus Technologies, S.A. entered into several agreements which ultimately gave
  Canal Plus Technologies control over Metabyte Networks, Inc. (MNI),
  a company owned by plaintiffs. One of the agreements was a Put Option Agreement
  (POA) whereby the common shareholders of MNI could require Canal Plus Technologies
  to purchase their shares in three Tranches. The POA specifically provided that
  it would only be exercisable in the event that MNI first met certain technical
  and financial milestones which were to be set by MNIs board and Canal
  Plus Technologies. No milestones were ever set. In 2002, Canal Plus Technologies
  rejected plaintiffs attempt to exercise the put option. Plaintiffs filed
  suit against Canal Plus Technologies in October 2002 in U.S. District Court
  for the Northern District of California alleging breach of contract and breach
  of the covenant of good faith and fair dealing. In June 2004, the Court denied
  Canal Plus Technologies motion for summary judgment, which asserted that
  the POA was an unenforceable agreement to agree, ruling that material issues
  of fact exist with respect to several matters including whether Canal Plus Technologies,
  through the conduct of the individuals it placed on the MNI board, excused MNI
  from the condition precedent of setting and meeting milestones. A court-ordered
  mediation occurred on December 6, 2004 but was unsuccessful. Pursuant to the
  Stock Purchase Agreement of Canal Plus Technologies between Thomson and Groupe
  Canal+ S.A., Groupe Canal+ granted Thomson certain rights with respect to amounts
  that may become payable by Thomson in connection with this dispute. The matter
  is scheduled for trial on June 13, 2005.

> Thomson Inc. v. Praxair

After closure of the Circleville, Ohio glass manufacturing facility in March 2004, Thomson Inc. received a letter, dated March 25, 2004, from Praxair, Inc., owner and operator of an onsite oxygen manufacturing plant constructed on the Circleville facility property in 1996, demanding assurances that Thomsons performance would be maintained for an alleged remaining seven (7) years of the contract.  Although the Circleville facility no longer uses oxygen, Praxair argues that the contract provides for the continuance of certain minimum payments and services.  An initial meeting was conducted with Praxair representatives on May 28, 2004, but no progress was made toward a resolution of the dispute. On July 30, 2004, Thomson filed suit against Praxair in Cleveland, Ohio seeking a declaration from the Court that its remaining obligations under the contract, if any, are terminated. Thomson has also sued Praxair and its alliance partner, Corning, Inc., to recover certain damages Thomson contends it sustained as a result of certain misrepresentations which were made by Praxair/Corning concerning the operating efficiencies, benefits, and reduced costs involved in shifting production to an oxy-fueled system. Praxair has responded by filing a Counterclaim seeking a declaration that the contract continues to be valid and enforceable and seeking an award of damages to be proven at trial.

> Compression Labs, Inc. v. Adobe Systems, et al.

In April 2004, Compression Labs (CLI) filed suit against Thomson
  S.A. and 27 other companies in the U.S. District Court for the Eastern District
  of Texas, Marshall Division, alleging infringement of U.S. patent 4,698,672
  which relates to a method and apparatus for processing signals used in video
  compression systems including the JPEG standard. Compression systems are typically
  utilized in products such as digital cameras, cellular phones, printers and
  scanners. The Federal Trade Commission (FTC) has undertaken a non-public
  antitrust investigation of CLI and its parent, Forgent Corporation, to determine
  whether CLI violated the FTC Act by reason of CLIs involvement in the

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JPEG standard-setting process.

> Environmental matters

A certain number of Thomsons current and previously owned manufacturing
  sites have an extended history of industrial use. Soil and groundwater contamination,
  which occurred at some sites, may occur or be discovered at other sites in the
  future. Industrial emissions at sites that Thomson has built or acquired expose
  the Group to remediation costs. The Group has identified certain sites at which
  chemical contamination has required or will require remedial measures.

Soil and groundwater contamination was detected near a former production facility
  acquired from General Electric and owned by Thomson from 1987 to 1992 in Taoyuan,
  Taiwan. Production activities at this site ceased after being sold by the Group.
  Thomson is currently working with the local Taoyuan Environmental Protection
  Bureau to perform an investigation and feasibility study relating to potential
  groundwater contamination issues. In accordance with an agreement for the acquisition
  of General Electric Companys consumer electronics business in 1987, General
  Electric Company has assumed or indemnified Thomson with respect to certain
  liabilities resulting from this issue, and should assume or indemnify the Group
  with respect to certain liabilities that could arise from the period prior to
  Thomsons acquisition of the property.

The Group believes that the amounts reserved and the contractual guaranties provided by its contracts for the acquisition of certain production assets will enable it to reasonably cover its safety, health and environmental obligations. Potential problems cannot be predicted with certainty, however, and it cannot be assumed that these reserve amounts will be precisely adequate. In addition, future developments such as changes in governments or in safety and health laws or the discovery of new risks could result in increased costs and liabilities that could have a material effect on the Groups financial condition or results of operations.  Based on current information and the provisions established for the uncertainties described above, the Group does not believe it is exposed to any material adverse effects on its business, financial condition or result of operations arising from its environmental, health and safety obligations and related risks.

C Dividends

We may declare a dividend upon the recommendation of our Board of Directors
  and the approval of our shareholders at their annual general meeting. Under
  French company law, our right to pay dividends is limited in specific circumstances.
  For a description of these restrictions, refer to Item 10: Additional
  InformationMemorandum and Articles of Association.

On March 1, 2005, the Board of Directors proposed the distribution of a dividend amounting to 0.285 per share, or a 9.6% increase as compared to the 0.26 dividend paid last year. The distribution of this dividend was approved by the annual shareholders meeting held on May 10, 2005.

Any future payments of dividends will depend on our financial condition and results of operations, especially net income, and our investment policy at that time.

Dividends on shares that are not claimed within five years of the actual dividend payment date revert to the French State.

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ITEM 9 - THE OFFER AND LISTING

Trading Market for Shares and ADSs

Since November 3, 1999, our shares have been listed:

- on the Eurolist dEuronext Paris S.A(Compartiment A)
    and are eligible for the Système de Règlement Différé(deferred settlement service) under the Euroclear France code ISIN FR0000184533,
    each described below; and
- on the New York Stock Exchange in the form of ADSs under the ticker symbol TMS.

A Listing on the Eurolist of Euronext Paris S.A.

Euronext Paris S.A. (Euronext Paris) is a wholly owned French subsidiary of Euronext NV, a Dutch holding company and the first pan-European stock exchange (Euronext). Securities listed on any of the stock exchanges participating in Euronext are traded through a common platform, with central clearinghouse, settlement and custody structures.  However, securities remain listed on their respective local exchanges. Euronext Paris retains responsibility for the admission of securities to its trading markets, as well as the regulation of these markets.

Securities approved for listing by Euronext Paris are traded in one of the three compartimentsof Eurolist: Compartiment A, Compartiment Band Compartiment C.Aside from these regulated markets, securities of certain other companies are traded on a non-regulated market, the Marché Libre. These markets are all operated and managed by Euronext Paris, a market operator responsible for the admission of securities and the supervision of trading in listed securities.

Official trading of listed securities on Euronext Paris, including our shares,
  is transacted through authorized financial institutions that are members of
  Euronext Paris. Trading on Eurolist (Compartiment A)takes place continuously
  on each business day in Paris from 9:00 a.m. to 5:25 p.m., with a pre-opening
  session from 7:15 a.m. to 9:00 a.m. and a post-closing session from 5:25 p.m.
  to 5:30 p.m. (during which time trades are recorded but not executed) with a
  final fixing at 5:30 p.m. Euronext Paris publishes a daily Official Price List
  that includes price information on each listed security. Euronext Paris has
  introduced continuous trading by computer for most actively traded securities,
  including our shares. Euronext Paris may reserve or suspend trading in a security
  listed on Eurolist (Compartiment A)if the quoted price of the security
  exceeds certain price limits defined by the regulations of Euronext Paris. In
  particular, if the quoted price of a security varies by more than 10% from the
  reference price, Euronext Paris may restrict trading in that security for up
  to four minutes (réservation à la hausse ou à la baisse).
  The reference price is the opening price or, with respect to the first quoted
  price of a given trading day, the last traded price of the previous trading
  day, as adjusted if necessary by Euronext Paris. Euronext Paris may also reserve
  trading for a four minute period if the quoted price of a security varies by
  more than 2% from the last traded price. However, subject to trading conditions
  and appropriate and timely information, Euronext Paris may modify the reservation
  period and may accept broader fluctuation ranges than above mentioned. Euronext
  Paris also may suspend trading of a security listed on Eurolist (Compartiment
  A)in certain other limited circumstances, including, for example, where
  there is unusual trading activity in the security (suspension de la cotation).
  In addition, in certain exceptional cases, the AMF (the body created by the
  merging of the former French Conseil des Marchés Financiersand
  the Commission des Opérations de Bourse, or COB) and
  the issuer also may request a suspension in trading.

Trades of securities listed on Eurolist (Compartiment A)are settled on a cash basis on the third trading day following the trade (immediate settlement or Règlement Immédiat). Market intermediaries are also permitted to offer investors a deferred settlement service (Service de Règlement Différéor SRD) for a fee. The deferred settlement service is only available for trades in securities which either (i) are a

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component of the Index SBF 120 or (ii) have both a total market capitalization of at least 1 billion and a daily average volume of trades of at least 1 million.

Our shares are eligible for the deferred settlement service. In the deferred settlement service, the purchaser may decide on the determination date (date de liquidation), which is the fifth trading day prior to the end of the month, either (i) to settle the trade no later than the last trading day of such month, or (ii) upon payment of an additional fee, to extend to the determination date of the following month the option either to settle no later than the last trading day of such month or to postpone again the selection of a settlement date until the next determination date. Such option may be maintained on each subsequent determination date upon payment of an additional fee.

Equity securities traded on a deferred settlement basis are considered to have been transferred only after they have been registered in the purchasers account. Under French securities regulations, any sale of a security traded on a deferred settlement basis during the month of a dividend payment date is deemed to occur after the dividend has been paid. Thus if the deferred settlement sale takes place during the month of a dividend payment, but before the actual payment date, the purchasers account will be credited with an amount equal to the dividend paid and the sellers account will be debited by the same amount.

Trading by our company in our own shares

Under French law, our company may not issue shares to itself, but we may purchase
  our shares in the limited cases described in Item 10: "Additional InformationMemorandum
  and Articles of AssociationPurchase of our own shares and Trading
  in our own shares.

In France, our shares have been included in the SBF 120 and SBF 250 Indices since March 7, 2000 and in the CAC 40 Index since August 23, 2000. We are also part of the CAC IT20 Index, a Euronext Paris technology index.

The tables below set forth, for the periods indicated, the high and low quoted prices in euro for our outstanding shares on the Eurolist of Euronext Paris.

|     |  |                        |  |                   |  |                |  |               |  |       |  |       | 
|---- |  | ---------------------- |  | ----------------- |  | -------------- |  | ------------- |  | ----- |  | ----- | 
|     |  |                        |  |                   |  | Euronext Paris |  |               |  |       |  |       | 
|     |  |                        |  |                   |  |                |  |               |  |       |  |       | 
|     |  | Volume of transactions |  | Share price (in) | 
|     |  |                        |  |                   |  |                |  |               |  |       |  |       | 
|     |  | in                    |  | Shares            |  | Average        |  | Average       |  | High  |  | Low   | 
|     |  | millions               |  |                   |  | volume         |  | closing price |  |       |  |       | 
|     |  |                        |  |                   |  |                |  |               |  |       |  |       | 
|2002 |  | 13,558.5               |  | 546,861,580       |  | 2,144,555      |  | 25.23         |  | 37.15 |  | 12.05 | 
|2003 |  | 7,792.9                |  | 518,801,361       |  | 2,034,515      |  | 14.81         |  | 19.20 |  | 9.25  | 
|2004 |  | 9,137.0                |  | 554,675,374       |  | 2,141,604      |  | 16.45         |  | 19.58 |  | 13.83 | 
|     |  |                        |  |                   |  |                |  |               |  |       |  |       | 

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Quarters for years ending December 31,

|                |                | Euronext Paris         |            
|--------------- | -------------- | ---------------------- | -----------
|                |                |                        |            
|                |                | Volume of transactions |            
|                |                |                        |            
|                |                | in                    |            
|                |                | millions               |            
|                |                |                        |            
|2002            |                |                        |            
|First Quarter   | 4,765.7        |                        | 147,684,525
|Second Quarter  | 3,313.7        |                        | 116,607,097
|Third Quarter   | 3,072.0        |                        | 143,567,015
|Fourth Quarter  | 2,407.1        |                        | 139,002,943
|                |                |                        |            
|2003            |                |                        |            
|First Quarter   | 1,342.6        |                        | 100,997,052
|Second Quarter  | 2,009.7        |                        | 150,575,479
|Third Quarter   | 1,602.0        |                        | 105,152,943
|Fourth Quarter  | 2,862.6        |                        | 163,850,680
|                |                |                        |            
|2004            |                |                        |            
|First Quarter   | 2,715.2        |                        | 167,551,752
|Second Quarter  | 1,746.2        |                        | 109,807,619
|Third Quarter   | 2,125.3        |                        | 135,837,278
|Fourth Quarter  | 2,550.4        |                        | 141,478,725
|                |                |                        |            
|Source:         | Euronext Paris |                        |            
|                |                |                        |            
|                |                |                        |            
|Last six months |                |                        |            
|                |                | Euronext Paris         |            
|                |                |                        |            
|                |                | Volume of transactions |            
|                |                |                        |            
|                |                | in                    |            
|                |                | millions               |            
|                |                |                        |            
|2005            |                |                        |            
|April           |                | 774.6                  |            
|March           |                | 892.6                  |            
|February        | 658.8          |                        | 33,168,216 
|January         |                | 941.4                  |            
|                |                |                        |            
|2004            |                |                        |            
|December        | 824.9          |                        | 43,400,709 
|November        | 780.9          |                        | 43,514,896 
|                |                |                        |            
|Source:         | Euronext Paris |                        |            

B Listing on the New York Stock Exchange

JPMorgan Chase Bank had been serving as the depositary with respect to the ADSs traded on the New York Stock Exchange until December 31, 2004. Since February 2005, The Bank of New York now acts as Thomsons depositary bank. Each ADS represents one ordinary Share.

The tables below set forth, for the periods indicated, the high and low quoted prices in U.S. dollars for our ADSs on the New York Stock Exchange.

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Years ending December 31,

|                        |  | New York Stock Exchange | 
|----------------------- |  | ----------------------- | 
|                        |  |                         | 
|                        |  | Volume of transactions  | 
|                        |  |                         | 
|                        |  | U.S.$ in                | 
|                        |  | millions                | 
|                        |  |                         | 
|2002                    |  | 81.8                    | 
|2003                    |  | 78.8                    | 
|2004                    |  | 256.7                   | 
|                        |  |                         | 
|Source: NYSE, Bloomberg |  |                         | 

Quarters for years ending December 31,

|               |                         |  |                      |  |         |  |               |  |       |  |       | 
|-------------- | ----------------------- |  | -------------------- |  | ------- |  | ------------- |  | ----- |  | ----- | 
|               | New York Stock Exchange | 
|               |                         |  |                      |  |         |  |               |  |       |  |       | 
|               | Volume of transactions  |  | ADS price (in U.S.$) | 
|               |                         |  |                      |  |         |  |               |  |       |  |       | 
|               | U.S.$ in                |  | Shares               |  | Average |  | Average       |  | High  |  | Low   | 
|               | millions                |  |                      |  | volume  |  | closing price |  |       |  |       | 
|               |                         |  |                      |  |         |  |               |  |       |  |       | 
|2002           |                         |  |                      |  |         |  |               |  |       |  |       | 
|First Quarter  | 26.2                    |  | 896,200              |  | 14,937  |  | 29.26         |  | 32.98 |  | 24.90 | 
|Second Quarter | 21.9                    |  | 790,700              |  | 12,355  |  | 26.45         |  | 31.20 |  | 20.85 | 
|Third Quarter  | 15.3                    |  | 743,300              |  | 11,614  |  | 20.82         |  | 25.78 |  | 15.00 | 
|Fourth Quarter | 18.3                    |  | 1,059,500            |  | 16,555  |  | 17.47         |  | 23.07 |  | 12.12 | 
|2003           |                         |  |                      |  |         |  |               |  |       |  |       | 
|First Quarter  | 13.9                    |  | 979,800              |  | 16,062  |  | 14.74         |  | 18.64 |  | 10.23 | 
|Second Quarter | 18.2                    |  | 1,220,000            |  | 19,365  |  | 14.96         |  | 18.95 |  | 11.13 | 
|Third Quarter  | 17.2                    |  | 1,030,600            |  | 16,103  |  | 16.98         |  | 19.57 |  | 15.08 | 
|Fourth Quarter | 27.5                    |  | 1,326,500            |  | 20,727  |  | 20.48         |  | 22.37 |  | 17.48 | 
|2004           |                         |  |                      |  |         |  |               |  |       |  |       | 
|First Quarter  | 30.6                    |  | 1,509,200            |  | 24,342  |  | 20.29         |  | 23.12 |  | 17.21 | 
|Second Quarter | 28.0                    |  | 1,460,200            |  | 23,552  |  | 19.17         |  | 20.14 |  | 17.74 | 
|Third Quarter  | 31.0                    |  | 1,606,200            |  | 25,097  |  | 19.11         |  | 21.09 |  | 17.55 | 
|Fourth Quarter | 167.0                   |  | 6,705,200            |  | 104,769 |  | 23.67         |  | 26.66 |  | 20.62 | 
|2005           |                         |  |                      |  |         |  |               |  |       |  |       | 
|First Quarter  | 170.3                   |  | 6,539,300            |  | 107,202 |  | 26.15         |  | 28.36 |  | 23.49 | 
|               |                         |  |                      |  |         |  |               |  |       |  |       | 

|Source: NYSE, Bloomberg |                         |  |                      |  |         |  |               |  |       |  |       | 
|----------------------- | ----------------------- |  | -------------------- |  | ------- |  | ------------- |  | ----- |  | ----- | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|Last six months         |                         |  |                      |  |         |  |               |  |       |  |       | 
|                        | New York Stock Exchange | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|                        | Volume of transactions  |  | ADS price (in U.S.$) | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|                        | U.S.$ in                |  | Shares               |  | Average |  | Average       |  | High  |  | Low   | 
|                        | Thousands               |  |                      |  | volume  |  | closing price |  |       |  |       | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|2005                    |                         |  |                      |  |         |  |               |  |       |  |       | 
|April                   | 32.5                    |  | 1,243,700            |  | 59,224  |  | 26.10         |  | 27.39 |  | 24.30 | 
|March                   | 74.7                    |  | 2,742,500            |  | 124,659 |  | 27.34         |  | 28.36 |  | 25.86 | 
|February                | 32.3                    |  | 1,247,800            |  | 65,674  |  | 25.93         |  | 27.50 |  | 24.75 | 
|January                 | 63.3                    |  | 2,549,000            |  | 127,450 |  | 25.04         |  | 26.92 |  | 23.49 | 
|2004                    |                         |  |                      |  |         |  |               |  |       |  |       | 
|December                | 125.9                   |  | 4,884,700            |  | 222,032 |  | 25.75         |  | 26.66 |  | 24.44 | 
|November                | 21.4                    |  | 915,600              |  | 43,600  |  | 23.45         |  | 24.30 |  | 22.57 | 
|                        |                         |  |                      |  |         |  |               |  |       |  |       | 
|Source: NYSE, Bloomberg |                         |  |                      |  |         |  |               |  |       |  |       | 

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ITEM 10 - ADDITIONAL INFORMATION

A  Share Capital

Following the cancellation of 7 305 476 treasury shares on October 19, 2004, Thomsons share capital is as of March 31, 2005 1,024,905,120 composed of 273 308 032 shares each with a nominal value of 3.75.

See also Item 7.A above.

B  Memorandum and Articles of Association

Our company is a société anonyme, a form of limited liability company, incorporated under the laws of France. We are registered in the Register of Commerce and Companies (Registre du Commerce et des Sociétés)of Nanterre under No. 333 773 174 and our APE code, which identifies a companys type of business and activities, is 741J, corresponding to the business of corporate administration. Our by-laws (statuts)specify that our corporate affairs are governed by the Title II of the French Commercial Code and the statutsthemselves. Our corporate purpose, as defined in Article 2 of our statuts, is:

- the taking of equity holdings or interests in any business of any nature in
    any form whatsoever, whether in existence or to be created;
- the acquisition, management, and transfer of all manner of real property rights
    and assets and of all manner financial instruments, as well as the execution
    of all manner of financing transactions;
- the acquisition, transfer and exploitation of all manner of intellectual property
    rights, licenses or processes; and
- the manufacture, purchase, importation, sale, exportation, anywhere of all
    manner of materials and products, as well as the rendering of all manner of
    services.

We may act directly or indirectly for our own account or for the account of third parties, whether alone or by equity holding, under agreement, in joint venture, or in partnership with any other legal entity or individual, and we may carry out, whether in France or abroad, in any manner whatsoever, all manner of financial, commercial, industrial, real property, and personal property transactions within our corporate purpose or involving similar or related matters.

We summarize below certain material provisions of applicable French law and our statuts.  An unofficial English translation of our statutsis included hereafter as Exhibit 1 to this Annual Report. You may obtain copies of our statutsin French from the Greffeof the Registry of Commerce and Companies of Nanterre, France.

Authorized but Unissued Capital

Under authorizations that our Board of Directors has received from our shareholders, the Board of Directors may grant stock options or free shares (restricted stocks units) to employees and corporate officers and may additionally increase our capital for certain other purposes.  More specifically, the following delegations to the Board of Directors were renewed by the last annual general shareholders meeting held on May 10, 2005:

- Delegations to the Board of Directors to approve capital increases up to a
    maximum nominal amount of 250 million through the issuance  with
    or without preferred subscription right  of shares and/or issuance of
    securities giving access to the capital of the Company and/or securities giving
    an entitlement to debt securities giving access to the capital of the Company.These
    delegations are valid for 26 months from May 10, 2005.

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- Delegation to the Board of Directors to approve capital increases up to
    a maximum nominal amount of 250 million by capitalizing premiums, reserves,
    profit or otherwise. That delegation is valid for 26 months from May 10, 2005.
    In case of increase of capital without preferred subscription rights, the
    Board indicated that it will limit the use of its delegation to up to €200
    millions.
- Delegation to the Board of Directors to increase the capital up to a maximum
    nominal amount of  15 million in favor of members of Company savings
    plans.
- Delegations to the Board of Directors to grant stock options to subscribe
    or to purchase shares and/or free shares to staff or corporate officers of
    the Group. These delegations are valid for 38 months from May 10, 2005.

For information about our share capital history for the last three fiscal years, refer to Note 16 to our consolidated financial statements.

Shareholders Meetings and Voting Rights

> General

In accordance with the French Commercial Code, there are three types of shareholders general meetings, ordinary, extraordinary and special.

Ordinary general meetings of shareholders are required for matters such as:

- electing, replacing and removing directors;
- appointing independent auditors;
- approving the annual accounts;
- declaring dividends or authorizing dividends to be paid in shares provided
    the statuts contain a provision to that effect, as ours do; and
- issuing debt securities.

Extraordinary general meetings of shareholders are required for approval of matters such as amendments to our statuts, including any amendment required in connection with extraordinary corporate actions. Extraordinary corporate actions include:

- changing our companys name or corporate purpose;
- increasing or decreasing our share capital;
- creating a new class of equity securities;
- authorizing the issuance of investment certificates, convertible or exchangeable
    securities;
- establishing any other rights of equity securities;
- selling or transferring substantially all of our assets; and
- the voluntary liquidation of our company.

Special meetings of shareholders of a certain category of shares (such as, among others, preferred shares) are required for any modification of the rights derived from such category of shares. The resolutions of the shareholders' general meeting affecting these rights are effective only after approval by the relevant special meeting. As previously noted, the ordinary shares currently constitute the Company's only class of capital stock and the Company has not issued any preferred shares.

The Chairman of our Board of Directors or a Vice President of the Board of Directors presides over shareholders meetings.  If none are available, the Board of Directors may delegate a member to preside over the meeting. Otherwise, those present at the meeting may elect a meeting chairperson.

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> Annual Ordinary Meetings

The French Commercial Code requires our Board of Directors to convene an annual ordinary general meeting of shareholders for approval of the annual accounts. This meeting must be held within six months of the end of each fiscal year. This period may be extended by an order of the President of the Tribunal de Commerce. The Board of Directors may also convene an ordinary or extraordinary meeting of shareholders upon proper notice at any time during the year. If the Board of Directors fails to convene a shareholders meeting, our independent auditors, the majority shareholder (either in terms of capital stock or of voting rights) after a tender offer (offre publique dachat ou déchange), or after the transfer of a controlling block or a court-appointed agent may call the meeting. Any of the following may request the court to appoint an agent:

- one or several shareholders holding at least 5% of our share capital;
- any interested party in cases of urgency;
- duly qualified associations of shareholders who have held their shares in
    registered form for at least two years and who together hold at least 1% of
    the voting rights of our company;
- the Workers Council (comité dentreprise) provided that
    there is an emergency; or
- the majority shareholder (either in terms of capital stock or of voting rights)
    after a tender offer (offre publique dachat ou déchange),
    or after the transfer of a controlling block.

In the case of a bankruptcy, our liquidator may also call a shareholders meeting in some instances.

> Notice of Shareholders Meetings

We must announce general meetings at least 30 days in advance by means of a preliminary notice which is published in the Bulletin des Annonces Légales Obligatoires, or BALO. The preliminary notice must be sent to the AMF prior to publication. It must contain, among other things, the time, date and place of the meetings, the agenda, a draft of the resolutions to be submitted to the shareholders, a description of the procedures which holders of bearer shares must follow to attend the meeting and the procedure for voting by mail. The AMF also recommends that simultaneously with the publication of the preliminary notice in the BALO, a summary of the preliminary notice should be published in a newspaper of national circulation in France, which contains the time, date and place of the meeting as well as indicates how investors can obtain documents relating to such meetings.

At least fifteen days prior to the date set for the meeting on first call, and at least six days before any second call, we must send a final notice containing the final agenda, place, date and other information for the meeting. The final notice must be sent by mail to all registered shareholders who have held shares for more than one month prior to the date of the final notice and published in a newspaper authorized to publish legal announcements in the local administrative area (département) in which our company is registered as well as in the BALO, with prior notice having been given to the AMF.

In general, shareholders can only take action at shareholders meetings on matters listed on the agenda for the meeting. As an exception to this rule, shareholders may take action with respect to the appointment and dismissal of directors even though these actions have not been included on the agenda. Additional resolutions to be submitted for approval by the shareholders at the meeting may be proposed to the Board of Directors within ten days of the publication of the preliminary notice in the BALO by:

- one or several shareholders holding a specified percentage of shares;
- a duly qualified association of shareholders who have held their shares in
    registered form for at least two years and who together hold at least 1% of
    our voting rights; or
- the Workers Council.

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The Board of Directors must submit these resolutions to a vote of the shareholders.

During the two weeks preceding a meeting of shareholders, any shareholder may submit written questions to the Board of Directors relating to the agenda for the meeting. The Board of Directors must respond to these questions. Moreover, the Board of Directors must, 15 calendar days before a meeting, make available relevant documents that will enable the voting shareholders to make an informed decision.

> Attendance and Voting at Shareholders Meetings

Each shareholder is entitled to one vote per share at any general meeting.

If a shareholder fails to properly notify us, in the manner described below under Requirements for Holdings Exceeding Certain Percentages, on passing the threshold of 0.5%, the shares over that threshold may be deprived of their voting right.

Under the French Commercial Code, shares of a company held by entities controlled directly or indirectly by that company are not entitled to voting rights and do not count for quorum or majority purposes.

Shareholders may attend ordinary general meetings and extraordinary general meetings and exercise their voting rights subject to the conditions specified in the French Commercial Code and our statuts. There is no requirement that a shareholder have a minimum number of shares in order to attend or to be represented at an ordinary or extraordinary general meeting.

Each shareholder shall have the right, upon substantiating his identity, to participate in the general meetings of shareholders under the condition:

- for the owners of registered shares, that an entry of registration has been
    made in the records of the company;
- for the owners of bearer shares, that a certificate issued by an authorized
    intermediary confirming the unavailability of their shares entered on account
    up to the date of the meeting of shareholders has been deposited at the places
    mentioned in the notice of meeting, and as the case may be, that he provides
    to the company, in accordance with the provisions in force, any evidence enabling
    him to be identified.

These formalities must be fulfilled prior to 3:00 p.m. (Paris time) the day before the meeting of shareholders unless there is an earlier deadline mentioned in the meeting notice or mandatory provisions in force that shorten this deadline.

An express revocation of the registration or of the unavailability of the shares referred to above can only take place in accordance with the provisions in force.

For the purpose of identifying the owners of securities, the Company shall have the right to request the following information, at any time, at its own expense and pursuant to applicable law and regulations from the institution that handles the clearing of share transactions: the name, nationality, year of birth or formation, country of incorporation and address of individuals or legal entities that own securities that may, either immediately or in the future, confer the right to vote at the Companys shareholders meetings, the number of the securities owned by each of these shareholders and any restrictions to which these securities may be subject.

When a person for whom information has been requested does not provide this information within the time allowed by the applicable law and regulations or has provided incomplete or erroneous

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information with respect to either his/her/its legal capacity in relation to the owner of the securities, the shares, or the securities that immediately or in the future entitle their owner to receive shares, and for which this person was registered as a shareholder shall be deprived of the right to vote at all shareholders meetings that may be held until proper identification is provided and the payment of the dividend on said shares or securities shall be withheld until this date.

> Proxies and Votes by Mail

In general, all shareholders who have properly registered their shares or duly presented a certificate from their accredited financial intermediary may participate in general meetings. Shareholders may participate in general meetings either in person or be represented by a spouse or by another shareholder. Shareholders may vote in person, by proxy either to a spouse or to another shareholder or by mail. However, a holder of bearer shares who is not a French resident may be represented at shareholders meetings by an appointed intermediary as described in Attendance and Voting at Shareholders Meetings.

Proxies will be sent to any shareholder on request. In order to be counted, such proxies must be received at our registered office, or at any other address indicated on the notice convening the meeting, prior to the date of the meeting. A shareholder may only grant proxies to his or her spouse or to another shareholder.  A shareholder that is a corporation may grant proxies to a legal representative.  Alternatively, the shareholder may send us a blank proxy without nominating any representative. In this case, the chairman of the meeting will vote the blank proxies in favor of all resolutions proposed or allowed by the Board of Directors and against all others.

With respect to votes by mail, we must send shareholders a voting form. The completed form must be returned to us at least three days prior to the date of the shareholders meeting.

Under conditions established by law and regulations, the shareholders may also send their proxy forms and forms for voting by data transmission upon a decision of the Board of Directors published in the announcement of session and the notice of meeting.

> Quorum

The French Commercial Code requires that shareholders having at least 25% of the shares entitled to voting rights must be present in person, vote by proxy or by mail or data transmission to fulfill the quorum requirement for:

- an ordinary general meeting; or
- an extraordinary general meeting where an increase in our share capital is
    proposed through incorporation of reserves, profits or share premium.

The quorum requirement is one-third of the shares entitled to voting rights, on the same basis, for any other extraordinary general meeting.

For a special meeting of holders of a certain category of shares, the quorum requirement is one-half of the shares entitled to vote in that category, in person or vote by mail, proxy or video conference.

If a quorum is not present at a meeting, the meeting is adjourned. When an adjourned meeting is resumed, there is no quorum requirement for an ordinary meeting or for an extraordinary general meeting where an increase in our share capital is proposed through incorporation of reserves, profits or share premium. In the case of any other reconvened extraordinary general meeting, shareholders having at least 25% of the voting rights attached to outstanding shares must be present in person or voting by mail or data transmission (if applicable) or by proxy for a quorum. However, only questions

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that were on the agenda of the adjourned meeting may be discussed and voted upon. If a quorum is not present, the reconvened meeting may be adjourned for a maximum of two months.  No deliberation by the shareholders may take place without a quorum.

At the time of the notice of meeting the Board of Directors may decide on the public rebroadcast of the entirety of such general meeting by video conference and/or data transmission in the conditions fixed by the regulations in force. In that case, the shareholders who attend the general meeting by video conference or means of data transmission are deemed to be present for the quorum and majority calculation, on the conditions provided by the regulations in force. As the case may be, this decision is to be communicated in the announcement of the session and in the notice of the meeting.

Under French law, shares of a company held in treasury by that company are not counted for quorum purposes.

> Majority

A simple majority of the shareholder votes cast may pass a resolution at an ordinary general meeting or an extraordinary general meeting concerning only a capital increase by incorporation of reserves, profits or share premium. At any other extraordinary general meeting, a two-thirds majority of the shareholder votes cast, including abstentions by shareholders present or represented by proxy or voting by mail or data transmission (if applicable), is required.

A unanimous shareholder vote is required to increase liabilities of shareholders.

Abstention from voting by those present or those represented by proxy or voting by mail or data transmission (if applicable) is counted as a vote against the resolution submitted to a shareholder vote.

Under French law, shares of a company held in treasury by that company are not entitled to voting rights.

> Shareholder Rights

Shareholder rights can be amended only after an extraordinary general meeting of the class of shareholders affected has taken place. Two-thirds of the votes appertaining to shares of the affected class voting either in person or by mail or proxy must approve any proposal to amend shareholder rights.  The voting requirements applicable to this type of special meeting are the same as those applicable to an extraordinary general meeting, and the quorum requirements for a special meeting are 50% of the voting shares, or 25% upon resumption of an adjourned meeting.  A unanimous shareholder vote is required to increase liabilities of shareholders.

Financial Statements and other Communications with Shareholders

In connection with any shareholders meeting, we must provide a set of documents including our annual report and a summary of the results of the five last fiscal years to any shareholder who so requests. The French Commercial Code requires that a special report be provided to the ordinary shareholders meeting regarding stock options authorized and/or granted by the Company.

Dividends

We may only distribute dividends out of our distributable profits, plus any amounts held in our reserve which the shareholders decide to make available for distribution, other than those reserves which are specifically required to be maintained by law or our statuts. Distributable profits consist

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of our unconsolidated net profit in each fiscal year, as increased or reduced by any profit or loss carried forward from prior years, less any contributions to the reserve accounts.

> Legal Reserve

The French Commercial Code provides that French sociétés
  anonymessuch as our company must allocate 5% of their unconsolidated statutory
  net profit for each year to their legal reserve fund before dividends may be
  paid with respect to that year. Funds must be allocated until the amount in
  the legal reserve is equal to 10% of the aggregate nominal value of the issued
  and outstanding share capital. The legal reserve of any company subject to this
  requirement may only be distributed to shareholders upon liquidation of the
  company. This restriction on the payment of the dividends also applies on an
  unconsolidated basis to each of our French subsidiaries organized as a société
  anonyme, société en commandite par actions, société
  par actions simplifiéeor société à responsabilité
  limitée.

> Approval of Dividends

According to the French Commercial Code, the Board of Directors may propose a dividend for approval by the shareholders at the annual general meeting of shareholders.  If we have earned distributable profits since the end of the preceding fiscal year, as reflected in an interim income statement certified by our auditors, the Board of Directors may distribute interim dividends to the extent of the distributable profits for the period covered by the interim income statement. The Board of Directors exercises this authority subject to French law and regulations and may do so without obtaining shareholder approval.

> Distribution of Dividends

Dividends are distributed to shareholders pro rata according to their respective holdings of shares. Outstanding dividends are payable to shareholders on the date of the shareholders meeting at which the distribution of dividends is approved. In the case of interim dividends, distributions are made to shareholders on the date of the Board of Directors meeting in which the distribution of interim dividends is approved.  The actual dividend payment date is decided by the shareholders in an ordinary general meeting, or by the Board of Directors in the absence of such a decision by the shareholders.

> Timing of Payment

According to the French Commercial Code, we must pay any dividends within nine months of the end of our fiscal year, unless otherwise authorized by court order.  Dividends on shares that are not claimed within five years of the actual dividend payment date revert to the French State.

Changes in Share Capital

> Increases in share capital

As provided by the French Commercial Code, our share capital may be increased only with the shareholders approval at an extraordinary general meeting following the recommendation of the Board of Directors. Such approval can either constitute a decision of the shareholders to increase the share capital or a delegation of power granted by the shareholders to the Board of Directors to increase the share capital. Increases in our share capital may be effected by:

- issuing additional shares;
- increasing the nominal value of existing shares; or
- creating a new class of equity securities.

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Increases in share capital by issuing additional securities may be effected through one or a combination of the following:

- for cash;
- for assets contributed in kind;
- by conversion or redemption of debt securities previously issued;
- by exercise or exchange of any other securities giving rights to such securities;
- by capitalization of profits, reserves or share premiums;
- subject to various conditions, in satisfaction of debt incurred by our company;
    or
- any combination of the above.

Decisions to increase the share capital through the capitalization of reserves, profits and/or share premiums require the approval of an extraordinary general meeting, acting under the quorum and majority requirements applicable to ordinary shareholders meetings. Increases effected by an increase in the nominal value of shares require unanimous approval of the shareholders, unless effected by capitalization of reserves, profits or share premiums. All other capital increases require the approval of an extraordinary general meeting. Refer to Shareholders Meetings and Voting Rights.

Pursuant to a French law of February 19, 2001, any of the above decisions to increase the share capital requires the shareholders, at an extraordinary shareholders meeting, to consider and vote upon a capital increase reserved for employees, although such reserved capital increase need not be approved.  Non-compliance with this requirement may result in the invalidity of the share capital increase. For the available authorizations to increase our share capital, see Authorized but Unissued Capital above.

The shareholders may delegate the right to carry out any increase in share
  capital to the Board of Directors, provided that the increase has been previously
  authorized by the shareholders. The Board of Directors may further delegate
  this right to the Chief Executive Officer.

> Decreases in share capital

According to the French Commercial Code, any decrease in our share capital requires approval by the shareholders entitled to vote at an extraordinary general meeting. The share capital may be reduced either by decreasing the nominal value of the outstanding share capital or by reducing the number of outstanding shares. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and cancellation of shares. In the case of a capital reduction, through a reduction of the number of outstanding shares other than a reduction to absorb losses or a reduction as part of a program to purchase our own shares, all holders of shares must be offered the possibility to participate in such a reduction. Holders of each class of shares must be treated equally unless each affected shareholder agrees otherwise.

> Preferential subscription rights

According to the French Commercial Code, if we issue specific kinds of additional securities, current shareholders will have preferential subscription rights to these securities on a pro rata basis. These preferential rights require us to give priority treatment to those shareholders. The rights entitle the individual or entity that holds them to subscribe to an issue of any securities that may increase the share capital of our company by means of a cash payment or a set-off of cash debts. Preferential subscription rights are transferable during the subscription period relating to a particular offering. These rights may also be listed on Euronext Paris.

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The affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote at an extraordinary general meeting may waive the preferential subscription rights of all shareholders with respect to any particular offering or a portion of that offering. French law requires that the Board of Directors and our independent auditors present reports that specifically address any proposal to waive preferential subscription rights.  In the event of a waiver, the issue of securities must be completed within the period prescribed by law. The shareholders may also decide at an extraordinary general meeting to give the existing shareholders a non-transferable priority right to subscribe to the new securities, during a limited period of time. Shareholders also may notify us that they wish to waive their own preferential subscription rights with respect to any particular offering if they so choose.

In the event of a capital increase without preferential subscription rights to existing shareholders, French law requires that the capital increase be made at a price equal to or exceeding the average market price of the shares in the three trading days preceding the setting of the price (such average market price may be reduced by a maximum discount of 5%). However, within the limit of 10% of the share capital per year, the general extraordinary shareholder meeting may authorize the board of directors to set the issuing price in accordance with terms set by the general extraordinary shareholder meeting.

Form, Holding and Transfer of shares

> Form of shares

Our statuts provide that the shares may be held in registered or bearer form at the holders election. Our statuts also provide that any person holding more than 2% of our share capital or voting rights must within fifteen days of passing this threshold request that its shares be converted into registered form.

> Holding of shares

In accordance with French law concerning dematerialization of securities, shareholders ownership rights are represented by book entries instead of share certificates.

We maintain a share account with Euroclear France (a French clearing system, which holds securities for its participants) for all shares in registered form, which is administered by Crédit Agricole Investor Indosuez Corporate Trust. In addition, we maintain separate accounts in the name of each registered shareholder either directly, or, at a shareholders request, through the shareholders accredited intermediary. Each registered shareholder account shows the name of the holder and the number of shares held and, in the case of shares held through an accredited intermediary, shows that they are so held.  Crédit Agricole Investor Indosuez Corporate Trust, as a matter of course, issues confirmations to each registered shareholder as to shares registered in the shareholders account, but these confirmations are not documents of title.

Shares held in bearer form are held on the shareholders behalf in an
  account maintained by an accredited intermediary and are registered in an account
  which the accredited intermediary maintains with Euroclear France. That account
  is separate from our companys share account with Euroclear France. Each
  accredited intermediary maintains a record of shares held through it and will
  issue certificates of deposit for the shares that it holds. Shares held in bearer
  form may only be transferred through accredited intermediaries and Euroclear
  France. Our statuts permit us to request that Euroclear France provide us at
  any time with the identity of the holders of our shares or other securities
  granting immediate or future voting rights, held in bearer form, and with the
  number of shares or other securities so held. Also, we may request any legal
  person (personne morale) who holds more than 2.5% of our shares, to disclose
  the name of any person who owns, directly or indirectly, more than a third of
  its share capital or of its voting rights.

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> Transfer of shares

Registered shares must be converted into bearer form before being transferred on the Euronext Paris and, accordingly, must be registered in an account maintained by an accredited intermediary.  A shareholder may initiate a transfer by giving instructions to the relevant accredited intermediary. For dealings on Euronext Paris, a tax assessed on the price at which the securities were traded, or impôt sur les opérations de bourse, is payable at the rate of 0.3% on transactions of up to 153,000 and at a rate of 0.15% thereafter. This tax is subject to a rebate of 23 per transaction and a maximum assessment of 610 per transaction. However, non-residents of France are not required to pay this tax. In addition, a fee or commission is payable to the broker involved in the transaction, regardless of whether the transaction occurs within or outside France. No registration duty is normally payable in France, unless a transfer instrument has been executed in France.

Liquidation Rights

If we are liquidated, any assets remaining after payment of our debts, liquidation expenses and all of our remaining obligations will be distributed first to repay in full the nominal value of our shares. Any surplus will be distributed pro rata among shareholders in proportion to the nominal value of their shareholdings.

Requirements for Holdings Exceeding Certain Percentages

The French Commercial Code provides that any individual or entity, acting alone or in concert with others, that becomes or ceases to be the owner, directly or indirectly, of more than 5%, 10%, 20%, 33 1/3%, 50% or 66 2/3%, as applicable, of the outstanding shares or voting rights of a listed French company whose shares are registered with an accredited financial intermediary, such as our company, or that increases or decreases its shareholding or voting rights above or below any of those percentages, must notify the company within five trading days of the date it crosses such threshold, of the number of shares it holds (directly or in the form of ADSs or by an intermediary as described in Attendance and Voting at Shareholders Meetings), their voting rights and the number of securities giving access, directly or indirectly, to shares and/or voting rights. The individual or entity must also notify the AMF within five trading days of the date it crosses the threshold. The AMF makes the notice public.

French law and the New General Regulation of the AMF impose additional reporting requirements on persons who are increasing their ownership above 10% or 20% of the outstanding shares or voting rights of a listed company.  These persons must file a report (declaration of intention) with the company and the AMF within 10 trading days of the date they cross the threshold. In the report, the acquirer must specify its intentions for the following 12-month period, including whether or not it intends to continue its purchases, to acquire control of the company in question or to seek nomination to the board of directors. The AMF makes the report public. The acquirer must also publish a press release stating its intentions in a financial newspaper of national circulation in France. The acquirer may amend it stated intentions, provided that it does so on the basis of significant changes in its own situation or shareholding. Upon any change of intention which change may only be motivated by a significant change in the business, it must file a new report.

Under AMF regulations, and subject to limited exemptions granted by the AMF, any person or persons acting in concert owning in excess of 33 1/3% of the share capital or voting rights of a French listed company must initiate a public tender offer for the balance of the share capital of such company. The regulations provide for some exceptions to the rule.

If any person fails to comply with the legal notification requirement, the shares or voting rights in excess of the relevant threshold will be deprived of voting rights for all shareholders meetings until the end of a two-year period following the date on which the owner thereof complies with the

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notification requirements. In addition, any shareholder who fails to comply with these requirements may have all or part of its voting rights suspended for up to five years by the Commercial Court at the request of our Chairman, any shareholder or the AMF, and may be subject to criminal fees.

In addition, our statutsprovide that any individual or entity acting alone or in concert who becomes, directly or indirectly, the owner of 0.5%, or more, of the total number of shares or voting rights of the Company (as defined in Article L.233-7 of the French Commercial Code) must notify the company within 5 trading days of exceeding the threshold by registered/certified letter with return receipt requested, by fax, or by telex indicating whether the shares or voting rights are or are not held for the account of, under the control of, or in concert with other legal entities or individuals.  It is to be renewed per additional holding of 0.5 % of the capital or of the voting rights, without limitation. This duty applies under the same conditions when the equity holding or the voting rights become lower than the thresholds mentioned above.  Each shareholder who does not comply with these requirements may be deprived of the right to vote pertaining to the shares exceeding the threshold at issue.

In addition, upon holding directly or indirectly 2%, or more, of the total number of shares comprising the share capital or voting rights, a person, acting alone or in concert, is required within 5 days of exceeding this threshold to request that its shares be converted into registered form. This only applies to all the shares acquired beyond that threshold.  A copy for entry in registered form, sent by registered/certified letter with return receipt requested, by telex or by fax to the company within this 5-day period shall operate as a statutory declaration of exceeding the threshold.

In order to permit holders to give the required notice, we must publish in the BALO, not later than fifteen calendar days after the annual ordinary general meeting of shareholders, information with respect to the total number of voting rights outstanding as of the date of such meeting. In addition, if the number of outstanding voting rights changes by 5% or more between two annual ordinary general meetings, we must publish in the BALO, within fifteen calendar days of such change, the number of voting rights outstanding. In both cases, the Company must also provide the AMF with a written notice (avis) setting forth the number of voting rights outstanding. The AMF publishes the total number of voting rights so notified by all listed companies in a weekly notice, mentioning the date each such number was last updated.

In order to facilitate compliance with the notification requirements, a holder of ADSs may deliver any such notification to the Depositary and the Depositary shall, as soon as practicable, forward such notification to us and to the AMF.

Purchase of Own Shares

Under French law, the Company may not issue shares to itself. However, it may, once listed, either directly or through a financial intermediary acting on its behalf, acquire up to 10% of its share capital within a maximum period of 18 months. To acquire shares for this purpose, the Company must file a note d'informationthat has received the approval (visa) of the AMF. The Company can elect to file such note d'informationeither prior to obtaining shareholders' approval at an ordinary general meeting, or after the board of directors, duly authorized by the shareholders, has decided to initiate the share repurchase plan.

In accordance with the European Union Commission Regulation (EC) 2273/2003 of December 22, 2003 and with the Règlement Général instructions and communications of the AMF, the Company may repurchase its shares for the following purposes:

- to cancel the shares, with shareholders' approval at an extraordinary general meeting;
- to deliver shares in connection with the conversion of securities giving
    access to its share capital;

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- to sell or transfer the shares to its employees under a profit sharing plan or stock option plan that has been approved by shareholders at an ordinary general meeting;
- to deliver shares (in exchange, payment or otherwise) in the context of
    external growth transactions; or
- to put in place with one or several providers of investment services acting
    independently a liquidity agreement compliant with a code of practices (charte
    de déontologie)recognized by the AMF.

Shares can be purchased on the market or otherwise, such as the purchase of blocks of shares.

The Company may not cancel more than 10% of its outstanding share capital over any 24-month period. Its repurchase of shares also may not result in the Company holding, directly or through a person acting on its behalf, more than 10% of its outstanding share capital, or if it has different classes of shares, 10% of the shares in each class.

The Company must hold any repurchased shares in registered form. These shares also must be fully paid up. Shares repurchased by the Company are deemed outstanding under French law but are not entitled to dividends or voting rights, and the Company may not exercise the preferential subscription rights attached to them.

The shareholders, at an extraordinary general meeting, may decide not to take these shares into account in determining the preferential subscription rights attached to the other shares. If the shareholders decide to take them into account, the Company must either sell the rights attached to the shares it holds on the market before the end of the subscription period or distribute them to the other shareholders on a pro rata basis.

A delegation to the Board of Directors was given by the Annual Shareholders Meeting held on May 10, 2005 to repurchase up to 10% of our share capital. The purchase price may not exceed 50 per share, subject to adjustment for changes in our share capital and except in certain limited circumstances, including where securities are issued by way of payment or exchange, particularly in connection with external-growth operations. This authorization is valid for 18 months as of May 10, 2005. This authorization cancels and replaces the authorization given on May 7, 2004.

Trading in our own shares

Article 631-1 of the General Regulations (Règlement Général) of the
  AMF prohibits market manipulation. Market manipulation is defined as:

- Transactions or orders to trade (i) which give, or are likely to give, false
    or misleading signals as to the supply of, demand for or price of financial
    instruments, or (ii) which secure, by a person, or persons acting in collaboration,
    the price of one or several financial instruments at an abnormal or artificial
    level, unless, in both (i) and (ii), the person who entered into the transactions
    or issued the orders to trade establishes that its reasons for so doing are
    legitimate and that these transactions or orders to trade conform to accepted
    market practices on the regulated market concerned; and
- Transactions or orders to trade which employ fictitious devices or any other
    form of deception or contrivance.

Trading in own shares as part of share repurchase plans provided these programs
  comply (a) with the provisions described in the preceding section 
  Purchase of Own Shares or (b) with a market practice admitted by the AMF
  and the provisions described in the preceding section  Purchase
  of Own Shares are presumed not to be market manipulation.

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These provisions also do not apply to transactions carried out by a provider
  of investment services within the framework of the stabilization of a financial
  instrument in compliance with European Union Commission Regulation (EC) 2273/2003
  of December 22, 2003.

Article 631-6 of the General Regulations (Règlement Général) provides
  that there are two periods during which the Company is not permitted to trade
  in its own securities: the 15-day period before the date on which it makes its
  annual, half-yearly and, if applicable, quarterly consolidated or unconsolidated
  accounts public, and the period beginning on the date at which it becomes aware
  of information that, if disclosed, would have a significant impact on the market
  price of its securities and ending on the date this information is made public.

After making an initial purchase of its own shares, the Company must file
  monthly reports with the AMF that contain specific information about subsequent
  transactions. The AMF makes this information publicly available.

Thomson has established black-out periods during which shares must not be
  sold or purchased by Thomson. These periods include half-year black-out periods
  from June 25 to the second day following the announcement of the first half
  results and from December 25 to the second day following the announcement of
  the full year results. Thomson has also established quarterly black-out periods
  from March 25 to the second day following the announcement of the first quarter
  sales and from September 25 to the second day following the announcement of
  the third quarter sales.

C  Material Contracts

For a discussion of the Combination Agreement that we have entered into with
  TCL in connection with establishing TTE and certain related arrangements entered
  into in connection therewith, see Item 4: Information on the CompanyBusiness
  OverviewMainstream Consumer ProductsLaunch of TTE.

D  Exchange Controls and Other Limitations Affecting Security Holders

Ownership of shares or American Depositary Shares by Non-French Persons

Under French law, there is no limitation on the right of non-French residents or non-French security holders to own, or where applicable, to vote securities of a French company, subject to generally applicable restrictions.

Under current French foreign direct investment regulations, however, a notice
  (déclaration administrative) must generally be filed with the
  French Ministry of Economy and Finance in the event of the acquisition of an
  interest in any French company by any non-French resident or by any foreign
  entity, if such acquisition would result in non-French residents or foreign
  entities possessing more than 33.33% of the voting rights or share capital of
  such French company.

Exchange Controls

Under current French exchange control regulations, there are no limitations on the amount of payments that may be remitted by a French company to non-residents.  Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a non-resident be handled by an accredited intermediary. In France, all registered banks and substantially all credit establishments are accredited intermediaries.

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E  Taxation

French Taxation

The following generally summarizes the material French tax consequences of owning and disposing of our shares. The statements relating to French tax laws set forth below are based on the laws in force as of the date hereof and are subject to any changes in applicable laws and tax treaties after that date.

This discussion is intended only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects of the ownership or disposition of the shares.

The following summary does not discuss the treatment of shares that are held by a resident of France (except for purposes of illustration) or in connection with a permanent establishment or fixed base through which a holder carries on business or performs personal services in France, or by a person that owns, directly or indirectly, 5% or more of the stock of our company.

Taxation of Dividends on Shares

In France, companies may only pay dividends out of income remaining after tax has been paid.

The term dividends used in the following discussion means dividends within the meaning of the relevant income tax treaties where applicable, or where not defined by such treaties, within the meaning of French domestic tax law as set forth in a recent administrative guideline dated February 25, 2005 (4 J-1-05) (the Administrative Guideline).

Prior to December 31, 2004, shareholders resident in France (French Resident Holders) who received a dividend were, under certain circumstances, entitled to a tax credit (avoir fiscal)representing a portion of the underlying tax paid at the corporate level.

The French Finance Law of 2004 (the Finance Law) repealed the benefit of the avoir fiscalwith respect to dividends received by corporate French Resident Holders after December 31, 2003 (subject to certain exceptions). Additionally, the Finance Law repealed the avoir fiscalwith respect to dividends received after December 31, 2004 by French Resident Holders who are individuals. Instead, French Resident Holders who are individuals who receive dividends after December 31, 2004 are taxed on only 50% of the amount of the dividends and, in addition, are entitled to a new tax credit (crédit dimpôt)equal to 50% of the amount of dividends they received.  The crédit dimpôtis subject to an overall annual cap of 230 or 115, depending on the marital status of the individual holder.

Dividends paid to shareholders that are not residents of France (Non-French Resident Holders) are generally subject to a 25% withholding tax, to be levied by the paying agent of such dividends. Non-French Resident Holders will not be eligible to the crédit dimpôt(with respect to dividends received as of January 1, 2005).

Under various income tax treaties entered into by France with other countries, qualifying Non-French Residents Holders were, under certain circumstances, entitled to a reduced rate of withholding (generally to 15% or 5%) or an elimination of the French withholding tax and a refund of the avoir fiscal(the refund being, however, subject to the French withholding tax). Non-French Resident Holders who are individuals who received dividends in 2004 are still eligible for the avoir fiscalrefund, even if, in practice, the refund is paid in 2005. The avoir fiscalrefund should be equal to 50% of the dividend (subject to the applicable withholding tax) if such Non-French Resident Holders complied with the procedural rules applicable at the dividend payment date.

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The Administrative Guideline provides for the following requirements in order to obtain a reduction or an elimination of the French withholding tax under the terms on an income tax treaty with respect to dividends paid as of January 1, 2005. A reduction or elimination at the time of payment (i.e., at source) will only be granted (i) to those Non-French Resident Holders that may qualify for the so-called simplified procedure, and (ii) to a certain extent, those Non-French Resident Holders whose identity and tax residence are known by the French paying agent of the dividends (within the meaning of the Administrative Guideline).

Under the simplified procedure, Non-French Resident Holders may claim a reduction or an elimination of the French withholding tax on the French dividends to be received, by providing the financial institution managing their securities account and the paying agent, before the dividend payment date, a certificate of residence conforming with the template attached to the Administrative Guideline.  The certificate of residence must be certified by the tax authority of the Non-French Resident Holders country of residence, in compliance with the requirements provided by the Administrative Guideline.

Where the Non-French Resident Holders identity and tax residence are known by the French paying agent, the latter may apply the reduction or elimination of the withholding tax rate to dividends it pays to such Non-French Resident Holders without obtaining a certificate of residence.

Non-French Resident Holders eligible for treaty benefits that are not entitled to the simplified procedure and whose identity and tax residence are not known by the paying agent may obtain reduction or elimination of the withholding tax under the so-called standard procedure. Under the standard procedure, the French paying agent withholds the entire tax and the Non-French Resident Holder may apply for a partial or total refund provided that the Non-French Resident Holders produce the appropriate form (issued by the Republic of France or any other form required by the French tax administration) duly completed in compliance with the provisions set out in the Administrative Guideline. Any French withholding tax refund is generally expected to be refunded within twelve months from the filing of the appropriate form. However, it will not be refunded before January 15 of the year following the year in which the dividend was paid.

The Administrative Guideline does not clarify whether the crédit dimpôtwill be available to Non-French Resident Holders who are individuals and who benefit from a tax treaty providing for the transfer of the avoir fiscal. It is therefore not clear whether the relevant French tax authorities would agree with an analysis which would consider the crédit dimpôtto be available to qualifying Non-French Resident Holders to the same extent that the avoir fiscalwas available.

France has entered into tax treaties with the following countries and overseas possessions under which qualifying residents are entitled to obtain from the French tax authorities a reduction (generally to 15%) of the French dividend withholding tax and a refund of the avoir fiscal(net of applicable withholding tax). Non-French Resident Holders should consult their own tax advisors in order to determine the effect of the relevant tax treaty provisions (if any), the consequences of the Finance Law, and the applicable procedures in respect of the Administrative Guideline, in light of such holders particular circumstances.

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|Australia    | Japan           | Norway                  
|------------ | --------------- | ------------------------
|Austria      | Latvia          | Pakistan                
|Belgium      | Lithuania       | Saint-Pierre et Miquelon
|Bolivia      | Luxembourg      | Senegal                 
|Brazil       | Malaysia        | Singapore               
|Burkina Faso | Mali            | South Korea             
|Canada       | Malta           | Spain                   
|Estonia      | Mauritius       | Sweden                  
|Finland      | Mayotte         | Switzerland             
|Gabon        | Mexico          | Togo                    
|Ghana        | Namibia         | Turkey                  
|Iceland      | The Netherlands | Ukraine                 
|India        | New Caledonia   | United Kingdom          
|Israel       | New Zealand     | United States of America
|Italy        | Niger           | Venezuela               
|Ivory Coast  |                 |                         

Potential investors should consult their own advisors to determine whether they are entitled to a tax treaty and, if so, what procedures must be followed in order to claim those benefits.

Taxation on Sale or Other Disposition of Shares

Subject to more favorable provisions of any relevant double tax treaty, Non-French Resident Holders, who do not hold shares in connection with the conduct of a business or profession in France, and have held not more than 25% of our dividend rights (bénéfices sociaux), directly or indirectly, alone or with relatives at any time during the preceding five years, are not subject to any French income tax or capital gains tax on the sale or disposition of our shares.

A 1% registration duty (subject to a maximum of 3,049 per transfer) applies to certain transfers of shares in French companies. The duty does not apply to transfers of shares in listed companies that are not evidenced by a written agreement, or if any such written agreement is executed outside France. The French Finance Law amending the French Finance Law of 2004 increased the above 1% rate of registration duty to 1.1% (subject to a maximum increased to 4,000 per transfer) with respect to written share transfer agreements executed in France as of January 1, 2006. No French stock exchange stamp duty is payable on the sale of our shares by Non-French Residents Holders, unless the sale is evidenced by a written agreement executed in France.

Estate and Gift Tax

France imposes estate and gift tax on shares of a French company that are acquired by inheritance or gift. The tax applies without regard to the residence of the transferor. However, France has entered into estate and gift tax treaties with a number of countries pursuant to which, assuming certain conditions are met, residents of the treaty country may be exempted from such tax or obtain a tax credit. Prospective investors should consult their own advisors concerning the applicability of French estate and gift tax to these ownership of shares and the availability of, and the conditions for claiming exemptions under, such a treaty.

Wealth Tax

The French wealth tax (impôt de solidarité sur la fortune)generally does not apply to Non-French Resident Holders who are individuals owning directly or indirectly less than 10 percent of our share capital assuming the shares do not enable such non-French residents to exercise influence over our Company.

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Taxation of U.S. Investors

This section describes the material United States federal income tax consequences and French tax consequences to U.S. holders, as defined below, of owning and disposing of our shares or ADSs. It applies to you only if you hold your shares or ADSs as capital assets for tax purposes. This section may not apply to you if you are a member of a special class of holders subject to special rules, including:

- a dealer in securities,
- a trader in securities that elects to use a mark-to-market method of accounting
    for its securities holdings,
- a tax-exempt organization,
- a life insurance company,
- a person liable for alternative minimum tax,
- a person that actually or constructively owns 5% or more of the voting stock
    or the share capital of Thomson,
- a person that holds shares or ADSs as part of a straddle or a hedging or conversion
    transaction, or
- a U.S. holder (as defined below) whose functional currency is not the U.S.
    dollar.

This section is based on the Internal Revenue Code of 1986, as amended (the Code), its legislative history, existing and proposed regulations, published rulings and court decisions, and the laws of France, all as currently in effect, as well as on the income tax treaty between the United States of America and France (the Treaty). These laws are subject to change, possibly on a retroactive basis.

In addition, this section is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms. In general, for United States federal income tax and French tax purposes, if you hold ADRs evidencing ADSs, you will be treated as the owner of the shares represented by those ADRs. Exchanges of shares for ADRs, and ADRs for shares generally will not be subject to United States federal income or to French tax.

You are a U.S. holder if you are a beneficial owner of shares or ADSs and you are for U.S. federal income tax purposes:

- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax regardless
    of its source, or
- a trust if a United States court can exercise primary supervision over the
    trusts administration and one or more United States persons are authorized
    to control all substantial decisions of the trust.

You should consult your own tax advisor regarding the United States federal,
  state and local and the French and other tax consequences of owning and disposing
  of shares and ADSs in your particular circumstances, in particular if you are
  eligible for the benefits of the Treaty.

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Taxation of Dividends

> French Taxation

As discussed in more detail under French Taxation, dividends paid by French companies to Non-French Resident Holders generally are subject to French withholding tax at a 25% rate. Such Non-French Resident Holders were generally not eligible for the benefit of the avoir fiscal(with respect to dividends received prior to January 1, 2005) and will not be eligible for the crédit dimpôt(with respect to dividends received as of January 1, 2005).

However, U.S. holders are entitled to a reduced rate of withholding at a rate of 15% with respect to dividends, subject to the satisfaction of certain requirements described below.

U.S. Holders are no longer entitled to any refund of the avoir fiscalor
  the précomptewith respect to dividends distributed in 2005, as
  both the avoir fiscaland the précomptehave been repealed
  pursuant to the Finance Law. However, U.S. holders who are individuals remain
  entitled to a refund of the avoir fiscalwith respect to dividends paid
  to them in 2004, even if the avoir fiscalis, in practice, refunded in
  2005. Therefore, U.S. holders who are individuals that received dividends in
  2004 are entitled to an avoir fiscalrefund equal to 50% of the dividends
  (subject to a deduction of the 15% withholding tax), provided that such U.S.
  holders complied with the procedural rules applicable at the dividend payment
  date.

As discussed in more detail under French Taxation, French Resident Holders who receive dividends paid on or after January 1, 2005 by French companies may be entitled to the crédit dimpôtequal to 50% of the dividends with an overall annual cap of 230 or 115, depending on the marital status of the individual. Neither French law nor the Administrative Guideline specifies whether Non-French Resident Holders are eligible for the newly established crédit dimpôt. It is therefore not clear whether the relevant French tax authorities would agree with an analysis which would consider the crédit dimpôtto be available to qualifying Non-French Resident Holders to the same extent that the avoir fiscal was available.

> French Procedure to Claim Treaty Benefits

Under the Treaty, the rate of the withholding tax will be reduced to 15%, provided that certain requirements are satisfied.

The requirements provided by the Administrative Guideline and referred to in more detail under French Taxation above apply to a U.S. holder, although the U.S. Internal Revenue Service (the IRS) is not required to certify the certificate of residence, provided that (i) the U.S. holder provides the U.S. financial institution managing such holders securities account a certificate of residence conforming with the template attached to the Administrative Guideline and (ii) the U.S. financial institution managing the U.S. holders securities account in the United States certifies to the French paying agent that the U.S. holder complies with all the requirements for obtaining the reduced rate set forth in the Administrative Guidelines.  If the certification by the U.S. financial institution managing the U.S. holders securities account in the United States is not obtained, the Internal Revenue Service should certify the abovementioned certificate of residence and, upon certification, the U.S. Holder should furnish it to the French paying agent.

Where the U.S. holders identity and tax residence are known by the French paying agent, the latter may apply the 15% withholding tax rate to dividends it pays to such U.S. holder even if the U.S. holder does not comply with the requirements set forth in the preceding paragraph.

In all cases, application of the 15% withholding tax rate at source will be available only if the appropriate forms mentioned in the Administrative Guideline are duly sent to the paying agent before the dividend payment date.

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A U.S. holder that is not eligible for the 15% withholding tax rate at source may apply for a refund of taxes withheld that were in excess of the 15% rate provided that it furnishes to the French paying agent an application for refund on form RF 1A EU-No 5052 certified by the U.S. financial institution managing the U.S. holders securities account before December 31 of the second year following the date of payment of the withholding tax at the 25% rate to the French tax authorities, according to the requirements provided by the February 25, 2005 Administrative Guideline. Any French withholding tax refund is generally expected to be paid within twelve months from the filing of form RF 1A EU-No 5052. However, it will not be paid before January 15 of the year following the year in which the dividend was paid.

Copies of the form RF 1A EU-No 5052, together with instructions, are available from the U.S. Internal Revenue Service. Certificates of residence mentioned in the Administrative Guideline may also be available from the U.S. Internal Revenue Service and the French Centre des Impôts des Non-Résidents at 9, rue dUzès, 75094 Paris Cedex 2, France. Information regarding the identity and address of the paying agent will be available from the Company.

US Pension Funds and other tax-exempt entities created and operating their activities in accordance with the provisions of Sections 401(a), 403(b), 457 or 501(c) (3) of the Code are subject to the same general filing requirements except that, in addition, they have to provide a certificate issued by the IRS or any other document stating that they have been created and are operating their activities in accordance with the provisions of the above-mentioned Sections of the Code. This certificate must be provided only once after the first application for the 15% withholding tax rate at source and at the specific request of the French Tax Authorities.

Similarly, regulated companies such as RICs, REITs and REMICs (Regulated Companies) will have to send to the financial institution managing their securities account a certification from the IRS indicating that they are classified as a Regulated Company under the relevant sections of the Code. This certification must be produced each year.

The Depository is obligated to provide certificates of residence together with instructions to all U.S. holders of ADRs registered with the Depository. The Depository is also obligated to use reasonable efforts to follow the procedures established by the French tax authorities for U.S. holders to benefit from the 15% French withholding tax rate at source or, if the French paying agent withheld at the 25% rate, recover the excess 10%, and obtain, with respect to dividend distributions made in 2004 to U.S. holders who are individuals, the refund of the avoir fiscal, in accordance with the procedures established by the French tax authorities. To affect such benefit, recovery and/or refund, the Depository is obligated to advise such U.S. holders to return the relevant form and certificate to it properly completed and executed. The Depository is obligated to cause properly completed forms and certificates to be filed with the appropriate French tax authorities. Additionally the Depository is obligated to transfer to the U.S. holders any resulting remittance as soon as practicable in U.S. dollars.

> United States Federal Income Taxation

Subject to the passive foreign investment company rules discussed below, if you are a U.S. Holder, you must include in your gross income the gross amount of any dividend paid by us out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes and including any avoir fiscal, précompte or crédit dimpôt to which you may be entitled under the Treaty). You must include any French tax withheld from the dividend payment in this gross amount even though you do not in fact receive it.  Dividends paid to a non corporate U.S. holder before January 1, 2009 that constitute qualified dividend income will be taxable to the holder at a maximum rate of 15%, provided that the holder has a holding period in the shares or ADSs of more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid by Thomson with respect to the shares or ADSs will generally be qualified dividend income.

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You must include the dividend in income when you, in the case of shares, or the Depositary, in the case of ADSs, receive the dividend, actually or constructively. The dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from other United States corporations. The amount of the dividend distribution that you must include in your income as a U.S. Holder will be the U.S. dollar value of the euro payments made, determined at the spot euro/U.S. dollar rate on the date the dividend distribution is includible in your income, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Distributions in excess of current and accumulated earnings and profits, as determined for United States federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the shares or ADSs and thereafter as capital gain.

Subject to generally applicable limitations, the French tax withheld in accordance with the Treaty and paid over to France will be creditable against your United States federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate. To the extent a refund of the tax withheld is available to you under French law or under the Treaty, the amount of tax withheld that is refundable will not be eligible for credit against your United States federal income tax liability. Refer to the caption Taxation of DividendsFrench Procedure to Claim the Treaty Benefits above for the procedures for obtaining a tax refund.

Dividends will be income from sources outside the United States, but generally will be passive income or financial services income which is treated separately from other types of income for purposes of computing the foreign tax credit allowable to you. Special rules will apply in determining the foreign tax credit limitation with respect to dividends that are subject to the maximum 15% tax rate.

Taxation of Capital Gains

> French Taxation

If you are eligible for the benefits of the Treaty, you will not be subject to French tax on any gain derived from the sale or exchange of our shares, unless the gain is effectively connected with a permanent establishment or fixed base maintained by you in France.

> United States Federal Income Taxation

Subject to the passive foreign investment company rules discussed below, if you are a U.S. holder and you sell or otherwise dispose of your shares or ADSs, you will recognize capital gain or loss for United States federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your shares or ADSs. Capital gain of a non-corporate U.S. holder that is recognized before January 1, 2009 is generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

French Gift and Inheritance Tax

Under the estate and gift tax convention between the United States and France, a transfer of shares by gift or by reason of the death of a U.S. Holder entitled to benefits under that convention will not be subject to French gift or inheritance tax, so long as the donor or decedent was not domiciled in France

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at the time of the transfer, and the shares were not used or held for use in the conduct of a business or profession through a permanent establishment or fixed base in France.

Passive Foreign Investment Company Status

We believe that our shares and ADSs should not be treated as stock of a PFIC, for United States federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If we were to become a PFIC, the tax treatment of distributions on our shares or ADSs and of any gains realized upon the disposition of our shares or ADSs may be less favorable than as described herein. You should consult your own tax advisors regarding the PFIC rules and their effect on you if you hold shares or ADSs.

F  Documents on Display

Thomson files annual, periodic, and other reports and information with the
  Securities and Exchange Commission. You may read and copy any reports, statements
  or other information Thomson files with the Securities and Exchange Commission
  at the Securities and Exchange Commissions public reference rooms by calling
  the Securities and Exchange Commission for more information at 1-800-SEC-0330.
  All of the Companys Securities and Exchange Commission filings made after
  December 31, 2001 are available to the public at the Securities and Exchange
  Commission web site at http://www.sec.gov and from certain commercial document
  retrieval services. Thomsons website at http://www.thomson.net includes
  information about our businesses and also includes recent press releases and
  other publications of Thomson. You may also read and copy any document the Company
  files with the Securities and Exchange Commission at the offices of The New
  York Stock Exchange, 20 Broad Street, New York, New York 10005.

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ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Thomsons financial market risks are managed centrally by its corporate treasury department in France. The corporate treasury has reporting to it two regional treasury departments in Indianapolis, United States, and in Hong Kong.  The treasury department is part of the corporate finance department and reports to the CFO. Total staffing of treasury is 15 persons.

Management of financial risks by the corporate treasury is done in accordance
  with corporate policies and procedures which cover, among other aspects, responsibilities,
  authorizations, limits, permitted instruments and reporting. All financial market
  risks are monitored continually and reported regularly to the Chief Financial
  Officer, to the Executive Committee and to the Audit Committee of the Board
  of Directors via various reports showing the companys exposures to these
  risks with details of the transactions undertaken to reduce these risks.

Thomson faces financial market risks primarily due to exchange rate fluctuations, interest rate fluctuations, stock price fluctuations and liquidity risk. To reduce interest rate and currency exchange rate risk we enter into hedging transactions. To reduce liquidity risk we put in place various long-term and committed financings.

With regard to derivative instruments, our policy is not to use derivatives for any purpose other than for hedging our commercial and financial exposures.  This policy does not permit us or our subsidiaries to take speculative market positions.

We may also use derivatives to reduce our exposure to stock price fluctuations of certain of our investments in listed companies.

In order to reduce our exposure to interest rate and currency fluctuations, we use interest and currency rate derivative instruments in accordance with market conditions and within the framework of procedures established by us.

All interest rate transactions are executed centrally by the corporate treasury department in France. Foreign exchange transactions are carried out, depending on local regulations or to permit practical access to the market, either by the corporate treasury department in France or by the Hong Kong regional treasury.  Foreign exchange transactions for Mexican affiliates are executed by the U.S. regional treasury.

Financial instruments are only used to hedge existing or anticipated financial and commercial exposures or investments.  We undertake this hedging within the over-the-counter market with a limited number of highly rated counterparties.

Liquidity risk is also managed centrally by the corporate treasury department in accordance with financial policies approved by the Chief Financial Officer and the Executive Committee. All long-term and committed financings are carried out by the corporate treasury department in France.

Exchange Rate Fluctuations

Translation Risks

The assets, liabilities, revenues and expenses of our operating entities are denominated in various currencies, principally U.S. dollars.  Our consolidated financial statements are presented in euro. Thus, assets, liabilities, revenues and expenses denominated in currencies other than the euro must be translated into euro at the applicable exchange rate to be included in our financial statements.

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If the euro increases in value against a currency, the value in euro of assets, liabilities, revenues and expenses originally recorded in such other currency will decrease. Conversely, if the euro decreases in value against a currency, the value in euro of assets, liabilities, revenues and expenses originally recorded in such other currency will increase. Thus, increases and decreases in the value of the euro can have an impact on the value in euro of our non-euro assets, liabilities, revenues and expenses, even if the value of these items has not changed in their original currency.

Our main translation risk concerns the sales and income of our subsidiaries that report in U.S. dollars as well as our investments in these subsidiaries.

Due to the long-term nature of our investments in foreign subsidiaries, our
  policy is not to hedge such exposures. Our principal foreign investment is the
  shares we hold in our U.S. subsidiary, Thomson Inc., the book value of which
  was 1,735 million at December 31, 2004. The variations in the euro value
  of this investment as well as those in our other foreign subsidiaries are booked
  under Cumulative translation adjustment on our balance sheet.

Transaction Risks

> Commercial Exposure

Our foreign exchange risk exposure mainly arises from purchase and sale transactions
  by our subsidiaries in currencies other than their functional currencies. The
  principal currencies to which we had significant exposure in 2004 were the U.S.
  dollar, Chinese yuan, Japanese yen, British pound, Canadian dollar, Mexican
  peso, Singapore dollar, Hong Kong dollar and Polish zloty.

In order to reduce the currency exposure on commercial transactions, our subsidiaries seek to denominate their costs either in the same currencies as their sales or in specific cases in currencies that we believe are not likely to increase in value compared with the currencies in which sales are made. Our policy is for our subsidiaries to report regularly their projected foreign currency needs and receipts to the corporate treasury department, which then reduces the overall exposure by netting purchases and sales in each currency on a global basis. Exposures that remain after this process are hedged with banks using foreign currency forward contracts and occasionally foreign currency options.

For our products with a short business cycle, our policy is to hedge on a short-term basis up to six months. For our products and services which are sold on a longer-term basis and in particular our Licensing activities we may hedge for periods greater than six months.

In most cases, our corporate treasury department will hedge the full amount of our estimated net exposure with banks, thereby eliminating the currency risk.  In exceptional cases in which it anticipates a favorable currency exchange rate movement, the corporate treasury department may leave a portion of our estimated exposure unhedged.

> Financial exposure

Our general policy is for subsidiaries to borrow and invest excess cash in the same currency as their functional currency. In certain emerging countries with currencies which may depreciate, we may, however, elect to maintain deposits in U.S. dollars or euros rather than the subsidiaries functional currency. These transactions are performed through the corporate treasury department to the extent practicable. In order to balance the currencies that the corporate treasury department borrows (both internally and externally) with currencies that we lend to affiliates, we enter into currency swaps. At December 31, 2004, these swaps were primarily undertaken to swap euros, both deposited internally with and borrowed externally by our corporate treasury, against U.S. dollars lent out by our corporate treasury department.

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Impact on Thomson of exchange rate fluctuations

The majority of our net sales as well as a significant portion of our operating income are in subsidiaries that use the U.S. dollar as their functional currency. This reflects our strong presence in the United States, particularly with our Consumer Products and Content and Networks divisions. As a result, the fluctuations of the U.S. dollar/euro exchange rate have a significant translation impact on our net sales and to a lesser extent on our operating income.

In 2004, the exchange rate fluctuations had a negative translation impact
  of 399 on our sales and of  5 million on our operating income,
  following a 7% decline in the U.S. dollar/euro rate over the year 2004. We estimate
  that this sensitivity has not significantly changed since the end of 2004. As
  described above, we do not hedge this translation exposure.

Further, exchange rate fluctuations on our commercial exposures also impact
  our net sales and operating income. The impact, however, is significantly less
  than the translation impact. For our sales, the impact on commercial exposures
  is less important than the translation impact because 80-85% of the sales of
  our subsidiaries are in their domestic currency.

In addition, the two main commercial exposures are our European Licensing activities receipts in U.S. dollars and purchases in U.S. dollars made in Asia (principally finished products) by our European marketing and sales entities within the Consumer products division. The effects of these exposures partially compensate each other.

Future Cash Flows from Currency Hedging

The tables below provide an indication of the estimated future cash flows (in euro equivalents) from our existing currency hedging instruments at December 31, 2004, shown by maturity dates and calculated based on the applicable forward rate in each contract.

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|                           |                 |  |      |  |      |  |      |  |            | 
|-------------------------- | --------------- |  | ---- |  | ---- |  | ---- |  | ---------- | 
|At December 31, 2003       | 2005            |  | 2006 |  | 2007 |  | 2008 |  | Thereafter | 
|                           |                 |  |      |  |      |  |      |  |            | 
|                           | ( in millions) | 
|Commercial Transactions    |                 |  |      |  |      |  |      |  |            | 
|Forward purchases:         |                 |  |      |  |      |  |      |  |            | 
|Euro                       | 478             |  | 26   |  |     |  |     |  |           | 
|U.S. dollar                | 375             |  |     |  |     |  |     |  |           | 
|Polish zloty               | 61              |  |     |  |     |  |     |  |           | 
|Mexican peso               | 33              |  |     |  |     |  |     |  |           | 
|British pound              | 130             |  |     |  |     |  |     |  |           | 
|Singaporean dollar         | 26              |  |     |  |     |  |     |  |           | 
|Hong Kong dollar           | 22              |  |     |  |     |  |     |  |           | 
|Other currencies           | 7               |  |     |  |     |  |     |  |           | 
|Total                      | 1,132           |  | 26   |  |     |  |     |  |           | 
|                           |                 |  |      |  |      |  |      |  |            | 
|                           |                 |  |      |  |      |  |      |  |            | 
|Forward sales:             |                 |  |      |  |      |  |      |  |            | 
|Euro                       | 475             |  |     |  |     |  |     |  |           | 
|U.S. dollar                | 415             |  | 25   |  |     |  |     |  |           | 
|British pound              | 83              |  |     |  |     |  |     |  |           | 
|Japanese yen               | 14              |  |     |  |     |  |     |  |           | 
|Canadian dollar            | 52              |  |     |  |     |  |     |  |           | 
|Polish zloty               | 57              |  |     |  |     |  |     |  |           | 
|Other currencies           | 36              |  |     |  |     |  |     |  |           | 
|Total                      | 1,132           |  | 25   |  |     |  |     |  |           | 
|                           |                 |  |      |  |      |  |      |  |            | 
|                           |                 |  |      |  |      |  |      |  |            | 
|Financial Transactions     |                 |  |      |  |      |  |      |  |            | 
|Forward purchases:         |                 |  |      |  |      |  |      |  |            | 
|Euro                       | 1,368           |  |     |  |     |  |     |  |           | 
|U.S. dollar                | 202             |  |     |  |     |  |     |  |           | 
|British pound              | 52              |  |     |  |     |  |     |  |           | 
|Polish zloty               | 28              |  |     |  |     |  |     |  |           | 
|Other currencies           | 29              |  |     |  |     |  |     |  |           | 
|Total                      | 1,679           |  |     |  |     |  |     |  |           | 
|                           |                 |  |      |  |      |  |      |  |            | 
|                           |                 |  |      |  |      |  |      |  |            | 
|Forward sales:             |                 |  |      |  |      |  |      |  |            | 
|U.S. dollar                | 1,120           |  |     |  |     |  |     |  |           | 
|Euro                       | 310             |  |     |  |     |  |     |  |           | 
|Polish zloty               | 44              |  |     |  |     |  |     |  |           | 
|British pound              | 69              |  |     |  |     |  |     |  |           | 
|Swiss franc                | 23              |  |     |  |     |  |     |  |           | 
|Japanese Yen               | 15              |  |     |  |     |  |     |  |           | 
|Total                      | 1,581           |  |     |  |     |  |     |  |           | 
|                           |                 |  |      |  |      |  |      |  |            | 
|                           |                 |  |      |  |      |  |      |  |            | 
|Interest Rate Fluctuations |                 |  |      |  |      |  |      |  |            | 

We are mainly exposed to interest rate risk on our deposits and indebtedness. In order to reduce this exposure, we enter into interest rate swaps, forward rate agreements and caps.

Our policy is for all subsidiaries to borrow from, and invest excess cash with, our corporate treasury department, which in turn satisfies our net cash needs by borrowing from external sources. Subsidiaries that are unable to enter into transactions with our corporate treasury department because of local laws or regulations borrow from or invest directly with local banks in accordance with the policies and rules established by the corporate treasury department.

In accordance with our corporate policies and procedures, the corporate treasury department manages our financings, and hedges interest rate risk exposure in accordance with target ratios of fixed to floating debt, which are set periodically as a function of market conditions.

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In 2004, our average financial debt amounted to 2,302 million, on average 30% at floating rates, meaning interest rates that are fixed for a period of less than one year, taking into account interest rate hedging operations.  Our average deposits in 2004 amounted to 1,532 million, 100% at floating rates.

In 2003, our average financial debt amounted to 1,914 million, on average 21% at floating rates, taking into account interest rate hedging operations, and our average deposits amounted to 1,334 million, 100% at floating rates.

In addition, we have recorded promissory notes in an average amount in 2004 of 109 million as Debt related to Technicolor acquisition.  Two synthetic leases, previously recorded off-balance sheet, were consolidated in 2004. The promissory notes were entirely at floating interest rates.

The table below presents the periods for which the interest rate of our interest rate sensitive assets and liabilities are fixed.  The amounts shown are those reflected in our consolidated financial statements and include principal and accrued interests at December 31, 2004.

|                                          | Amounts at December 31, 2004 with
      interest rate | 
|----------------------------------------- | ----------------------------------------------------- | 
|                                          | fixed for the following periods                       | 
|                                          |                                                       | 
|                                          | Less than                                             | 
|                                          | 1 year                                                | 
|                                          |                                                       | 
|                                          | ( in millions)                                       | 
|Convertible bonds                         | (587)                                                 | 
|Other long term debt                      | (204)                                                 | 
|Short term debt (excluding the short-term |                                                       | 
|component of convertible bonds)           | (317)                                                 | 
|Total Debt                                | (1,108)                                               | 
|Promissory notes                          | (84)                                                  | 
|Deposits                                  | 1,906                                                 | 
|Net positions before hedging              | 714                                                   | 
|Interest rate hedging                     | (195)                                                 | 
|Net positions after hedging               | 519                                                   | 
|                                          |                                                       | 

In 2004, applying a 1% point variation in interest rates to the less than one year net position would have a maximum annual net impact of approximately 5.1 million.

For further information regarding our financial debt, please refer to Note 20 to our consolidated financial statements.

Interest Rate Hedging Cash Flows

The table below provides an indication of the estimated future cash flows existing at December 31, 2004 from our interest rate hedging instruments and the related hedged assets and liabilities. These cash flows are calculated based, as applicable, on the market interest rates and on the applicable spot currency exchange rates at December 31, 2004 and are the estimated interest flows until maturity of the transaction.

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|                                    |                |  |        |  |        |  |        |  |        |  |            | 
|----------------------------------- | -------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ---------- | 
|At December 31, 2004                | 2005           |  | 2006   |  | 2007   |  | 2008   |  | 2009   |  | Thereafter | 
|                                    |                |  |        |  |        |  |        |  |        |  |            | 
|                                    | (in millions) | 
|Interest-rate swaps                 |                |  |        |  |        |  |        |  |        |  |            | 
|Fixed rates:                        |                |  |        |  |        |  |        |  |        |  |            | 
|Lender (rates of Senior Notes)      | 10.1           |  | 10.1   |  | 10.1   |  | 10.1   |  | 10.1   |  | 48.9       | 
|Floating rates:                     |                |  |        |  |        |  |        |  |        |  |            | 
|Borrower (3 month LIBOR)            | (5.2)          |  | (5.2)  |  | (5.2)  |  | (5.2)  |  | (5.2)  |  | (24.3)     | 
|Borrower (6 month £-LIBOR)          | (2.8)          |  | (2.8)  |  | (2.8)  |  | (2.8)  |  | (2.8)  |  | (11.0)     | 
|Total interest-rate swaps           | 2.1            |  | 2.1    |  | 2.1    |  | 2.1    |  | 2.1    |  | 13.6       | 
|Long-term debt                      |                |  |        |  |        |  |        |  |        |  |            | 
|Fixed rate                          | (51.3)         |  | (45.3) |  | (28.2) |  | (28.2) |  | (28.1) |  | (78.6)     | 
|Floating rates (1 month LIBOR)      | (3.8)          |  | (3.8)  |  | (1.3)  |  |       |  |       |  |           | 
|Floating rates (3 month LIBOR)      | (1.1)          |  | (1.1)  |  | (1.1)  |  | (1.1)  |  | (1.1)  |  | (1.1)      | 
|Total long-term debt                | (56.2)         |  | (50.2) |  | (30.6) |  | (29.3) |  | (29.2) |  | (79.7)     | 
|Short-term debt and bank overdrafts |                |  |        |  |        |  |        |  |        |  |            | 
|net of cash and cash equivalents    |                |  |        |  |        |  |        |  |        |  |            | 
|(floating rate mainly EONIA         |                |  |        |  |        |  |        |  |        |  |            | 
|and 1-month LIBOR)                  | 0.7            |  |       |  |       |  |       |  |       |  |           | 
|                                    |                |  |        |  |        |  |        |  |        |  |            | 
|                                    |                |  |        |  |        |  |        |  |        |  |            | 
|Liquidity Situation                 |                |  |        |  |        |  |        |  |        |  |            | 

In order to assure a continued uninterrupted access to the financial markets at attractive conditions and to protect against market liquidity shortages we maintain prudent credit policies which include:

- keeping a moderate level of net debt to equity,
- maintaining at all times strong cash flow to debt and interest coverage ratios,
- having sufficient liquidity available including committed back-up credit facilities,
    and
- financing with a significant portion of long term debt.

In July of 2002 Standard & Poors announced a long-term credit rating
  on our senior unsecured debt facilities and convertible bonds of BBB+ and a
  short-term rating of A-2 with stable outlook. This rating was reconfirmed most
  recently in March 2005. In October 2004, Moodys assigned a long-term issuer
  rating to Thomson S.A. of Baa1 with a stable outlook.

The table below summarizes our liquidity situation at December 31, 2004.

|Debt instrument or credit facility | Type of       |  | Amount         |  | Drawn at |          | First maturity |                   | Existence   
|---------------------------------- | ------------- |  | -------------- |  | -------- | -------- | -------------- | ----------------- | ------------
|                                   | interest rate |  | (in millions) |  | December |          |                |                   | of hedges(1)
|                                   |               |  |                |  |          | 31, 2004 |                |                   |             
|                                   |               |  |                |  |          |          |                |                   |             
|Convertible bond                   | fixed         |  | 659            |  |          | 659      |                | Jan. 1, 2006      |             
|Convertible bond                   | fixed         |  | 367            |  |          | 367      |                | Sep. 16, 2008 (3) |             
|Senior notes                       | fixed         |  | 346            |  |          | 346      |                | June 30, 2010     |             
|Convertible bond                   | fixed         |  | 13             |  |          | 13       |                | Jan. 1, 2008      |             
|Other long-term debt               | various       |  | 212            |  |          | 212      |                | Various           |             
|Short-term portion of conv. bond   | fixed         |  | 587            |  |          | 587      |                | Jan. 1, 2005 (4)  |             
|Other short-term debt              | floating      |  | 317            |  |          | 317      |                | 0 to 3 months     |             
|TOTAL DEBT                         |               |  | 2,501          |  |          | 2,501    |                |                   |             
|                                   |               |  |                |  |          |          |                |                   |             
|Available cash and deposits (6)    | floating      |  | 1,906          |  |          | -        |                | 0 to 1 month      |             
|Committed credit facility          | floating      |  | 1,750          |  |          | -        |                | July 5, 2009      |             
|Other committed credit facilities  | floating      |  | 51             |  |          | 51       |                | 1 to 2 years      |             
|Receivables securitization         | floating      |  | 147            |  |          | -        |                | Dec. 20, 2005 (7) |             
|TOTAL LIQUIDITY                    |               |  | 3,854          |  |          | 51       |                |                   |             
|                                   |               |  |                |  |          |          |                |                   |             

|(1) | Interest rate hedges covering debt instrument or credit facility.               
|--- | --------------------------------------------------------------------------------
|(2) |  195 million swapped to floating rate.                                         
|(3) | Date of investor put; normal 3% maturity of this convertible
      bond is 2010.

173

---

|(4) | Date of investor put; normal 1% maturity of this convertible
      bond is 2008.
|--- | --------------------------------------------------------------------------------
|(5) | Interest rate cap.                                                              
|(6) | Cash and deposits less blocked deposits except deposits guaranteeing
      debt.
|(7) | Cancelled in March 2005.                                                        

Several of Thomsons financing agreements have covenants pertaining to Thomsons consolidated financial situation.  However, Thomson has no financing agreements with rating triggers.  These financings are:

- the senior notes issued privately to institutional investors in a total amount of 346 million and a44 million Mexican capital lease which are subject to two financial covenants: maintenance of a minimum ratio of operating income to interest expense of 3 to 1 and a maximum ratio of net debt to net worth of 1 to 1;
- the 1.75 billion credit facility which is subject to one financial covenant: maintenance of a minimum ratio of operating income to interest expense of 3 to 1; and
- the 165 million Mexican synthetic lease (which was unwound and repaid on January 24, 2005) which was subject to two financial covenants: maintenance of a minimum ratio of EBIT (earnings before interest and tax) to net interest expense of 5 to 1 and maintenance of a maximum ratio of balance sheet net debt to net worth of 0.7 to 1.

At December 31, 2004, Thomson is in compliance with all of these financial covenants.

Fair value of financial instruments

The fair value of swap contracts is calculated by discounting the future cash flows. The fair value of forward exchange contracts is computed by discounting the difference between the contract and the market forward rate and multiplying it by the nominal amount. The fair value of currency options is calculated using standard option pricing software and verified with banks. The fair value of all current assets and liabilities (trade accounts receivable and payable, short term loans and debt, cash, bank overdrafts) is considered to be equivalent to net book value due to their short-term maturities. The fair value of financial debt is determined by estimating future cash flows on a borrowing-by-borrowing basis and discounting these future cash flows using the borrowing rates at year-end for similar types of borrowing arrangements. The fair value of listed investment securities is calculated using their last known market price at year-end.

For additional information regarding our financial instruments and management of market risks, please refer to Note 25 to our consolidated financial statements.

Risk of share price variation

On March 31, 2005, Thomson held 2,544,116 treasury shares representing 0.9%
  of the capital stock. These shares have been acquired since October 25, 2004
  at an average price of 18.82. These treasury shares have been eliminated
  from shareholders equity: thus, variations in share price have no effect
  on the Groups consolidated income statement. In the event of a disposal
  of such shares, the effect on the consolidated accounts would be an increase
  in cash equal to the value of the selling price, with a corresponding increase
  in shareholders equity of the same amount. Consequently, in the hypothesis
  of a sale of all treasury shares at a share price of 20.80 (share price
  as of March 31, 2005), the effect on the Groups consolidated accounts
  would be an increase in cash of 52.9 million, with a corresponding increase
  in shareholders equity of the same amount. A decrease of 10% of the share
  price in the event of such sale would have the effect of increasing the cash
  received by only  47.6 million, with the Groups shareholders
  equity increasing by the same amount.

174

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Thomson
  Group

In Thomsons statutory accounts, a decrease of 10% in the share price compared to the share price as of March 31, 2005 (20.80) would have the effect of decreasing by 5.3 million the net book value of the treasury shares, which are classified as financial assets in the balance sheet, with a corresponding depreciation in financial investments in the income statement.

In addition, Note 10 of our consolidated financial statements presents gross
  value, depreciation and net book value of the Groups investments in listed
  and non-listed securities. As of December 31, 2004, the net book value of the
  equity securities held by the Group amounted to 113 million. As of December
  31, 2004, the market value of the listed securities is equal to their net book
  value as indicated in Note 25 to our consolidated financial statements. As described
  in Note 1 to our consolidated financial statements, we may also use derivatives
  to reduce our exposure to share price variations of certain of our investments
  in listed companies.

ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

175

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PART II

ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS

None.

ITEM 15 - CONTROLS AND PROCEDURES

The directors, the Chief Executive Officer and the Chief Financial Officer consider that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. The Groups management is required to apply judgment in evaluating the risks facing the Group in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materializing, in identifying the Companys ability to reduce the incidence and impact on the business of risks that do materialize and in ensuring the costs of operating particular controls are proportionate to the benefit.

Under the supervision and with the participation of our senior management at the corporate and business unit level, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of Thomsons disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this annual report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that these disclosure controls and procedures were effective as of December 31, 2004.

There occurred no changes in our internal control over financial reporting during the fiscal year 2004 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

ITEM 16A - AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that two members of our Audit Committee, Eric Bourdais de Charbonnière and Paul Murray, are audit committee financial experts as defined in Item 16A of Form 20-F.

ITEM 16B - CODE OF ETHICS

Thomson has not yet adopted a code of ethics applicable to its senior officers which satisfies the definition of code of ethics in Item 16B of Form 20-F.  Thomson is, however, in the process of developing a code of ethics that complies with the criteria in Item 16B of Form 20-F and will adopt such code and make it available to the public in 2005.

In 2000, Thomson adopted an Ethics Charter, signed by the Groups 471
  principal managers, which, although not within the definition of code
  of ethics in Item 16B of Form 20-F, requires its principal managers to
  adhere to ten general principles, including the avoidance of potential conflicts
  of interest and the respect and protection of shareholder value. This Ethics
  Charter is periodically re-affirmed by the senior management of Thomson. (See
  Item 6Directors, Senior Management and EmployeesGeneral Control
  EnvironmentEthical values and principles of conduct for the Groups
  managers.)

176

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Thomson
  Group

ITEM 16C - PRINCIPAL ACCOUNTANT FEES AND SERVICES

|Accountant Fees and Services |                   |  |                           |  |               |  |        | 
|---------------------------- | ----------------- |  | ------------------------- |  | ------------- |  | ------ | 
|                             |                   |  |                           |  |               |  |        | 
|( in thousands)             | Mazars et Guérard |  | Barbier Frinault & Autres | 
|                             |                   |  |                           |  | Ernst & Young | 
|                             |                   |  |                           |  |               | 
|                             | 2003              |  | 2004                      |  | 2003          |  | 2004   | 
|                             |                   |  |                           |  |               |  |        | 
|                             |                   |  |                           |  |               |  |        | 
|Audit Fees (1)               | 2,323             |  | 2,478                     |  | 7,558         |  | 10,487 | 
|Audit-Related Fees (1)       | 206               |  | 763                       |  | 1,039         |  | 3,543  | 
|Tax Fees                     | 93                |  | 19                        |  | 626           |  | 452    | 
|Other Fees                   | 50                |  | 1,104                     |  | 1,502         |  | 1,924  | 
|TOTAL                        | 2,672             |  | 4,364                     |  | 10,724        |  | 16,406 | 
|                             |                   |  |                           |  |               |  |        | 

|(1) | The increase in audit and audit-related fees
      in 2004 is primarily due to the implementation of new IFRS accounting standards
      and the accounting rules in connection with the Sarbanes-Oxley Act of 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Audit Feesare the aggregate fees billed by Barbier Frinault & Autres
  (Ernst & Young) and Mazars et Guérard for professional services in
  connection with the audit of the Companys consolidated annual financial
  statements and services normally provided by these auditors in connection with
  statutory and regulatory filings or engagements, including reviews of interim
  financial statements, as well as audits of statutory financial statements of
  the Company and its subsidiaries.

Audit-RelatedFees consist of fees billed for services related to consultations concerning financial accounting and reporting standards and due diligence in connection with acquisitions.

Tax Feesinclude fees billed for tax compliance and for tax advice on actual or contemplated transactions, expatriate employee tax services and transfer pricing studies.

Other Feesinclude human resource consulting for cost containment, vendor assessments, compliance risk assessment and reward design and implementation.

Audit Committee Pre-Approval Policies

In April 2005, Thomsons Board of Directors adopted a new policy for Pre-Approval
  of Audit and Non-Audit Services provided by the Independent Registered Public
  Accounting Firm (the Policy) that performs the role of External Auditor of
  Thomson. This Policy provides for non audit services to be either: (a) authorized
  by the Audit Committee (the Committee) under a policy pre-approval that approves
  specific categories of non-audit services and the value of those services, provided
  the Committee is informed of each service provided (policy pre-approval).
  Any policy pre-approvals will be valid for 12 months from the date of pre-approval,
  unless the Committee provides otherwise; or (b) specifically pre-approved (i)
  by the Committee or (ii) by any member(s) of the Committee who are independent
  directors within the meaning of the Sarbanes-Oxley Act of 2002 and have been
  specifically designated and delegated authority by the Committee for that purpose,
  provided that the decisions regarding such pre-approvals of any such member(s)
  so delegated are presented to the full Committee at each scheduled meeting (the
  pre-approval pursuant to clauses (i) and (ii) being referred to as specific
  pre-approval).

Unless a type of service has received policy pre-approval, it will require
  specific pre-approval by the Committee or its designated member(s) (as described
  above) if it is to be provided by the Independent Registered Public Accounting
  Firm. Any proposed services exceeding pre-approved cost levels or budgeted amounts
  will also require specific pre-approval by the Committee, unless and until the
  Committee reviews and if appropriate revises the Policy. For both types of pre-approval,
  the Committee must consider whether such services are consistent with the SECs
  rules on auditor independence.

All requests or applications for services to be provided by the Independent
  Registered Public Accounting Firm that do not require specific pre-approval
  by the Committee will be submitted to the

177

---

Vice President, Corporate Audit and must include a detailed description of
  the services to be rendered. The Vice President, Corporate Audit and the Independent
  Registered Public Accounting Firm then determine jointly whether such services
  are included within the list of services that have received policy pre-approval
  of the Committee and whether their performance and their policy pre-approval
  is consistent with the SECs rules on auditor independence, and will inform
  the Committee promptly of any such services rendered or to be rendered by the
  independent auditor.

Requests or applications to provide services that require specific pre-approval by the Committee will be submitted to the Committee by both the independent auditor and the Vice President, Corporate Audit, and must include a joint statement as to whether, in their view, the request or application is consistent with the SECs rules on auditor independence.

During 2004, no audit-related fees, tax fees or other non-audit fees were approved by the Committee pursuant to the de minimisexception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

ITEM 16D  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E - PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
  PURCHASERS

The table below sets forth, for the periods indicated, the total number of
  shares purchased pursuant to publicly announced share repurchase programs approved
  by the AMF and authorized by our shareholders, the average price paid per share,
  and the maximum amount of payments that may be made by the Company for share
  repurchases under our programs, with respect to any purchase made by us or on
  our behalf, or by an affiliated purchaser or on behalf of an affiliated purchaser.

|Period               | Total Number |  | Average Price  |       | Total Number of     |  | Maximum Number     | 
|-------------------- | ------------ |  | -------------- | ----- | ------------------- |  | ------------------ | 
|                     | of Shares    |  | Paid per Share |       | Shares Purchased    |  | of Shares that May | 
|                     | Purchased    |  | (in)          |       | as Part of Publicly |  | Yet Be Purchased   | 
|                     |              |  |                |       |                     |  | Announced Plans    | 
|                     |              |  |                |       |                     |  | or Programs(1)     | 
|                     |              |  |                |       |                     |  |                    | 
|January 2004         | 0            |  |                | 0     |                     |  | 0                  | 
|February 2004        | 0            |  |                | 0     |                     |  | 0                  | 
|March 2004           | 0            |  |                | 0     |                     |  | 0                  | 
|April 2004           | 0            |  |                | 0     |                     |  | 0                  | 
|May 2004             | 0            |  |                | 0     |                     |  | 0                  | 
|June 2004            | 0            |  |                | 0     |                     |  | 0                  | 
|July 2004            | 0            |  |                | 0     |                     |  | 0                  | 
|August 2004          | 0            |  |                | 0     |                     |  | 0                  | 
|September 2004       | 1,074,247    |  |                | 16.43 |                     |  | 1,074,247          | 
|October 2004         | 290,000      |  |                | 17.16 |                     |  | 290,000            | 
|November 2004        | 2,517,763    |  |                | 17.89 |                     |  | 2,517,763          | 
|December 2004        | 275,000      |  |                | 19.21 |                     |  | 275,000            | 
|Total Full Year 2004 | 4,157,010    |  |                | 17.55 |                     |  | 4,157,010          | 
|                     |              |  |                |       |                     |  |                    | 

|(1) | Thomson's share repurchase plan was initially
      authorized by the annual shareholders meeting of May 7, 2004, and
      the prospectus (Note dinformation)related thereto was approved
      by the AMF under visa No. 04-263 on April 8, 2004. This share repurchase
      plan was renewed by the shareholders meeting of May 10, 2005, and
      the prospectus (Note dinformation)related thereto was approved
      by the AMF under visa No. 05-422 on May 19, 2005. This authorization expires
      on November 10, 2006. The authorization limits the Companys purchase
      of shares in the following manner: (a) the number of shares that the Company
      may buy during the term of the share repurchase plan may not exceed, at
      any time, 10% of the Companys share capital, this percentage applying
      to capital adjusted to reflect potential issuances subsequent to May 10,
      2005, and (b) the number of shares that the Company can hold at any time
      may not exceed 10% of the Companys share capital.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

178

---

Thomson
  Group

PART III

ITEM 17 - FINANCIAL STATEMENTS

Not applicable.

ITEM 18 - FINANCIAL STATEMENTS

The following consolidated financial statements and related notes, together with the report of the Independent Auditors, are filed as part of this Annual Report:

|Report of Independent Auditors                                                    | F-1 | 
|--------------------------------------------------------------------------------- | --- | 
|Consolidated Income Statement                                                     | F-2 | 
|Consolidated Balance Sheet                                                        | F-3 | 
|Consolidated Statements of Cash Flow                                              | F-5 | 
|Consolidated Statements of Changes in Shareholders Equity and Minority Interests | F-6 | 
|Notes to the Consolidated Financial Statements                                    | F-7 | 
|                                                                                  |     | 
|ITEM 19 - EXHIBITS                                                                |     | 
|                                                                                  |     | 
|The following exhibits are filed as part of this Annual Report:                   |     | 

- Exhibit 1: Bylaws of Thomson (Incorporated by reference to Exhibit 4.1 to
    the Companys Form S-8 filed on April 22, 2005)
- Exhibit 4: Combination Agreement among TCL, TCL international Holdings Limited
    and Thomson S.A., dated as of January 28, 2004 (Incorporated by reference
    to Exhibit 4 to the Companys Annual Report on Form 20-F for the year
    ended December 31, 2003)
- Exhibit 8: Subsidiaries (Refer to Note 30 to our consolidated financial statements)
- Exhibit 12.1: Chief Executive Officer Certification
- Exhibit 12.2: Chief Financial Officer Certification
- Exhibit 13.1: Chief Executive Officer Certification
- Exhibit 13.2: Chief Financial Officer Certification
- Exhibit 14: Consent of Barbier Frinault & Autres (Ernst and Young) and
    of Mazars & Guérard
- Exhibit 99.1: Excerpts of Thomsons report on Form 6-K submitted to the
    SEC on April 21, 2005.

179

---



Signature

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

| | THOMSON S.A.
      By: /s/ Frank E. Dangeard | 
| | -------------------------------------------- | 
| |                                              | 
| | Name: Frank E. Dangeard                      | 
| | Title: Chairman and Chief Executive Officer  | 

Dated: June 3, 2005



180

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| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

INDEX
  TO CONSOLIDATED FINANCIAL STATEMENTS

Financial statements of Thomson and its consolidated subsidiaries



|Report of independent auditors                             | F-1 | 
|---------------------------------------------------------- | --- | 
|                                                           |     | 
|Consolidated statements of operations                      |     | 
|year ended December 31, 2004                               | F-2 | 
|                                                           |     | 
|Consolidated balance sheets as of December 31, 2004        | F-3 | 
|                                                           |     | 
|Consolidated statements of cash flows                      |     | 
|year ended December 31, 2004                               | F-5 | 
|                                                           |     | 
|Consolidated statements of changes in shareholders equity |     | 
|and minority interests                                     | F-6 | 
|                                                           |     | 
|Notes to the consolidated financial statements             | F-7 | 

The accompanying notes are an integral part of the consolidated financial
  statements.

---







[This page intentionally left blank]







---



REPORT OF INDEPENDENT
  AUDITORS

To the Board of Directors and Shareholders of THOMSON

We have audited the accompanying consolidated balance sheets of THOMSON and
  subsidiaries ("THOMSON") as of December 31, 2004, 2003 and 2002, and the related
  consolidated statements of operations, changes in shareholders' equity and minority
  interests, and cash flows for the years then ended. These financial statements
  are the responsibility of THOMSONs management. Our responsibility is to express
  an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
  Accounting Oversight Board (United States). Those standards require that we
  plan and perform the audit to obtain reasonable assurance about whether the
  financial statements are free of material misstatement. We were not engaged
  to perform an audit of THOMSON's internal control over financial reporting.
  Our audits included consideration of internal control over financial reporting
  as a basis for designing audit procedures that are appropriate in the circumstances,
  but not for the purpose of expressing an opinion on the effectiveness of THOMSONs
  internal control over financial reporting. Accordingly, we express no such opinion.
  An audit also includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements, assessing the accounting principles
  used and significant estimates made by management, and evaluating the overall
  financial statement presentation. We believe that our audits provide a reasonable
  basis for our opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the consolidated financial
  position of THOMSON as of December 31, 2004, 2003 and 2002, and the consolidated
  results of its operations and its cash flows for the years then ended in conformity
  with accounting principles generally accepted in France.

Accounting principles generally accepted in France vary in certain
  significant respects from accounting principles generally accepted in the United
  States of America. Information relating to the nature and effect of such differences
  is presented in Note 31 and 32 to the consolidated financial statements.

Paris, France, March 4, 2005 except for the notes 31 and 32 for
  which the date is May 31, 2005.

|BARBIER FRINAULT & AUTRES 
      Ernst & Young 
      Jérôme Guirauden | MAZARS & GUERARD
      Mazars 
      Thierry de Bailliencourt
|---------------------------------------------------------------------- | -------------------------------------------------------------



The accompanying notes are an integral part of the consolidated
  financial statements.

F-1

---

CONSOLIDATED
  STATEMENTS OF OPERATIONS

|                                                        |      | Year ended December 31 ,           | 
|------------------------------------------------------- | ---- | ---------------------------------- | 
|                                                        | Note | 2002                               | 
|                                                        |      |                                    | 
|                                                        |      | ( in millions)                    | 
|                                                        |      |                                    | 
|Net sales                                               | (3)  | 10,187                             | 
|Cost of sales                                           |      | (7,761)                            | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Gross margin                                            |      | 2,426                              | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Selling, general and administrative expense             |      | (1,334)                            | 
|Research and development expense                        | (4)  | (374)                              | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Operating income                                        |      | 718                                | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Restructuring costs                                     | (18) | (141)                              | 
|Other income (expense), net                             | (6)  | 45                                 | 
|Equity investments                                      | (9)  | -                                  | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Earnings before interest, goodwill amortization and tax |      | 622                                | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Interest income (expense), net                          |      | 9                                  | 
|Other financial expense, net                            |      | (137)                              | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Financial expense                                       | (5)  | (128)                              | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Amortization and impairment charge of goodwill          |      | (78)                               | 
|Income tax                                              | (7)  | (56)                               | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Net income before minority interests                    |      | 360                                | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Minority interests                                      |      | 13                                 | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Net income (loss)                                       |      | 373                                | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|                                                        |      | Year ended December 31,            | 
|                                                        |      | 2002                               | 
|                                                        |      |                                    | 
|                                                        |      | (in euro, except number of shares) | 
|Weighted average number of shares                       |      |                                    | 
|outstanding - basic net of treasury stock (1)           |      | 277,240,438                        | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Basic net income (loss) per share                       |      | 1.35                               | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|                                                        |      |                                    | 
|Diluted net income (loss) per share(2)                  |      | 1.29                               | 
|                                                        |      |                                    | 

|(1) | In 2003 and 2004, the decrease is due to the treasury sharestock
      acquired (note 16).
|--- | ------------------------------------------------------------------------------------------
|(2) | See note 16.                                                                              

The accompanying notes are an integral part of the consolidated financial
  statements.

F-2

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

CONSOLIDATED BALANCE SHEETS

|                                               |      |  | AsofDecember 31, | 
|---------------------------------------------- | ---- |  | ---------------- | 
|                                               | Note |  | 2002             | 
|                                               |      |  |                  | 
|                                               |      |  | ( in millions)  | 
|ASSETS:                                        |      |  |                  | 
|Long lived assets:                             |      |  |                  | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Intangible assets, net                         | (8)  |  | 2,183            | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Property, plant and equipment                  |      |  | 3,800            | 
|Less: accumulated depreciation                 |      |  | (2,178)          | 
|                                               |      |  |                  | 
|Property, plant and equipment, net             | (8)  |  | 1,622            | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Equity investments                             | (9)  |  | 4                | 
|Other investments                              | (10) |  | 58               | 
|Loans and other non-current assets             |      |  | 156              | 
|                                               |      |  |                  | 
|Total investments and other non-current assets |      |  | 218              | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Total long lived assets                        |      |  | 4,023            | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Current assets:                                |      |  |                  | 
|                                               |      |  |                  | 
|Inventories                                    | (11) |  | 962              | 
|Trade accounts and notes receivable, net       | (12) |  | 1,675            | 
|Current accounts with affiliated companies     |      |  | 71               | 
|Other receivables                              | (13) |  | 1,278            | 
|Contracts advances, net                        | (14) |  | 242              | 
|Cash and cash equivalents                      | (15) |  | 1,463            | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Total current assets                           |      |  | 5,691            | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|                                               |      |  |                  | 
|Total assets                                   |      |  | 9,714            | 
|                                               |      |  |                  | 

The accompanying notes are an integral part of the consolidated financial
  statements.

F-3

---



CONSOLIDATED BALANCE SHEETS

|                                        |      | AsofDecember 31, | 
|--------------------------------------- | ---- | ---------------- | 
|                                        | Note | 2002             | 
|                                        |      |                  | 
|                                        |      | ( in millions)  | 
|                                        |      |                  | 
|LIABILITIES, SHAREHOLDERS              |      |                  | 
|EQUITY AND MINORITY INTERESTS           |      |                  | 
|                                        |      |                  | 
|Shareholders equity:                   | (16) |                  | 
|Common stock (273,308,032 shares,       |      |                  | 
|nominal value €3.75 per share at        |      |                  | 
|December 31, 2004 ; 280,613,508 shares, |      |                  | 
|nominal value €3.75 per share at        |      |                  | 
|December 31, 2003 and 2002)             |      | 1,052            | 
|Treasury shares                         |      | (155)            | 
|Additional paid in capital              |      | 1,938            | 
|Retained earnings                       |      | 1,447            | 
|Cumulative translation adjustment       |      | (339)            | 
|Revaluation reserve                     |      | 4                | 
|                                        |      |                  | 
|                                        |      |                  | 
|Shareholders equity                    |      | 3,947            | 
|                                        |      |                  | 
|                                        |      |                  | 
|Minority interests                      |      | 38               | 
|                                        |      |                  | 
|                                        |      |                  | 
|Reserves:                               |      |                  | 
|Reserves for retirement benefits        | (17) | 705              | 
|Restructuring reserves                  | (18) | 127              | 
|Other reserves                          | (19) | 216              | 
|                                        |      |                  | 
|                                        |      |                  | 
|Total reserves                          |      | 1,048            | 
|                                        |      |                  | 
|                                        |      |                  | 
|Financial debt                          | (20) | 1,694            | 
|(of which short-term portion)           |      | 262              | 
|                                        |      |                  | 
|Current liabilities:                    |      |                  | 
|Trade accounts and notes payable        |      | 1,235            | 
|Accrued employee expenses               |      | 223              | 
|Other creditors and accrued liabilities | (21) | 1,070            | 
|Debt related to Technicolor acquisition | (22) | 459              | 
|                                        |      |                  | 
|                                        |      |                  | 
|Total current liabilities               |      | 2,987            | 
|                                        |      |                  | 
|                                        |      |                  | 
|                                        |      |                  | 
|Total liabilities, shareholders        |      |                  | 
|equity and minority interests           |      | 9,714            | 
|                                        |      |                  | 
|                                        |      |                  | 
| Off-balance sheet commitment          | (24) |                  | 
| Contingencies                         | (27) |                  | 

The accompanying notes are an integral part of the consolidated financial
  statements.

F-4

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                 | Year endedDecember 31, | 
|---------------------------------------------------------------- | ---------------------- | 
|                                                                 | 2002                   | 
|                                                                 |                        | 
|                                                                 | ( in millions)        | 
|Operating Income                                                 | 718                    | 
|Adjustments to reconcile operating income                        |                        | 
|to cash provided by operating activities:                        |                        | 
|Depreciation of property, plant and equipment                    | 358                    | 
|Amortization of intangible assets                                | 38                     | 
|Amortization of contracts and changes in                         |                        | 
|reserves reflected in operating income (1)                       | 45                     | 
|Decrease (increase) in inventories, net                          | 155                    | 
|Decrease (increase) in trade and other receivables,
      net    | 401                    | 
|Increase (decrease) in trade accounts,                           |                        | 
|notes payable and accrued expenses                               | (139)                  | 
|Change in other current assets and current liabilities
      (2) | (115)                  | 
|Restructuring cash expenses                                      | (175)                  | 
|Others (3)                                                       | (182)                  | 
|                                                                 |                        | 
|                                                                 |                        | 
|Net cash provided by operating activities (I)                    | 1,104                  | 
|                                                                 |                        | 
|                                                                 |                        | 
|Capital expenditures                                             | (608)                  | 
|Proceeds from disposal of fixed assets (4)                       | 16                     | 
|Acquisition of investments (note 23) (5)                         | (1,273)                | 
|Proceeds from disposals of investments                           | 149                    | 
|                                                                 |                        | 
|                                                                 |                        | 
|Net cash used by investing activities (II)                       | (1,716)                | 
|                                                                 |                        | 
|Net cash provided (used) by operations (I+II)                    | (612)                  | 
|                                                                 |                        | 
|                                                                 |                        | 
|Dividends paid (6)                                               | -                      | 
|Minority interests and share repurchases                         | -                      | 
|Increase in short-term debt (7)                                  | 218                    | 
|Repayment of short-term debt                                     | (248)                  | 
|Increase in long-term debt (note 20)                             | 607                    | 
|Repayment of long-term debt                                      | (37)                   | 
|                                                                 |                        | 
|Net cash provided (used) by financing activities (III)           | 540                    | 
|                                                                 |                        | 
|                                                                 |                        | 
|Effect of exchange rates and changes                             |                        | 
|in reporting entities (IV)                                       | 3                      | 
|Net increase (decrease) in cash and cash                         |                        | 
|equivalents (I+II+III+IV)                                        | (69)                   | 
|                                                                 |                        | 
|Cash and cash equivalents at the beginning of year               | 1,532                  | 
|                                                                 |                        | 
|Cash and cash equivalents at the end of year                     | 1,463                  | 
|                                                                 |                        | 

|(1) | The amortization of contract advances amounts to €144
      million, €136 million and €66 million for the years ended December
      31, 2004, 2003 and 2002, respectively.                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This line excludes any change in balance sheet items unrelated
      to operating income, which mainly includes interest, income tax and non-current
      items, the cash effect of which is presented under Others.
|(3) | Includes any change in balance sheet items unrelated to operating
      income, mainly interest, income tax and non-current items, the cash effect
      of which is presented here.                                   
|(4) | Includes for €28 million the cash received in connection
      with the disposal of the optical components production plant.                                                                                           
|(5) | Includes the various impacts linked to the disposal of Thomsons
      TV business against a 33% stake in TTE.                                                                                                         
|(6) | Cash dividends paid to Thomsons shareholders in 2004
      amount to €71 million. Dividends paid to minority interests amount
      to €3 million.                                                                    
|(7) | Including the net cash impact of currency swap transactions.                                                                                                                                                           

The accompanying notes are an integral part of the consolidated financial
  statements.

F-5

---

CONSOLIDATED
  STATEMENTS OF
  CHANGES IN SHAREHOLDERS EQUITY AND MINORITY INTERESTS

|                                    | Number  |                 | Common |  | Additional  |  | Redeemable |  | Treasury |  | Accumulated |  | Cumulative  |  | Revaluation |  | Shareholders' |  | Minority  | 
|----------------------------------- | ------- | --------------- | ------ |  | ----------- |  | ---------- |  | -------- |  | ----------- |  | ----------- |  | ----------- |  | ------------- |  | --------- | 
|                                    | of      |                 | stock  |  | paid in     |  | bonds      |  | shares   |  | retained    |  | translation |  | reserves    |  | equity        |  | interests | 
|                                    | shares  |                 |        |  | capital net |  |            |  |          |  | earnings    |  | adjustment  |  |             |  |               |  |           | 
|                                    |         |                 |        |  | of costs    |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|(in thousands)                      |         | ( in millions) |       
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Balance at December  31, 2001       | 265,113 |                 | 994    |  | 1,235       |  | 761        |  | (156)    |  | 1,074       |  | 46          |  | 4           |  | 3,958         |  | 71        | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Translation adjustment              | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | (385)       |  | -           |  | (385)         |  | (9)       | 
|Redeemable bonds(1)                 | 15,500  |                 | 58     |  | 703         |  | (761)      |  | -        |  | -           |  | -           |  | -           |  | -             |  | -         | 
|Treasury stock loaned (interest)    | -       |                 | -      |  | -           |  | -          |  | 1        |  | -           |  | -           |  | -           |  | 1             |  | -         | 
|Change in perimeter                 | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | -           |  | -           |  | -             |  | (11)      | 
|Net income (loss)                   | -       |                 | -      |  | -           |  | -          |  | -        |  | 373         |  | -           |  | -           |  | 373           |  | (13)      | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Balance at December 31, 2002        | 280,613 |                 | 1,052  |  | 1,938       |  | -          |  | (155)    |  | 1,447       |  | (339)       |  | 4           |  | 3,947         |  | 38        | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Translation adjustment              | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | (273)       |  | -           |  | (273)         |  | (1)       | 
|Dividends                           | -       |                 | -      |  | -           |  | -          |  | -        |  | (62)        |  | -           |  | -           |  | (62)          |  | (4)       | 
|Treasury stock                      |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|(3,000,000 shares)                  | -       |                 | -      |  | -           |  | -          |  | (55)     |  | -           |  | -           |  | -           |  | (55)          |  | -         | 
|Change in perimeter                 | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | -           |  | -           |  | -             |  | (32)      | 
|Net income (loss)                   | -       |                 | -      |  | -           |  | -          |  | -        |  | 26          |  | -           |  | -           |  | 26            |  | 8         | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Balance at December 31, 2003        | 280,613 |                 | 1,052  |  | 1,938       |  | -          |  | (210)    |  | 1,411       |  | (612)       |  | 4           |  | 3,583         |  | 9         | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Translation adjustment              | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | (106)       |  | -           |  | (106)         |  | (1)       | 
|Dividends                           | -       |                 | -      |  | -           |  | -          |  | -        |  | (71)        |  | -           |  | -           |  | (71)          |  | (3)       | 
|Change in perimeter                 | -       |                 | -      |  | -           |  | -          |  | -        |  | -           |  | -           |  | -           |  | -             |  | 14        | 
|Treasury stock purchased            |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|(4,157,010 shares)                  | -       |                 | -      |  | -           |  | -          |  | (74)     |  | -           |  | -           |  | -           |  | (74)          |  | -         | 
|Warrants(3)                         | -       |                 | -      |  | 12          |  | -          |  | -        |  | -           |  | -           |  | -           |  | 12            |  | -         | 
|Treasury stock cancelled            |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|(7,305,476 shares)(4)               | (7,305) |                 | (27)   |  | (200)       |  | -          |  | 227      |  | -           |  | -           |  | -           |  | -             |  | -         | 
|Treasury stock granted to employees |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|(141,488 shares)                    | -       |                 | -      |  | (2)         |  | -          |  | 2        |  | -           |  | -           |  | -           |  | -             |  | -         | 
|Stock options granted(5)            | -       |                 | -      |  | -           |  | -          |  | -        |  | 5           |  | -           |  | -           |  | 5             |  | -         | 
|Change in accounting principles(2)  | -       |                 | -      |  | -           |  | -          |  | -        |  | (43)        |  | -           |  | -           |  | (43)          |  | -         | 
|Net income (loss)                   | -       |                 | -      |  | -           |  | -          |  | -        |  | (636)       |  | -           |  | -           |  | (636)         |  | 1         | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 
|Balance at December 31, 2004        | 273,308 |                 | 1,025  |  | 1,748       |  | -          |  | (55)     |  | 666         |  | (718)       |  | 4           |  | 2,670         |  | 20        | 
|                                    |         |                 |        |  |             |  |            |  |          |  |             |  |             |  |             |  |               |  |           | 

|(1) | 15.5 million of non-interest bearing ORA bonds
      redeemable in 15.5 million Thomson shares, nominal value €3.75 per
      share, were issued by Thomson and subscribed by Carlton on March 16, 2001
      and redeemed in shares on March 16, 2002.                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Impact due to the first consolidation of two special purpose
      entities (notes 1, 2 and 24).                                                                                                                                                                                                                                                                                                         
|(3) | On September 15, 2004, the extraordinary shareholders meeting
      approved a subscription plan for warrants (Bon dAcquisition ou de
      Souscription dActions BASA) for individual shareholders
      that filed certain conditions. As of December 31, 2004, a number of 12,471,859
      BASA at €1 each were subscribed. Each BASA give the right to subscribe
      one Thomson share at €16.
|(4) | On October 19, 2004, a total of 7,305,476 treasury shares
      were cancelled through a share capital reduction.                                                                                                                                                                                                                                                                                        
|(5) | Fair value as of July 31, 2004 of a common stock call option
      granted to TCL Corporation in connection with the TV Combination Agreement
      (notes 2 and 16).                                                                                                                                                                                                                                    

The accompanying notes are an integral part of the consolidated financial
  statements.

F-6

---



| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

1.THE
  GROUP AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Thomson provides a wide range of video (and enabling) technologies, systems,
  finished products and services to customers and professionals in the entertainment
  and media industries. In order to advance its strategy, Thomson announced its
  intention to put in place a reorganization of its activities as of January 1,
  2005. The Groups activities will be organized into three principal activities:
  Services, Systems & Equipments and Technology, plus two further divisions
  regrouping its remaining activities: Displays & Consumer Electronics partnerships
  and Corporate. The financial information presented in these financial statements
  remains based on the divisional structure in place during 2003 and 2004, which
  regrouped activities around four principal divisions: Content & Networks,
  Components, Consumer Products and Licensing.

In these financial statements, the terms Thomson group (formerly
  the Thomson multimedia group), the Group and Thomson
  mean Thomson S.A. together with its consolidated subsidiaries. Thomson S.A.
  refers to the Thomson group parent company (formerly Thomson multimedia S.A.).

The consolidated financial statements of Thomson have been prepared in accordance
  with French generally accepted accounting principles (French GAAP)
  as set forth in the French law on consolidation (the Act of January 3, 1985)
  and within Regulation 99-02, approved by the decree dated June 22, 1999 of the
  Comité de la Réglementation Comptable (CRC).

Financial statements of consolidated subsidiaries, when prepared in accordance
  with the accounting principles generally accepted in their country of origin,
  have been adjusted to French GAAP accordingly in consolidation. All figures
  are presented in millions of euro unless otherwise stated.

Statements of operations presentation:Thomson has elected to modify
  their statements of operations, as permitted by regulation 99-02, to take into
  account upcoming changes to the presentation format of the statements of operations
  to take place under IFRS. Thomson also believes that such a change provides
  more useful information to the users of financial statements. Prior periods
  and new sub-total captions have been restated with the new classification, however
  there is no change to previously reported statements of operations amounts.

Cash Flow presentation:Thomson has elected to present the breakdown
  of its cash flow from operating activities using the reconciliation
  from operating income according to the method permitted by regulation
  99-02, instead of the reconciliation from net income. Under this
  new method, operating income instead of net income is reconciled to the cash
  provided by operating activities. Thomson believes that such a change provides
  more useful information to the users of its financial statements. Also, others
  includes interest, non-current items and income tax, which are determined using
  the direct method (i.e., the net cash paid or received).

Use of estimates:The preparation of the consolidated financial statements
  in conformity with French GAAP requires management to make estimates and assumptions
  that affect the reported amounts of assets and liabilities and the reported
  amounts of revenues and expenses during the reporting period of the consolidated
  statements. Actual results could differ from these estimates.

Estimates made by management include among other items, allowance for doubtful
  accounts, inventory and investment valuation allowances, retirement and post-retirement
  benefits, depreciation

F-7

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

and amortization, loss reserves, deferred tax, contingencies and environmental
  obligations. 
  The accounting consequences of the TV disposal and TTE purchase as well as the
  assessment of the write-off of certain displays assets have been estimated
  using third parties offers (note 6, 9 and 18).

In 2003, design-tooling amortization was extended from 18 months to 24 months,
  mainly in the Consumer Products segments, because the usage of such tools is
  proven to be longer and because such tools are guaranteed by the supplier over
  such duration. The impact of the new duration, if applied in 2002, would have
  improved the operating income in an amount of €3 million in 2002. Had
  the previous duration been applied in 2003, the amortization charges would have
  increased by  2 million.

IFRS reconciliation:Thomson presents in the MD & A section of
  the annual report a reconciliation of its net income and its retained earnings
  to IFRS.

a) Consolidation

The financial statements of the subsidiaries in which Thomson has a direct
  or indirect controlling interest have been consolidated.

Article 133 of the French Law on Financial Security (Loi de Sécurité
  Financière or LSF) issued on August 1, 2003, modified article
  L233-16 of the French Commercial Code, which did not permit the consolidation
  of a company unless at least one share was owned. According to this new Article
  133 and disregarding the number of shares held, fully controlled special purpose
  entities (SPEs), are consolidated as of January 1, 2004, applying a retroactive
  method. The law did not allow early application. Thomson has two such SPEs,
  one put in place in 2000 and the other in 2001, which are affected by the application
  of this new article in 2004. 
  These SPEs have been consolidated retroactively as of December 31, 2003, increasing
  the net tangible fixed assets by €193 million, the financial debt by €321 million, decreasing the deferred income by €85 million and with the
  net impact booked to equity for €-43 million. 
  After consolidation of these SPEs, as of December 31, 2004, the Group no longer
  reports off-balance sheet future payments related to synthetic leases.

Investments in companies over which Thomson exercises significant influence,
  directly or indirectly, but does not control, are accounted for under the equity
  method.

Investments in companies over which Thomson has joint control with a limited
  number of partners (joint ventures) are accounted for under the
  pro rata consolidation method.

F-8

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

b) Translation of foreign subsidiaries financial statements

The financial statements of foreign subsidiaries are translated into euros
  using the following principles: - balance sheets are translated at the closing
  foreign exchange rates prevailing at the balance sheet date; - statements of
  income and cash flows are translated at the average exchange rates of the period;
  and - the resulting translation differences are reflected as a translation adjustment
  in the shareholders equity section of the balance sheet.

The main foreign exchange rates used for translation are summarized in the
  following table (expressed in each case as one unit of each foreign currency
  converted to euros):

|                 | 2002    |  | 2003    |  | 2004    | 
|---------------- | ------- |  | ------- |  | ------- | 
|                 |         |  |         |  |         | 
|                 | Closing |  | Average |  | Closing | 
|                 | rate    |  | rate    |  | rate    | 
|                 |         |  |         |  |         | 
|U.S. dollar      | 0.95356 |  | 1.05803 |  | 0.79177 | 
|Pound sterling   | 1.53728 |  | 1.59132 |  | 1.41884 | 
|Canadian dollar  | 0.60423 |  | 0.67386 |  | 0.61599 | 
|Hong Kong dollar | 0.12228 |  | 0.13566 |  | 0.10199 | 
|Polish zloty     | 0.24869 |  | 0.25915 |  | 0.21268 | 
|China Renminbi   | 0.11521 |  | 0.12783 |  | 0.09566 | 
|                 |         |  |         |  |         | 

The average rate is determined by taking the average of the month-end closing
  rates for the year period, unless such method results in a material distortion.

c) Transactions denominated in foreign currency

Monetary assets and liabilities denominated in foreign currencies are converted
  in functional currency at the respective exchange rates prevailing at the balance
  sheet dates. The related unrealised exchange gains and losses are included under
  other financial expense, net in the consolidated statements of operations,
  except if the assets or liabilities were hedged.

Transactions denominated in foreign currencies are converted at the exchange
  rate prevailing at the date of the transaction or at the rate of the applicable
  forward contract if hedged.

d) Financial instruments

Thomson enters into financial instruments to hedge foreign currency risk,
  interest rate risk and from time to time to hedge the market volatility of certain
  marketable equity investments.

Financial risk exposures are managed centrally by the corporate treasury department
  in Paris in accordance with market conditions and in the framework of procedures
  established by management. Thomson enters into over-the-counter financial instruments,
  with a limited number of counterparts. Depending on local foreign currency regulations
  or practical access to markets, foreign exchange transactions are carried out
  by the corporate treasury in Paris or by the Hong Kong regional treasury or
  by the Americas regional treasury (the latter for transactions in Mexican peso).
  Affiliates unable to

F-9

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

enter into foreign currency hedging operations with corporate treasury because
  of local laws or regulations do so directly with local banks under the supervision
  of corporate treasury and in accordance with corporate policies and procedures.

Foreign
  currency risk

Thomson operates as a global company and consequently is subject to mismatches
  between the currencies in which sales are made and the currencies in which expenses
  are incurred.

Moreover, the Group operates in certain emerging markets, which are subject
  to risks and uncertainties inherent in such markets, including economic and
  governmental instability, controls on repatriation of earnings and capital and
  restrictions on the means available to Thomson to hedge currency fluctuation
  risks.

Thomsons policy is to reduce the impact of foreign currency fluctuations
  on net commercial transaction exposures generally on a short-term basis and
  in certain cases for longer periods depending on the cycle of the underlying
  business activities. The Group buys and sells currencies on a forward basis
  and buys currency options.

Foreign currency forward contracts, and foreign currency options, are considered
  as hedges for accounting purposes if they are designated to hedge accounts receivable
  and accounts payable amounts on the balance sheet at the closing date of the
  period or anticipated commercial transactions.

The nature of the commercial products sold and the consistency of the demand
  for these products are such that it is reasonable to consider the anticipation
  of future cash flows generated by market demand as similar to firm order commitments.

Gains and losses on foreign currency instruments designated as hedges of the
  following years anticipated commercial transactions are recognized as
  income or expense over the same period as the underlying transaction.

Foreign currency instruments that do not qualify for hedge accounting are
  recorded at market value, and gains and losses resulting from these instruments
  are recognized as other financial expense, net in the consolidated
  statements of operations.

Interest
  rate risk

Thomsons policy is to hedge interest rate exposures in accordance with
  target ratios of fixed/floating debt, which are set periodically as a function
  of market conditions.

The Group enters into interest rate swaps and buys forward rate agreements
  and caps.

Gains and losses on interest rate instruments designated as hedges of the
  Groups debt instruments, are accounted for over the life of the contract,
  on an accrual basis, as an increase or decrease to interest income (expense),
  net and the accruals are included either in other receivables
  or other creditors and accrued liabilities on the balance sheet.

F-10

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Interest rate swaps and forward rate agreements that do not qualify for hedge
  accounting as well as interest rate caps are marked-to-market and if there is
  a loss it is recognized in other financial expense, net in the consolidated
  statements of operations.

Equity
  risk

From time to time, Thomson hedges the market volatility of certain marketable
  equity investments. Gains and losses on equity instruments designated as hedges
  are deferred until the related marketable equity securities are sold.

e) Net sales

Sale
  of goods and services

Revenue consists of income from all activities of consolidated subsidiaries
  after elimination of inter-company transactions. Revenue is recognized when
  ownership is transferred which generally occurs at the time of shipment.

Licensing
  revenue

Patent licensing agreements generally provide that a specified royalty amount
  is earned at the time of shipment of each product shipped to a third-party by
  a licensee. Thomsons policy is to record licensing revenue as it is earned.
  The gross royalty amount is determined on a quarterly basis and in accordance
  with the license agreement. Generally, the actual royalty amount is required
  to be declared by the licensee and paid to the Group within 30 to 60 days after
  the end of the calendar quarter. New license agreements can also include a provision
  for the licensee to pay for past shipments.

The Group may enter into specific licensing agreements according to which
  its only obligation is to maintain and defend the patent rights licensed to
  its customers. Under such contracts, the related revenues are recognized when
  the right to such revenues is acquired.

Sales of patents incidental to patent licensing activities are recorded as
  revenues when earned.

Warranty
  and returns

Estimated product warranty costs are accrued at the time of sale. The warranty
  reserve covers all of the products that are still under warranty. The amount
  of the reserve is determined based upon known non-recurring product issues as
  well as on historical experience.

The warranty reserve is intended to cover all returns from customers related
  either to product failures or consumer returns. Although Thomsons general
  policy is to not accept returns of undamaged products, Thomson may accept returns
  for undamaged products on a discretionary basis. The impact of these returns
  has historically not been material.

F-11

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Price
  protection

Price protection may be granted to customers in certain countries where it
  is common when Thomsons retail price of a product decreases for items
  held in stock by the customer. Price protection programs are discretionary.
  Accordingly, Thomson accrues for price protection at the time allowances are
  probable of being granted to customers. Price protection is reflected as a reduction
  of sales.

Sales
  incentives

Sales incentives to customers under sales incentives programs are deducted
  from sales unless the following conditions are met:

- Thomson receives an identifiable and separable benefit (goods or services)
  in exchange for the cash paid to the customer, and 
  - Thomson can reasonably estimate the fair value of the benefit.

Amounts paid in excess of such identified benefit are deducted from sales.

f) Long lived assets

Goodwill is amortized on a straight-line basis over its estimated useful life,
  generally over a period of 3 to 20 years.

Trademarks and similar rights with an indefinite economic life are no longer
  subject to amortization, in accordance with French GAAP.

Software development costs are generally expensed. Elements may be capitalized
  as intangible assets when they comply with the following criteria:
  - the project is clearly defined and costs are separately identified and reliably
  measured, 
  - the technical feasibility of the software is demonstrated,
  - the software will be sold or used in-house,
  - a potential market exists for the software, or its usefulness (in case of
  internal use), is demonstrated, and 
  - adequate resources for the project are available.

Software costs thus capitalized are categorized and amortized over their economic
  useful lives, which generally do not exceed 3 years.

Unless impaired, property, plant and equipment are carried at historical cost.

Depreciation is computed using the straight-line or declining-balance method
  over the estimated useful lives of the assets or using the unit of production
  method when appropriate.

Depreciation is generally applied over the following estimated useful lives
  of the fixed assets:

- 20 to 40 years for buildings, 
  - 1 to 12 years for plant and equipment, 
  - 4 to 10 years for other fixed assets.

F-12

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

At the balance sheet dates and whenever events or changes in market conditions
  indicate a potential impairment of intangible assets or property, plant and
  equipment, the expected future cash flows (undiscounted for tangible as well
  as intangible with a definite useful life and discounted for intangible with
  an indefinite useful life) of the related assets are compared with the carrying
  amounts of such assets. Whenever such review indicates that there is an impairment,
  the carrying amount of such assets is reduced to their fair market value. The
  fair value is computed by reference to the discounted expected future cash flows
  generated by these assets.

g) Other investments

Other investments are recorded at the lower of historical cost or net realizable
  value, assessed on an individual basis. Net realizable value is based upon the
  underlying equity of the investment, its expected future profitability, or its
  market value (average of the quoted prices of the closing month for listed investments).

h) Inventories

Inventories are carried at the lower of cost or market value. Cost is determined
  using the first-in, first-out (FIFO) or weighted-average method.

The cost of finished goods and work in progress inventories includes the cost
  of raw materials, labor and subcontracted purchases used during production,
  plus an allocation of industrial overhead. A valuation allowance is recorded
  when the carrying value is higher than the market value.

i) Research and development

Research and development costs are expensed as incurred (subject to the qualification
  set out in paragraph (f) above, concerning software development costs).

Subsidies for research and development are accounted for as income based on
  the stage of completion of the projects and are directly deducted from research
  and development costs. Certain projects are funded by means of repayable advances
  from governmental entities. Thomson deducts such external funding directly from
  research costs as incurred, as the repayments are generally contingent on future
  revenues generated by the project and are possible, but not probable.

j) Cash and cash equivalents

Cash and cash equivalents consist of cash and liquid investments with an initial
  maturity of three months or less.

k) Deferred tax

Thomson uses the liability method of tax allocation and records deferred taxes
  when there is a difference between the tax and accounting basis of assets and
  liabilities. A valuation allowance is recorded when there is uncertainty regarding
  the future utilization of these temporary differences. Tax on undistributed
  earnings of subsidiaries and equity companies are taken into account only when
  there is a planned distribution of dividends.

F-13

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

l) Pensions, retirement and termination benefits

Retirement indemnities and post-retirement benefits are accrued over the years
  of service of the employees.

The method used is the Projected Unit Credit Method with projected final salary
  using U.S. GAAP methodology. Actuarial gains or losses, such as gains and losses
  resulting from the effect of changes in actuarial assumptions, are deferred
  except for that part in excess of 10% (corridor) of the greater
  of the beginning balance of the fair market value of plan assets or the projected
  benefit obligation. This part in excess is amortized over the average remaining
  service period of active employees expected to receive benefits under the plan
  or if all of a plans participants are inactive, the average remaining
  life expectancy of the inactive participants is used. This part is included
  as a component of the pension costs.

In accordance with the opinion 2004-05 of the French Conseil National de la
  Comptabilité (CNC), jubilee awards are now classified under Other
  creditors and accrued liabilities  caption.

m) Reserves

Reserves and liabilities are accounted for in compliance with regulation 00-06
  of the French Committee on Accounting Regulations (Comité de la Réglementation
  Comptable) relating to the accounting for liabilities.

Restructuring reserves are recorded when Thomson has a current obligation
  as a result of a past event and for which an outflow of resources is probable
  and a reliable estimate can be made. Consequently, restructuring reserves are
  accrued for when a restructuring decision to close a facility, or to reduce
  or relocate the workforce meets the criteria stated in Regulation 00-06 of the
  French Committee on Accounting Regulations.

n) Statements of cash flows

Cash flows from operating activities are determined using the reconciliation
  from operating income according to the method permitted by Regulation
  99-02, instead of the reconciliation from net income.

o) Other income and expense

Other income (expense), net includes restructuring costs, gains
  or losses on disposals of fixed assets, write-offs/impairments of fixed assets
  and any other material unusual items.

p) Legal reserve

Pursuant to French law, Thomson is legally required to contribute a minimum
  of 5% of its annual net income (after any reduction for losses carried forward
  from the previous year) to a legal reserve. This minimum contribution is no
  longer required when the legal reserve equals 10% of the aggregate nominal value
  of its issued share capital. The legal reserve may be distributed only upon
  liquidation. At December 31, 2004 Thomsons legal reserve amounted to €43 million, compared to an aggregate nominal value of its share capital at the
  same date of €1,025 million.

F-14

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

q) Earnings per share

The basic earning per share is computed by dividing the net income available
  to common shareholders by the weighted average number of common shares outstanding
  during the year. Treasury shares are not considered as outstanding for the purposes
  of the computation of earnings per share. 
  The diluted earnings per share is computed by dividing the net income available
  to common shareholders by the weighted average number of common shares outstanding
  during the year adjusted to include any potential dilutive issues of common
  shares (mainly share options, warrants, and convertible bonds issued by the
  Company on its own common shares). Net income for the purposes of this calculation
  is therefore restated to exclude the interest expense, net of tax, related to
  such potential dilutive issues and numerator is restated by the equivalent in
  shares of convertible bonds.

2.
  SIGNIFICANT CHANGES IN THE CONSOLIDATED COMPANIES

As of and for the year ended December 31, 2004, Thomsons consolidated
  balance sheets and statements of operations include the accounts of companies
  listed in note 30. The following is a summary of the number of companies consolidated
  and accounted for under the full consolidation method, the equity method and
  the pro rata consolidation method.

|                            |        |  |        |  | December 31, |  |        |  |        | 
|--------------------------- | ------ |  | ------ |  | ------------ |  | ------ |  | ------ | 
|                            |        |  |        |  |              |  |        |  |        | 
|                            | 2002   |  | 2003   |  | 2004         | 
|                            |        |  |        |  |              |  |        |  |        | 
|                            | France |  | Others |  | France       |  | Others |  | France | 
|                            |        |  |        |  |              |  |        |  |        | 
|Number of companies:        |        |  |        |  |              |  |        |  |        | 
|                            |        |  |        |  |              |  |        |  |        | 
|Parent company and          |        |  |        |  |              |  |        |  |        | 
|consolidated subsidiaries   | 29     |  | 148    |  | 38           |  | 153    |  | 37     | 
|Companies consolidated      |        |  |        |  |              |  |        |  |        | 
|by pro rata method          | 5      |  | 25     |  | 5            |  | 26     |  | 5      | 
|Companies accounted         |        |  |        |  |              |  |        |  |        | 
|for under the equity method | -      |  | 2      |  | 3            |  | 7      |  | 3      | 
|                            |        |  |        |  |              |  |        |  |        | 
|                            |        |  |        |  |              |  |        |  |        | 
|Sub-total                   | 34     |  | 175    |  | 46           |  | 186    |  | 45     | 
|                            |        |  |        |  |              |  |        |  |        | 
|Total                       | 209    |  | 232    |  | 235          | 
|                            |        |  |        |  |              |  |        |  |        | 

F-15

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Changes in 2004

- (To be read in connection with note 24): In accordance with the new regulation
    Article 133 of the French Law on Financial Security (Loi de Sécurité
    Financière or LSF) issued on August 1, 2003, Thomson fully
    consolidated two SPEs starting on January 1, 2004. One of the SPEs was put
    in place in 2000 in connection with a synthetic lease transaction for Thomson
    Display Mexicana S.A. de C.V. concerning a television tube manufacturing facility
    located in Mexicali (Mexico) and the other SPE was put in place in 2001 in
    connection with a similar lease transaction for Thomson multimedia Polska
    sp.zo.o (Poland) which involved the transfer of title of its tube manufacturing
    equipment. On March 31, 2004 Thomson multimedia Polska sp.zo.o unwound the
    synthetic lease transaction by repaying the debt held via the SPE; consequently
    title of the equipment was transferred back to Thomson multimedia Polska sp.zo.o.
- On January 7, 2004, Thomson completed the acquisition of the Tubes division
    of the Chinese company Xinyuan Highway Development (known by the name of Fortune).
    This activity is fully consolidated from that date. Concurrently with this
    operation, Thomson increased its ownership in Thomson Guangdong Display Co.
    Ltd. to 77%.
- On March 23, 2004, Thomson signed a definitive agreement to sell to the
    Taiwanese company,Foxconn, its optical pick-up manufacturing activity located
    in China within Thomson OKMCO Shenzen Co. Ltd. Thomson continues its research,
    product development and selling activities in this business.
- On April 20, 2004, Thomson acquired International Recording, a Rome-based
    company specializing in creating multiple foreign language versions for theatrical
    and broadcast content, as well as for video games. This company is fully consolidated
    from that date.
- On May 12, 2004, Thomson acquired Command post, a leading Canadian provider
    of video/audio post-production and film services for the North American motion
    picture industry. This company is fully consolidated from that date.
- On May 15, 2004, Thomson acquired the video division of ParkerVision, a
    pioneer of live television production automation systems. This activity is
    fully consolidated from that date.
- On June 11, 2004, Thomson acquired from Beijing C&W Electronics (Group)
    Co. Ltd. the 45 % minority interest owned in Thomson Zhao Wei Multimedia Co.,
    Ltd. (Peoples Republic of China). Thomson already held the other 55%,
    as well as joint control. This company then formed part of the TV business
    contributed by Thomson to TCL-Thomson Electronics (TTE) in July
    2004.
- On June 16, 2004, Thomson acquired from Alcatel the 25% minority interest
    owned in Nextream S.A. Thomson already held the other 75%, together with the
    management control. Nextream which was fully consolidated is now 100% held
    by the Group.
- On June 18, 2004, Thomson acquired Madrid Film SL, also known as Madrid
    Film Group, the largest film and post-production operation in Spain. This
    company is fully consolidated from that date.

F-16

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

- On June 24, 2004, Thomson acquired the HNS set-top box manufacturing
    assets of Hughes Network Systems (the manufacturing activity of Direct TV
    Group) and signed concurrently an agreement for the long-term development
    and supply of digital satellite set-top boxes (STBs). This activity is fully
    consolidated from that date.
- On June 25, 2004, in order to complete the agreements signed in 2003 concerning
    Canal Plus Technologies and the sale of the MediaGuard business to Kudelski,
    Thomson sold to Kudelski 50% of its shares into Canal Plus Technologies to
    form a joint venture in the field of the conditional access systems patents,
    which is consolidated under the pro rata method from that date.
- On July 19, 2004, Thomson acquired Gyration, a Silicon Valley technology
    company that has developed a line of next-generation user-interface (UI) devices
    using proprietary technology based on gyroscopes. The technology is currently
    incorporated in a variety of hand-held UI devices, mainly for personal computers
    (PCs). This company is fully consolidated from that date.
- On July 31, 2004, Thomson and TCL combined their respective TV assets in
    a new company, TTE, of which Thomson holds 33% and TCL 67%. Thomson contributed
    its industrial TV assets mainly located in Mexico, Poland and Thailand as
    well as its R&D centres located in the U.S., Germany and Singapore. The
    new company TCL-Thomson Electronics(TTE) is licensed by Thomson
    for certain intellectual properties (trademarks and patents) and will exclusively
    use Thomson services for the distribution of TV sets in Europe and in the
    U.S., Thomson acting as an agent. Thomson has neither control nor joint control
    of TCL-THOMSON ELECTRONICS and consolidates TCL-THOMSON ELECTRONICS under
    the equity method from July 31, 2004. The TV activity before July 31, 2004
    is presented under full consolidation method. Thomson accounted the contribution
    of its TV business as a disposal and booked the 33% interest in TCL-THOMSON
    ELECTRONICS as an acquisition.
- On September 22, 2004, Thomson sold its 19.9% interest in Total Technology
    Company Limited. Before that date, the company was consolidated under the
    equity method.
- On October 27, 2004, Thomson acquired 77.61% in Corinthian Television Facilities
    Limited (UK). Corinthian is one of Europes leading broadcast television
    facilities companies providing live studios, graphics, video, audio production
    and post-production and transmission playout to major international broadcasters
    through long term contracts. This company is fully consolidated from that
    date.
- On November 4, 2004, Thomson acquired a 50% interest in Beijing Nokia CITIC
    Digital Technology Co Ltd. This company is mainly engaged in the production
    of digital multimedia terminals for reception of digital broadcasting and
    interactive services via satellite, cable, terrestrial and telecom networks
    and related products and systems for digital Internet services. The company
    is consolidated under the pro rata method from that date.
- On November 18, 2004, Thomson acquired EADS DCS (Defense and Communication
    Systems) Video Over Internet Protocol (IP) activity, specialised in the integration
    of video over IP systems, which enables seamless access to voice, data and
    video content. This activity is fully consolidated from that date.

F-17

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

- On December 9, 2004, Thomson acquired The Moving Picture Company
    (MPC). MPC is a London (UK) provider of visual effects and post-production
    services to both the motion picture and commercial advertising industries.
    This company is fully consolidated from that date.
- On December 10, 2004, Thomson sold its 36% interest in Keymro. The company
    that was pro rata consolidated is no more consolidated from that date.
- On December 31, 2004, Thomson sold Thomson Servicios Corporativos S.A de
    C.V, a set-top box manufacturing company in Mexico to Elcoteq. The activity
    before December 31, 2004 was fully consolidated.

Changes in 2003

- Since January 1, 2003, the financial statements of all subsidiaries in which
    Thomson has a direct or indirect controlling interest have been consolidated,
    whether or not the activity is significant, except for three insignificant
    companies held for liquidation. As a result, thirty entities have been included
    in the scope of consolidation, representing an external turnover of €14.6 million, operating result of €1 million and total assets of €45.2 million.
- In January 2003, Screenvision Europe Group sold its 71% participation in
    a subsidiary, TWICE, which is therefore not consolidated subsequent to December
    31, 2002.
- On January 31, 2003, Thomson acquired 89% of Canal+ Technologies (Thomson
    held a small percentage of Canal+ Technologies before this agreement). The
    company acquired comprised two businesses, namely conditional access systems
    marketed under the brand name MediaGuard and middleware operating systems
    marketed under the brand name of MediaHighway. In both cases, the related
    products and services are marketed to digital TV operators.
    During December 2003, Thomson completed the sale of the MediaHighway
    business and the MediaGuard business. The assets retained were intellectual
    property assets plus cash acquired with and retained in the business. Accordingly,
    the activity of Canal+ Technologies has been accounted for as a non-operational
    activity for 2003 and its results included in other income (expense),
    net, together with the gain on disposal, net of expected costs. More
    details of the financial consequences of the purchase and sale of the Canal+
    Technologies business are in notes 6 and 23. The revenue and the operating
    result of Canal+ Technologies before any impact related to the disposal of
    the activity disposed of were €90 million and €-2 million respectively
    for the eleven months of the year 2003.
- On February 5, 2003, Thomson acquired from Alcatel the latters 50%
    interest owned in the ATLINKS joint venture for an amount of €69 million,
    Thomson already held the other 50%, together with the management control.
    ATLINKS is now 100% held by the Group.
- On February 28, 2003, the Group acquired Pacifica Media Affiliates (PMA)
    assets, a leading Los Angeles-based provider of audio editorial, and mixing
    facilities for feature films and broadcast production content. PMA has been
    fully consolidated since that date.

F-18

---



| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

- On March 31, 2003, an amendment to the joint venture agreement with Schneider
    concerning Easyplug was made, according to which Thomson lost control over
    the joint venture. Easyplug is therefore consolidated by the equity method
    at 50% since that date.
- On May 8, 2003, Screenvision Europe, a 50-50 joint venture with Carlton
    Communications, acquired 100% of RMB Slovakia S.r.o. and 50% of Nordic Media
    Link A.B. (NML). These entities are consolidated from that date using the
    pro rata method.
- On June 6, 2003, Thomson acquired from Microsoft its 20.4% of minority interests
    in TAK. The Group now owns 100% of this company.
- On June 16, 2003, Screenvision Europe acquired the 50% minority interest
    in RMB Entertainment S.A.
- On June 16, 2003, Thomson purchased the remaining 11% minority interests
    in Thomson multimedia India Private Ltd. The Group now owns 100% of this company.
- On July 8, 2003, Thomson acquired for an amount of €50 million the
    business and assets of the Recoton accessories business, a leading provider
    of accessories and related services to the U.S. retail industry. The Recoton
    business has been fully consolidated since that date.
- On July 8, 2003, Thomson acquired additional shares in Celstream, a global
    information technology services firm with advanced expertise in product development,
    located in India. Thomson owns 38.75% of Celstream, which has been consolidated
    under the equity method since that date.
- On September 18, 2003, Thomson acquired from Qualcomm its 20% interest in
    the Technicolor Digital Cinema (TDC) joint venture, for a total amount of
    €23 million (of which €15 million was paid in cash in 2003). The
    Group now owns 100% of Technicolor Digital Cinema, which is fully consolidated
    since that date (previously, TDC was consolidated using the pro rata method).
- On October 21, 2003, Thomson acquired Cinecolor Lab Company, Ltd, a Thai
    company and one of the premier motion picture film laboratories and post-production
    facilities in the Austral-Asian film and post-production markets. Cinecolor
    is fully consolidated since that date.
- On November 13, 2003, Thomson completed the disposal of all of its interests
    in the business and assets of Singingfish for €7 million.
- On December 31, 2003, Thomson sold 55.1% of its participation in Total Technology
    Company, a company located in Asia.

F-19

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Pro forma information

For comparative purposes, the table below presents supplemental information
  on a pro forma basis as if the 2004 business acquisitions and disposals had
  been completed at the beginning of the period and provides for the same information
  as of the immediate comparative period.

|Unaudited             | 12 months2003 |               | Impact of |             | TV      |           | 12 months |      | 12 months |               | Impact of |             | TV    |  | 12 months2004
      Pro forma | 
|--------------------- | ------------- | ------------- | --------- | ----------- | ------- | --------- | --------- | ---- | --------- | ------------- | --------- | ----------- | ----- |  | ----------------------------- | 
|(In millions of euro, |               | acquired and  |           | business(3) |         | 2003      |           | 2004 |           | acquired and  |           | business(3) |       | 
|unless otherwise      |               | disposed      |           |             |         | Pro forma |           |      |           | disposed      |           |             |       | 
|stated)               |               | businesses(2) |           |             |         |           |           |      |           | businesses(2) |           |             |       | 
|                      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|Net sales             | 8,459         |               | 636       |             | (1,707) |           | 7,388     |      | 7,994     |               | 285       |             | (845) |  | 7,434                         | 
|Operating income      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|(loss)                | 508           |               | 64        |             | 199     |           | 771       |      | 434       |               | 32        |             | 114   |  | 580                           | 
|Financial expense(1)  | (79)          |               | (10)      |             | (2)     |           | (91)      |      | (79)      |               | (5)       |             | (1)   |  | (85)                          | 
|Goodwill              |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|amortization          | (76)          |               | (14)      |             | (51)    |           | (141)     |      | (130)     |               | (8)       |             | (33)  |  | (171)                         | 
|Minority interests    | (8)           |               | 1         |             | -       |           | (7)       |      | (1)       |               | (1)       |             | -     |  | (2)                           | 
|Net income (loss)     | 26            |               | 41        |             | 146     |           | 213       |      | (636)     |               | 18        |             | 80    |  | (538)                         | 
|Weighted average      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|number of shares      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|outstanding in the    |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|period                |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|(in thousands)        | 276,797       |               | -         |             | -       |           | 276,797   |      | 273,647   |               | -         |             | -     |  | 273,647                       | 
|Basic net income      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|(loss) per common     |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|share (In euro)       | 0.09          |               | 0.15      |             | 0.53    |           | 0.77      |      | (2.32)    |               | 0.07      |             | 0.29  |  | (1.96)                        | 
|Diluted net income    |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|(loss) per common     |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 
|share (In euro)       | 0.09          |               | 0.15      |             | 0.53    |           | 0.77      |      | (2.32)    |               | 0.07      |             | 0.29  |  | (1.96)                        | 
|                      |               |               |           |             |         |           |           |      |           |               |           |             |       |  |                               | 

|(1) | The additional pro forma financial expense represents only
      the increase of interest expenses measured as if the Group had paid for
      the related acquisitions at the beginning of the year and thereafter for
      the years presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The 2003 pro forma information has been computed as if 2003 and 2004
        business combinations had occurred as of January 1, 2003. The 2004 proforma
        information has been computed as if 2004 business combinations had occurred
        as of January 1, 2004. The following are acquisitions that have been restated
        for the proforma information:
      During the twelve months ended December 31, 2004, the material acquisitions
          comprise the following entities:
          Fortune
            ParkerVision
            Gyration
            Madrid Film
            MPC
            Corinthian
            EADS acquisition
            HNS business
            Command post
            International recording
        During the twelve months ended December 31, 2003, the material acquisitions
          comprise the following entities:
          PMA
            Cinecolor Lab Cie
            Recoton business
            Technicolor Digital Cinema (minority interest purchase)

F-20

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|In addition, the 2003 and 2004 proforma information excludes businesses
          disposed during 2004 and 2003 as if related disposals have been made
          as of January 1, 2003.
          Thomson Optical pick-up manufacturing activity within Thomson
              OKMCO Shenzen Co. Ltd. has been excluded from consolidation in April
              2004.
            Except the disposal of the TV business, which is shown in a separate
              column, no other material entity or segment component was excluded
              from consolidation in 2003 and 2004.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On July 31, 2004, Thomson and TCL international merged their
      TV business into a new company, TTE. Following this transaction, Thomson
      no longer had control over its TV manufacturing business and TTE is now
      accounted for using the equity method. As a result, the proforma information
      excludes the contribution of the TV business for 2003 and 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.
  INFORMATION BY GEOGRAPHIC AREA AND BUSINESS SEGMENT

|                        | France          |  | Rest      |  | U.S.  |  | Rest of  |  | Asia/   | Elimination | Total  | 
|----------------------- | --------------- |  | --------- |  | ----- |  | -------- |  | ------- | ----------- | ------ | 
|                        |                 |  | of Europe |  |       |  | Americas |  | Pacific |             |        | 
|                        |                 |  |           |  |       |  |          |  |         |             |        | 
|                        | ( in millions) | 
|December 31, 2004       |                 |  |           |  |       |  |          |  |         |             |        | 
|Net sales               | 1,851           |  | 1,339     |  | 3,702 |  | 438      |  | 664     | -           | 7,994  | 
|Transfers from/to other |                 |  |           |  |       |  |          |  |         |             |        | 
|geographical areas      | 413             |  | 632       |  | 120   |  | 307      |  | 557     | (2,029)     | -      | 
|Operating income (1)    | 213             |  | 120       |  | (1)   |  | 57       |  | 45      | -           | 434    | 
|Long lived assets, net  | 29              |  | 294       |  | 305   |  | 211      |  | 215     | -           | 1,054  | 
|                        |                 |  |           |  |       |  |          |  |         |             |        | 
|December 31, 2003       |                 |  |           |  |       |  |          |  |         |             |        | 
|Net sales               | 2,032           |  | 1,342     |  | 3,992 |  | 462      |  | 631     | -           | 8,459  | 
|Transfers from/to other |                 |  |           |  |       |  |          |  |         |             |        | 
|geographical areas      | 589             |  | 884       |  | 110   |  | 310      |  | 593     | (2,486)     | -      | 
|Operating income (1)    | 259             |  | 163       |  | 21    |  | 60       |  | 5       | -           | 508    | 
|Long lived assets, net  | 87              |  | 496       |  | 480   |  | 240      |  | 171     | -           | 1,474  | 
|                        |                 |  |           |  |       |  |          |  |         |             |        | 
|December 31, 2002       |                 |  |           |  |       |  |          |  |         |             |        | 
|Net sales               | 2,028           |  | 1,418     |  | 5,345 |  | 534      |  | 862     | -           | 10,187 | 
|Transfers from/to other |                 |  |           |  |       |  |          |  |         |             |        | 
|geographical areas      | 416             |  | 931       |  | 286   |  | 298      |  | 735     | (2,666)     | -      | 
|Operating income (1)    | 211             |  | 213       |  | 191   |  | 60       |  | 43      | -           | 718    | 
|Long lived assets, net  | 92              |  | 448       |  | 716   |  | 197      |  | 169     | -           | 1,622  | 
|                        |                 |  |           |  |       |  |          |  |         |             |        | 

|(1) | The variations of inter-company profits included
      in the inventories of the buying geographic area are deducted from or added
      to the operating income of the selling area.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net sales and operating income are classified by the location of the business
  that invoices the customer.

Analysis by Business Segment

Until 2004, Thomsons organizational and reporting structure consisted
  of four segments: Content & Networks, Components, Consumer Products
  and Licensing.

- Content & Networkscomprises the following activities:
    Video content preparation and distribution activities under the Technicolor®trademark (post-production, media asset management, replication
        and distribution of films, DVDs and VHS cassettes) and the screen-advertising
        businesses (Screenvision);
- Video content preparation and distribution activities under the Technicolor®trademark (post-production, media asset management, replication
        and distribution of films, DVDs and VHS cassettes) and the screen-advertising
        businesses (Screenvision);

F-21

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

- Broadcast and network equipment and services under GVG®trademark;
      and
- The Broadband Access Products activity, including decoders and modems.
      The business of ATLINKS, carried out in conjunction with telecommunications
      companies, is also managed within the Broadband Access Products activity.

- Components, produces and sells television tubes, other display devices,
    optical components and television and video components.
- Consumer Productsactivities comprise television sets, audio and
    video products, accessories, and home telephony products sold through retail
    channels. The Consumer Products segment also includes the worldwide marketing
    and sales organization for retail products.
- Licensingmanages and develops the Groups portfolio of licenses,
    as well as those of external customers.

In addition, Corporate column includes amounts related to central corporate
  functions and worldwide programs unrelated to a specific business segment (e.g.,
  central research and development).

The operations of the former New Media Servicesdivision have been
  absorbed in 2003 by Consumer Productsactivities (principally guide-related
  activities) and Content & Networksactivities (principally the screen-advertising
  activity).

|                                  | Content &      |  | Components |  | Consumer    |  | Licensing(f) |  | Corporate | Consolidation | Total | 
|--------------------------------- | -------------- |  | ---------- |  | ----------- |  | ------------ |  | --------- | ------------- | ----- | 
|                                  | Networks       |  |            |  | Products(*) |  |              |  |           | Adjustments   |       | 
|                                  |                |  |            |  |             |  |              |  |           |               |       | 
|                                  | (in millions) | 
|December 31, 2004                 |                |  |            |  |             |  |              |  |           |               |       | 
|Net sales to external             |                |  |            |  |             |  |              |  |           |               |       | 
|customers                         | 4,073          |  | 1,167      |  | 2,325       |  | 404          |  | 25        | -             | 7,994 | 
|Intersegment sales (a)            | 8              |  | 181        |  | 33          |  | 1            |  | 144       | (367)         | -     | 
|Depreciation and amortization     | (165)          |  | (97)       |  | (40)        |  | (1)          |  | (15)      | -             | (318) | 
|Operating income (loss)           | 407            |  | (105)      |  | (64)        |  | 325          |  | (129)     | -             | 434   | 
|Interest income (expense), net    | (16)           |  | (20)       |  | (11)        |  | 5            |  | 18        | -             | (24)  | 
|Income from equity investments    | -              |  | -          |  | (3)         |  | -            |  | -         | -             | (3)   | 
|Other income (expense),           |                |  |            |  |             |  |              |  |           |               |       | 
|net and restructuring charges (b) | (40)           |  | (730)      |  | (4)         |  | -            |  | 5         | -             | (769) | 
|Segment assets (d)                | 2,611          |  | 578        |  | 502         |  | 8            |  | 68        | -             | 3,767 | 
|Capital expenditures (c)          | (202)          |  | (93)       |  | (31)        |  | -            |  | (20)      | -             | (346) | 
|Capital employed (e)              | 2,007          |  | 263        |  | 161         |  | (115)        |  | (3)       | -             | 2,313 | 
|Net goodwill                      | 1,064          |  | 23         |  | 155         |  | -            |  | -         | -             | 1,242 | 
|                                  |                |  |            |  |             |  |              |  |           |               |       | 

(*) Includes the TV business up to the sale date, July 31, 2004 of €845 million and €-114 million respectively, in net sales and operating
  income.

F-22

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|                                                                                                                         | Content &       |  | Components |  | Consumer    |  | Licensing(f) |  | Corporate |  | Consolidation |  | Total  | 
|------------------------------------------------------------------------------------------------------------------------ | --------------- |  | ---------- |  | ----------- |  | ------------ |  | --------- |  | ------------- |  | ------ | 
|                                                                                                                         | Networks        |  |            |  | Products(*) |  |              |  |           |  | Adjustments   |  |        | 
|                                                                                                                         |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|                                                                                                                         | ( in millions) | 
|December 31, 2003                                                                                                        |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|Net sales to external                                                                                                    |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|customers                                                                                                                | 3,714           |  | 1,072      |  | 3,198       |  | 462          |  | 13        |  | -             |  | 8,459  | 
|Intersegment sales (a)                                                                                                   | 9               |  | 424        |  | 13          |  | 1            |  | 148       |  | (595)         |  | -      | 
|Depreciation and amortization                                                                                            | (141)           |  | (99)       |  | (80)        |  | (5)          |  | (16)      |  | -             |  | (341)  | 
|Operating income (loss)                                                                                                  | 436             |  | (101)      |  | (124)       |  | 411          |  | (114)     |  | -             |  | 508    | 
|Interest income (expense), net                                                                                           | (16)            |  | (5)        |  | (13)        |  | 5            |  | 20        |  | -             |  | (9)    | 
|Income from equity investments                                                                                           | (5)             |  | -          |  | (2)         |  | -            |  | -         |  | -             |  | (7)    | 
|Other income (expense),                                                                                                  |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|net and restructuring charges (b)                                                                                        | (75)            |  | (149)      |  | (52)        |  | 1            |  | 26        |  | -             |  | (249)  | 
|Segment assets (d)                                                                                                       | 2,431           |  | 920        |  | 911         |  | 8            |  | 98        |  | -             |  | 4,368  | 
|Capital expenditures (c)                                                                                                 | (297)           |  | (137)      |  | (48)        |  | (2)          |  | (9)       |  | -             |  | (493)  | 
|Capital employed (e)                                                                                                     | 1,917           |  | 612        |  | 320         |  | 47           |  | 82        |  | -             |  | 2,978  | 
|Net goodwill                                                                                                             | 1,077           |  | -          |  | 23          |  | -            |  | -         |  | -             |  | 1,100  | 
|                                                                                                                         |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|(*) Includes the TV business for 1,707 million and
      -199 million, respectively, in net sales and operating income |                
|                                                                                                                         |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|                                                                                                                         | Content &       |  | Components |  | Consumer    |  | Licensing(f) |  | Corporate |  | Consolidation |  | Total  | 
|                                                                                                                         | Networks        |  |            |  | Products(*) |  |              |  |           |  | Adjustments   |  |        | 
|                                                                                                                         |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|                                                                                                                         | ( in millions) | 
|December 31, 2002(**)                                                                                                    |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|Net sales to external                                                                                                    |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|customers                                                                                                                | 3,924           |  | 1,560      |  | 4,264       |  | 429          |  | 10        |  | -             |  | 10,187 | 
|Intersegment sales (a)                                                                                                   | 42              |  | 664        |  | 56          |  | -            |  | 188       |  | (950)         |  | -      | 
|Depreciation and amortization                                                                                            | (152)           |  | (125)      |  | (105)       |  | (2)          |  | (12)      |  | -             |  | (396)  | 
|Operating income (loss)                                                                                                  | 420             |  | 84         |  | (52)        |  | 387          |  | (121)     |  | -             |  | 718    | 
|Interest income (expense), net                                                                                           | (20)            |  | (3)        |  | (23)        |  | 8            |  | 47        |  | -             |  | 9      | 
|Income from equity investments                                                                                           | -               |  | -          |  | -           |  | -            |  | -         |  | -             |  | -      | 
|Other income (expense),                                                                                                  |                 |  |            |  |             |  |              |  |           |  |               |  |        | 
|net and restructuring charges (b)                                                                                        | (38)            |  | (42)       |  | 2           |  | -            |  | (18)      |  | -             |  | (96)   | 
|Segment assets (d)                                                                                                       | 2,736           |  | 1,047      |  | 1,244       |  | 19           |  | 76        |  | -             |  | 5,122  | 
|Capital expenditures (c)                                                                                                 | (359)           |  | (244)      |  | (67)        |  | (1)          |  | (11)      |  | -             |  | (682)  | 
|Capital employed (e)                                                                                                     | 2,209           |  | 728        |  | 771         |  | 66           |  | 107       |  | -             |  | 3,881  | 
|Net goodwill                                                                                                             | 1,310           |  | 1          |  | 9           |  | -            |  | -         |  | -             |  | 1,320  | 
|                                                                                                                         |                 |  |            |  |             |  |              |  |           |  |               |  |        | 

|(*)  | Includes the TV business for €2,223 million and €-71 million respectively in net sales and operating income                                                                                                                                                                                 
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(**) | Restated with the transfer of Nextream and Broadband Access
      Products activities from the Consumer Products segment to the Content &
      Networks segment and with the transfer of previous New Media Services activities
      to Consumer Products and Content & Networks segments.

F-23

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|(a) | The Licensing segment does not include license fees charged
      to other segments.
|--- | ------------------------------------------------------------------------------------
|(b) | The caption in other income (expense) mainly
      comprises the following:       

For the year ended December 31, 2004 significant items are :

- €-742 million of restructuring expenses as detailed in note
    18 restructuring reserves.
- €+40 million for Gain on disposal of fixed assets/investments
    as detailed in note 6.
- €-6 million for Write-off of fixed assets as detailed in note
    6.
- €-61 million for other non current gains (losses).

Significant other non current gains (losses) are the following:

- A loss of €-14 million has been recognized in the Content & Network
    Segment and relates to an indemnity paid in relation with the acquisition
    of the PDSC business made in 2002.
- Losses of €-25 million were recognized corresponding to costs incidental
    to the restructuring of its displays activities including an operational impairment
    amounted to €-3 million (consisting primarily of the reduced production
    output that resulted from the restructuring announcement until the effective
    closure), €-6 million loss related to the settlement of pension obligation
    in the United States of America following the closure of Tubes & Glass
    Plants, €-16 million on certain risks related to the exit of the business.
- Following the classification in 2003 of Canal + Technology as a discontinued
    operation, the Group has reported a €-8 million non-current loss, net
    of tax in the period ended December 31, 2004.

For the year ended December 31, 2003 significant items are :

- €-217 million for restructuring expenses as detailed in note
    18 restructuring reserves.
- €+51 million for gain on disposal of fixed assets/investments
    as detailed in note 6.
- €-52 million for write-off of fixed assets as detailed in note
    6.
- €-31 million for other non current gain (losses).

Significant other non current gains (losses) are the following:

- During February 2003, the Components segment decided to temporarily stop
    one of its large-size tube production lines (line 1) in Marion, Indiana. The
    decision to definitively close the line was finally announced on June 12,
    2003, together with the decision to close a second line (see below). The costs
    incurred between February and June associated with this closure have been
    classified under other income/(expenses) and totaled €-8
    million. They include mainly employee unemployment costs (€-3 million)
    and operational impairment (€-5 million). Operational impairment consists
    primarily of the reduced production output that resulted from inter-plant
    job changes that are required by the seniority protection clauses in the union
    contracts.
- €-10 million related to Components segment, which decided to stop
    a second display production line (line 2) in Marion, Indiana, in June. The
    costs incurred between February and June associated with this closure have
    been classified under other income/(expenses) and amount to €-10 million. This mainly includes employee unemployment costs (€-4 million),
    operational impairment (€-5 million) and some other costs (€-1
    million) with no future benefits for the Group and which are directly related
    to the decision to temporarily stop the production line.
- €+6 million income related to the reversal of a provision for litigation
    (i.e., a judgment rendered in favor of Thomson), as well as other various
    miscellaneous income.
- €-4 million pertains to pension and medical retiree benefit expenses
    incidental to the major restructuring plans. Such pension settlement expense
    corresponds to a portion of the unrecognized pension loss as employees from
    previous restructuring plans terminated their lay-off status and withdrew
    their pension money. Such amount is broken down by segment as follows: €-2 million in Consumer Products, €-1 million in Holdings and €-1 million in Content & Networks.
- €-8 million are related to litigation in the Audio Video profit center.

For the year ended December 31, 2002 significant items are :

- €-141 million for restructuring expenses as detailed in note 18 restructuring
    reserves.
- €+79 million for gain on disposal of fixed assets/investments as
    detailed in note 6.
- €-15 million for Write-off of fixed assets as detailed in note 6.
- €-19 million for other non current gain (losses).

F-24

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Significant other non current gains (losses) are the following:

- €-8 million is related to the TAK activity, discontinued in 2002.
    TAK was in the former New Media Services segment (now Content and Networks)
    and was developing and marketing services for interactive television. The
    amount classified in other income (expense), net corresponds to
    operating costs of the period of this discontinued activity. Prior year operating
    losses have not been restated (€-10 million for year 2001). Restructuring
    costs related to this discontinued activity (€-5 million) have also
    been classified under other income (expense), net.
- The effect of operational inefficiencies in one of the Components segment
    glass plants due to a fire, mainly unabsorbed overheads, labor variance and
    scrap, is presented under other income (expense), net in an amount
    of €-3 million.
- On June 10, 2002, in connection with a patent infringement claim concerning
    the Consumer Products segment, Thomson entered into a settlement and license
    agreement with the plaintiff. The payment is comprised of damages and royalties
    for the period prior to the date of the agreement (June 10, 2002), and a fully
    paid up worldwide license for the remaining life of the settled patents. Consistent
    with 2001 classification, the damages in excess of the previous year accruals
    have been classified under other income ( expense) and amount
    to €-5.7 million. When patent infringement cases are settled in the
    Groups favor the settlement received by the licensing companies of the
    Group corresponding to the amount of royalties which should have been received
    during the license period, is recorded under net sales
- The Group experienced operational inefficiencies on one of its Components
    segment glass panel lines beginning in the second half of 2001 due to equipment
    failure. Because no insurance indemnity had yet been agreed upon with the
    insurance company in 2001, the Group elected to classify the portion of scrap
    and overhead and labor variance in connection with this situation under other
    income (expense), net in the amount of €-6.6 million in 2001.
    In 2002, the insurance recovery proceeds received were allocated in an amount
    of €10 million and €9.9 million to other income (expense),
    net and operating income, respectively, in proportion to the costs incurred
    in 2001 and 2002 respectively.

|(c) | Amounts before the net change in debt related to capital
      expenditure payables of €-2 million, €-17 million and €+74 million for the years ended December 31, 2004, 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | Amounts include advances to suppliers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(e) | Capital employed is defined as being the aggregate of net
      tangible and intangible assets (excluding goodwill), operating working capital
      and other current assets and liabilities (excluding reserves, together with
      those related to employee benefits, tax, debt related to Technicolor acquisition
      and debt to suppliers of fixed assets).                                                                                                                                                                                                                            
|(f) | As set out under accounting policies of the Group, Thomsons
      patent license agreements generally provide that a specified royalty amount
      is earned on each product shipped to a third-party by a licensee. Thomsons
      policy is to record licensing revenue as it is earned. The gross royalty
      amount is determined on a quarterly basis and in accordance with the license
      agreement. However, some agreements may include royalty payments related
      to previous periods production. Such payments can be significant,
      as was the case notably in 2003.

Also, in the context of the sale of the Canal+ Technologies assets (see note
  6), Thomson Licensing S.A. sold fully paid-up licenses on patents.

F-25

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Reconciliation of segment information to consolidated figures:

|                                                                      | 2002            |  | 2003  |  | 2004  | 
|--------------------------------------------------------------------- | --------------- |  | ----- |  | ----- | 
|                                                                      |                 |  |       |  |       | 
|                                                                      | (€ in millions) | 
|Segment assets                                                        | 5,122           |  | 4,368 |  | 3,767 | 
|Goodwill                                                              | 1,320           |  | 1,100 |  | 1,242 | 
|Investments and other non-current assets                              | 218             |  | 185   |  | 280   | 
|Current accounts with affiliated companies                            | 71              |  | 79    |  | 183   | 
|Other receivables                                                     | 1,278           |  | 960   |  | 968   | 
|Contract advances, net (1)                                            | 242             |  | 205   |  | 179   | 
|Cash and cash equivalents                                             | 1,463           |  | 2,383 |  | 1,906 | 
|                                                                      |                 |  |       |  |       | 
|                                                                      |                 |  |       |  |       | 
|Total consolidated assets                                             | 9,714           |  | 9,280 |  | 8,525 | 
|                                                                      |                 |  |       |  |       | 
|(1) Contract
      advances relate to the Content & Networks segment. |                 |  |       |  |       | 
|                                                                      |                 |  |       |  |       | 

4. RESEARCH AND DEVELOPMENT EXPENSE

|                                                   | 2002            |  | 2003  |  | 2004  | 
|-------------------------------------------------- | --------------- |  | ----- |  | ----- | 
|                                                   |                 |  |       |  |       | 
|                                                   | (€ in millions) | 
|Research and development expense gross             | (386)           |  | (304) |  | (285) | 
|Government agency subsidies                        | 12              |  | 9     |  | 8     | 
|                                                   |                 |  |       |  |       | 
|Research and development expense, net of subsidies | (374)           |  | (295) |  | (277) | 
|                                                   |                 |  |       |  |       | 
|                                                   |                 |  |       |  |       | 

5. FINANCIAL EXPENSE

|                                                             | 2002            |  | 2003 |  | 2004 | 
|------------------------------------------------------------ | --------------- |  | ---- |  | ---- | 
|                                                             |                 |  |      |  |      | 
|                                                             | (€ in millions) | 
|Interest income                                              | 51              |  | 32   |  | 31   | 
|Interest expense                                             | (42)            |  | (41) |  | (55) | 
|                                                             |                 |  |      |  |      | 
|Interest (expense) income, net (1)                           | 9               |  | (9)  |  | (24) | 
|                                                             |                 |  |      |  |      | 
|                                                             |                 |  |      |  |      | 
|Cash payment discounts granted                               | (10)            |  | (9)  |  | (5)  | 
|Cash payment discounts obtained                              | 1               |  | 1    |  | -    | 
|Pension plan interest costs relating to shut-down activities | (26)            |  | (24) |  | (25) | 
|Other financial charges including bank fees                  | (13)            |  | (14) |  | (25) | 
|Dividends                                                    | -               |  | 2    |  | -    | 
|Exchange profit (loss)                                       | (2)             |  | (18) |  | 9    | 
|Other (2)                                                    | (87)            |  | (8)  |  | (9)  | 
|                                                             |                 |  |      |  |      | 
|                                                             |                 |  |      |  |      | 
|Other financial expense, net                                 | (137)           |  | (70) |  | (55) | 
|                                                             |                 |  |      |  |      | 
|Total                                                        | (128)           |  | (79) |  | (79) | 
|                                                             |                 |  |      |  |      | 

|(1) | Includes €2 million, €6 million and €15
      million of interest on promissory notes related to the acquisition of Technicolor
      for the years ended December 31, 2004, 2003 and 2002, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This amount mainly includes the valuation allowance related
      to financial investments carried at cost.                                                                                              

F-26

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

6. OTHER INCOME (EXPENSE), NET

|                                                                 | 2002            |  | 2003 |  | 2004 | 
|---------------------------------------------------------------- | --------------- |  | ---- |  | ---- | 
|                                                                 |                 |  |      |  |      | 
|                                                                 | (€ in millions) | 
|Gain on disposal of fixed assets/investments (1)                 | 79              |  | 51   |  | 40   | 
|Write-off of fixed assets other than in a restructuring plan (2) | (15)            |  | (52) |  | (6)  | 
|Other (3)                                                        | (19)            |  | (31) |  | (61) | 
|                                                                 |                 |  |      |  |      | 
|                                                                 |                 |  |      |  |      | 
|Total other income (expense), net                                | 45              |  | (32) |  | (27) | 
|                                                                 |                 |  |      |  |      | 

|(1) | Gain on disposal of fixed assets/investments                         
|--- | ---------------------------------------------------------------------
|    | a.                                                                   
|    | i.                                                                   
|    | ii.                                                                  
|    | b.                                                                   
|    | i.                                                                   
|    | c.                                                                   
|    | i.                                                                   
|(2) | Write-off of long lived assets other than in
      Restructuring plan
|    | a.                                                                   
|    | i.                                                                   
|    | b.                                                                   
|    | i.                                                                   
|    | c.                                                                   
|    | i.                                                                   
|(3) | Other                                                                
|    | This caption is detailed in note 3 by segment
      for 2002 to 2004.

7.
  INCOME TAX

Pursuant to the provisions of the French Tax Code (article 209 quinquies) and in accordance with a tax agreement from the French Tax Authorities dated November 6, 2002, Thomson S.A. now files a worldwide consolidated tax return (hereafter referred to as the Regime).

This Regime provides that the basis for income tax computation of the parent company includes the taxable result of French and foreign entities more than 50% owned (the Foreign Entities). Within

F-27

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

certain limits, the French Tax Code allows for the reduction of the taxable income of profitable companies by offsetting taxable losses of other entities. Also French income tax payable, as determined by the method described above, allows for the application of foreign taxes due in local jurisdictions and related to foreign entities more than 50% owned, to be applied as a credit to income taxes due in France.

The Regime has been in force since January 1, 2001 and will expire on December 31, 2005 unless renewed. As a consequence, Thomson filed worldwide consolidated tax returns for the years 2002 in November 2003 and for the year 2003 in November 2004, and the related consequences are reflected in Thomsons 2003 and 2004 financial statements.

a) Income tax expense is summarized below:

|                                    | 2002 |  | 2003            |  | 2004 | 
|----------------------------------- | ---- |  | --------------- |  | ---- | 
|                                    |      |  |                 |  |      | 
|                                    |      |  | (€ in millions) |  |      | 
|Current income tax:                 |      |  |                 |  |      | 
|France                              | (18) |  | (12)            |  | (18) | 
|Effect of the Regime                | 33   |  | -               |  | -    | 
|                                    |      |  |                 |  |      | 
|Sub-total current income tax France | 15   |  | (12)            |  | (18) | 
|                                    |      |  |                 |  |      | 
|Foreign                             | (93) |  | (79)            |  | (66) | 
|                                    |      |  |                 |  |      | 
|Total current income tax            | (78) |  | (91)            |  | (84) | 
|                                    |      |  |                 |  |      | 
|Deferred income tax                 |      |  |                 |  |      | 
|France                              | 47   |  | (2)             |  | (82) | 
|Foreign                             | (25) |  | 30              |  | 78   | 
|                                    |      |  |                 |  |      | 
|Total deferred income tax           | 22   |  | 28              |  | (4)  | 
|                                    |      |  |                 |  |      | 
|Total income tax                    | (56) |  | (63)            |  | (88) | 
|                                    |      |  |                 |  |      | 

In 2004, Thomson booked a net deferred tax liability of €4 million. This
  amount is mainly explained by the recognition of deferred tax assets in USA
  (€83 million) because of the expected profitability of Thomson Inc., following
  the exit of loss making TV business and the repositioning in Tube business (plants
  closure). The deferred tax asset recognized has been reduced in France due to
  the anticipated impact of the 2005 Loi de Finance which modifies
  and reduces drastically the capital gain tax rates. As a first consequence,
  starting January 1, 2005, the tax rate on Licensing income will be reduced from
  19% to 15%. As a second consequence, starting January 1, 2006, the taxable income
  resulting from Licensing revenues can no longer be, for tax purpose, offset
  by capital loss carried forwards. Therefore, the deferred tax asset relating
  to these capital loss carry forwards has been written down by an amount of €57
  million.

In 2004, the current income tax charge amounts to €18 million in France (non recoverable withholding taxes on Licensing revenue) and €66 million abroad, of which U.K. accounts for €17 million, Mexico for €10 million, Australia for €8 million and Netherlands for €7 million.

In 2003, the income tax charge of the Group amounted to €63 million, mainly in Poland and the U.K., while in the U.S. and France, where Thomson is in a loss position, patents income bears withholding taxes. Also, the Group has recorded a net deferred tax asset of €28 million. This amount includes mainly the recognition of deferred tax asset on part of the tax losses generated in the U.S in 2003, in view of an expected return to profitability in the U.S. resulting from the transfer of loss activities, as outlined in TCL agreement.

F-28

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

The increase of the current tax expense in 2003 compared to 2002 is mainly due to French taxes and relates to the effects of a non recurring tax refund in 2002 relative to the introduction of the Regime for €33 million.

In 2002, the Group recorded a net deferred tax asset of €22 million. This amount includes, in France a net of €47 million corresponding to the recognition of a tax benefit related to capital losses and valuation allowances on ordinary tax rate deferred assets, and a €25 million charge related to foreign entities.

b) Reconciliation between the provision for income tax and the pre-tax accounting income/(loss):

|                                                                       | 2002            |  | 2003  |  | 2004    | 
|---------------------------------------------------------------------- | --------------- |  | ----- |  | ------- | 
|                                                                       |                 |  |       |  |         | 
|                                                                       | (€ in millions) | 
|Net income/(loss)                                                      | 373             |  | 26    |  | (636)   | 
|Income tax                                                             | (56)            |  | (63)  |  | (88)    | 
|Minority interests                                                     | 13              |  | (8)   |  | (1)     | 
|                                                                       |                 |  |       |  |         | 
|Net income before tax (before minority interests and after equity)     | 416             |  | 97    |  | (547)   | 
|                                                                       |                 |  |       |  |         | 
|Equity result of unconsolidated subsidiaries                           | -               |  | (7)   |  | (3)     | 
|                                                                       |                 |  |       |  |         | 
|                                                                       |                 |  |       |  |         | 
|Pre-tax accounting income                                              | 416             |  | 104   |  | (544)   | 
|                                                                       |                 |  |       |  |         | 
|                                                                       |                 |  |       |  |         | 
|Provision for income tax using the statutory rate of 33.33%            |                 |  |       |  |         | 
|(33.33% in 2003 and 34.33% in 2002)                                    | (143)           |  | (35)  |  | 181     | 
|Permanent differences                                                  | 3               |  | 2     |  | (15)    | 
|Income tax refund due to retroactive application of the Regime         | 33              |  | -     |  | -       | 
|Unrecognized deferred tax assets and change in valuation allowance (1) | (68)            |  | (63)  |  | (281)   | 
|Tax credits                                                            | 9               |  | 17    |  | 8       | 
|Effects of differences in tax rate (2)                                 | 35              |  | 30    |  | 26      | 
|Other, net (3)                                                         | 75              |  | (14)  |  | (7)     | 
|                                                                       |                 |  |       |  |         | 
|Income tax                                                             | (56)            |  | (63)  |  | (88)    | 
|                                                                       |                 |  |       |  |         | 
|Pre-tax accounting income/(loss) before amortization                   |                 |  |       |  |         | 
|of goodwill and share in net income of equity affiliates(4)            | 494             |  | 180   |  | (414)   | 
|                                                                       |                 |  |       |  |         | 
|Effective tax rate(4)                                                  | 11.3%           |  | 35.0% |  | (21.2%) | 
|                                                                       |                 |  |       |  |         | 

|(1) | As of December 2004, tax loss carry forward have
      not been capitalized and deferred tax assets have been written off, in the
      USA for €78 million, France for €106 million and Italy for €47 million.
      As of December 2003, the net tax loss carry forwards created by the Regime
      have been recognized in the amount of €16 million based upon a probable
      taxable income before December 31, 2006. Also, €65 million of deferred
      tax on temporary differences has been depreciated in the U.S.
      In 2002, this amount includes €-61 million of change in valuation
      allowance, €-12 million of unrecognized deferred tax assets and €5 million of carry-back from Thomson, Inc.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | In 2004, this amount comprises €23 million
      related to operations taxed at a reduced rate in France and €3 million
      of effects of foreign tax rate differentials.
      In 2003, this amount comprised €21 million related to operations taxed
      at a reduced rate in France and €9 million of effects of foreign tax
      rate differentials.
      In 2002, this amount comprised €26 million related to operations taxed
      at a reduced rate in France, €11 million of effects of foreign tax
      rate differentials and €-2 million of effects of additional tax rate
      of 3.3%.                                                                                                            
|(3) | In addition to other taxes of foreign subsidiaries
      (including U.S.) not based upon taxable income, this amount includes:
      - In 2004, €-6 million of unrecoverable withholding tax on licensing
      revenues.
      - In 2003, €-11 million of unrecoverable withholding tax on licensing
      revenues.
      - In 2002, mainly €99 million for the recognition of unusual
      deferred tax benefits as described in paragraph a) above as well as €-19 million of unrecoverable withholding tax on licensing revenues.                                                                                                                                                                                  
|(4) | The effective tax rate has been calculated on
      a net result before tax, minority interests, equity investments (refer to
      (a) above) and goodwill amortization (€-130 million, €-76 million
      and €-78 million respectively at December 31, 2004, 2003 and 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-29

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

c) Income/(loss) before income taxes and minority interests:

|                                                      | 2002            |  | 2003  |  | 2004  | 
|----------------------------------------------------- | --------------- |  | ----- |  | ----- | 
|                                                      |                 |  |       |  |       | 
|                                                      | (€ in millions) | 
|Domestic activities                                   | 103             |  | 251   |  | 152   | 
|Foreign activities                                    | 313             |  | (154) |  | (699) | 
|                                                      |                 |  |       |  |       | 
|                                                      |                 |  |       |  |       | 
|Total income/(loss) before tax and minority interests | 416             |  | 97    |  | (547) | 
|                                                      |                 |  |       |  |       | 

d) Deferred tax liabilities and income taxes payable:

|                         | 2002            |  | 2003 |  | 2004 | 
|------------------------ | --------------- |  | ---- |  | ---- | 
|                         |                 |  |      |  |      | 
|                         | (€ in millions) | 
|                         |                 |  |      |  |      | 
|Deferred tax liabilities | 23              |  | 23   |  | 2    | 
|Income taxes payable     | 151             |  | 85   |  | 60   | 
|                         |                 |  |      |  |      | 
|Total tax liabilities    | 174             |  | 108  |  | 62   | 
|                         |                 |  |      |  |      | 

e) Deferred tax assets and liabilities included in other receivables
  and other creditors and accrued liabilities of the balance sheet:

|                                   | 2002            |  | 2003    |  | 2004    | 
|---------------------------------- | --------------- |  | ------- |  | ------- | 
|                                   |                 |  |         |  |         | 
|                                   | (€ in millions) | 
|Deferred tax assets (net)          | 1,437           |  | 1,657   |  | 1,742   | 
|Valuation allowance                | (1,154)         |  | (1,365) |  | (1,462) | 
|                                   |                 |  |         |  |         | 
|Deferred tax assets, net (note 13) | 283             |  | 292     |  | 280     | 
|                                   |                 |  |         |  |         | 
|                                   |                 |  |         |  |         | 
|Deferred tax liabilities (note 21) | (23)            |  | (23)    |  | (2)     | 
|                                   |                 |  |         |  |         | 
|Net deferred tax assets(1)         | 260             |  | 269     |  | 278     | 
|                                   |                 |  |         |  |         | 

|(1) | Including €93 million for Technicolor at
      December 31, 2002. This amount includes €-42 million of valuation
      allowance on deferred tax assets recorded through goodwill on Technicolor,
      PDSC and Grass Valley.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-30

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

f) Major temporary differences that give rise to deferred tax assets and liabilities:

|                                                | 2002            |  | 2003    |  | 2004    | 
|----------------------------------------------- | --------------- |  | ------- |  | ------- | 
|                                                |                 |  |         |  |         | 
|                                                | (€ in millions) | 
|Tax effect of tax loss carry-forwards           | 680             |  | 786     |  | 865     | 
|                                                |                 |  |         |  |         | 
|Foreign Tax credit related to the Regime(1)     | 112             |  | 176     |  | 233     | 
|                                                |                 |  |         |  |         | 
|Tax effect of temporary differences related to: |                 |  |         |  |         | 
|Accrued vacation pay                            | 9               |  | 8       |  | 7       | 
|Reserve for restructuring costs                 | 29              |  | 27      |  | 18      | 
|Reserve for other risks and losses              | 144             |  | 126     |  | 102     | 
|Reserve for depreciation of assets              | 13              |  | 37      |  | 180     | 
|Reserve for pensions                            | 192             |  | 195     |  | 186     | 
|Other temporary differences                     | 314             |  | 365     |  | 252     | 
|Total temporary differences                     | 701             |  | 758     |  | 745     | 
|                                                |                 |  |         |  |         | 
|Deferred tax assets, gross                      | 1,493           |  | 1,720   |  | 1,843   | 
|                                                |                 |  |         |  |         | 
|Tax effect of temporary differences related to: |                 |  |         |  |         | 
|Reserve for depreciation of assets              | (55)            |  | (44)    |  | (75)    | 
|Other                                           | (24)            |  | (42)    |  | (28)    | 
|                                                |                 |  |         |  |         | 
|Deferred tax liabilities, gross                 | (79)            |  | (86)    |  | (103)   | 
|                                                |                 |  |         |  |         | 
|Total valuation allowance                       | (1,154)         |  | (1,365) |  | (1,462) | 
|                                                |                 |  |         |  |         | 
|Net deferred tax assets (liabilities)           | 260             |  | 269     |  | 278     | 
|                                                |                 |  |         |  |         | 

|(1) | Foreign tax credits are comprised of corporate
      taxes paid outside France and deductible from the Regime future income tax
      payable.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

g) Expiration of the tax loss carry forward

|(€ in millions)     | 
|------------------- | 
|                    | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009                | 
|2010 and thereafter | 
|                    | 
|Total               | 
|                    | 

Out of this amount, €171 million correspond to the net tax loss carry forward created after January 1, 2001 in the Regime and can be used to offset taxable income on a worldwide basis until 2005. A valuation allowance is recognized for almost all the tax loss carry-forwards relating to European marketing subsidiaries (out of which Thomson multimedia Sales Germany GmbH represents 39% of the total tax loss carry-forwards).

F-31

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

8. LONG LIVED ASSETS

(a) Intangible assets:

|                                                   | 2002  |  | 2003  |  | 2004  | 
|-------------------------------------------------- | ----- |  | ----- |  | ----- | 
|                                                   |       |  |       |  |       | 
|(€ in millions)                                    | Net   |  | Net   |  | Gross | 
|                                                   |       |  |       |  |       | 
|                                                   |       |  |       |  |       | 
|Goodwill                                           | 1,320 |  | 1,100 |  | 1,518 | 
|Patents, trademarks and customer relationships (1) | 803   |  | 796   |  | 850   | 
|Other intangibles (2)                              | 60    |  | 39    |  | 352   | 
|                                                   |       |  |       |  |       | 
|                                                   |       |  |       |  |       | 
|Total                                              | 2,183 |  | 1,935 |  | 2,720 | 
|                                                   |       |  |       |  |       | 
|                                                   |       |  |       |  |       | 
|Gross value                                        | 2,524 |  | 2,317 |  |       | 
|Accumulated amortization                           | (341) |  | (382) |  |       | 
|                                                   |       |  |       |  |       | 

|(1) | This caption consists mainly of the trademarks (€169
      million for Technicolor trademark at December 31, 2004 closing rate) and
      customer relationships (€220 million and €65 million, respectively
      for Technicolor and PDSC at December 31, 2004 closing rate) which are not
      amortized.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The increase in 2004 is due to the addition of the DIRECTV
      customer relationships (€175 million as of December 31, 2004 closing
      rate) purchased as part of the HNS business described in note 2.                                                                                                 

|                                  |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|--------------------------------- | ----------- |  | -------------- |  | ---- | ----- | ---- | ----- | ----- | ----- | ------------ | ----- | --- |  | ----- | 
|Goodwill                          |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|(€ in millions)                   | Purchase    |  | Amortization   |  | 2002 |       | 2003 |       |       |       | 2004         |       |     |  |      
|                                  | Date        |  | Period (years) |  | Net  |       | Net  |       | Gross |       | Amortization |       | Net | 
|                                  |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|ATLINKS                           | 1999 & 2003 |  | 15             |  |      | 26    |      | 56    |       | 60    |              | (14)  |     |  | 46    | 
|Technicolor Group (1)             | 2001        |  | 20             |  |      | 535   |      | 417   |       | 454   |              | (97)  |     |  | 357   | 
|Screenvision US                   | 2001        |  | 20             |  |      | 39    |      | 31    |       | 34    |              | (6)   |     |  | 28    | 
|BTS                               | 2001 & 2002 |  | 15             |  |      | 116   |      | 107   |       | 130   |              | (37)  |     |  | 93    | 
|Nextream                          | 2001 & 2004 |  | 15             |  |      | 5     |      | 5     |       | 19    |              | (2)   |     |  | 17    | 
|Thomson Broadband (ADSL)          | 2001        |  | 10             |  |      | 61    |      | 54    |       | 67    |              | (21)  |     |  | 46    | 
|Vidfilm                           | 2002        |  | 20             |  |      | 68    |      | 27    |       | 28    |              | (4)   |     |  | 24    | 
|Grass Valley                      | 2002        |  | 15             |  |      | 93    |      | 80    |       | 84    |              | (16)  |     |  | 68    | 
|Southern Star Duplitek            | 2002        |  | 20             |  |      | 49    |      | 27    |       | 28    |              | (4)   |     |  | 24    | 
|Panasonic Disc Services           |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|Corporation (PDSC) (1)            | 2002        |  | 20             |  |      | 272   |      | 223   |       | 225   |              | (32)  |     |  | 193   | 
|Screenvision Europe               | 2002 & 2003 |  | 20             |  |      | 19    |      | 16    |       | 17    |              | (7)   |     |  | 10    | 
|Technicolor Digital Cinema        | 2003        |  | 20             |  |      | -     |      | 17    |       | 17    |              | (1)   |     |  | 16    | 
|Cinecolor                         | 2003        |  | 20             |  |      | -     |      | 11    |       | 11    |              | (1)   |     |  | 10    | 
|Fortune (2)                       | 2004        |  | 15             |  |      | -     |      | -     |       | 11    |              | (1)   |     |  | 10    | 
|Gyration (2)                      | 2004        |  | 8              |  |      | -     |      | -     |       | 13    |              | (1)   |     |  | 12    | 
|Corinthian (2)                    | 2004        |  | 20             |  |      | -     |      | -     |       | 25    |              | -     |     |  | 25    | 
|The Moving Picture Company (2)    | 2004        |  | 20             |  |      | -     |      | -     |       | 68    |              | -     |     |  | 68    | 
|HNS (2)                           | 2004        |  | 8              |  |      | -     |      | -     |       | 11    |              | (1)   |     |  | 10    | 
|TCL-Thomson Electronics (TTE) (2) | 2004        |  | 3              |  |      | -     |      | -     |       | 155   |              | (22)  |     |  | 133   | 
|Others (less than€10 million      |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|net individually)                 |             |  |                |  |      | 37    |      | 29    |       | 61    |              | (9)   |     |  | 52    | 
|                                  |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|                                  |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 
|Total                             |             |  |                |  |      | 1,320 |      | 1,100 |       | 1,518 |              | (276) |     |  | 1,242 | 
|                                  |             |  |                |  |      |       |      |       |       |       |              |       |     |  |       | 

|1) | Technicolor and PDSC goodwill gross value decreased
      by respectively €36 million and €16 million in 2004 due to the
      decrease in value of the USD.                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | As of December 31, 2004, a preliminary purchase
      valuation assessment had been carried out on these companies. The final
      assessment should be completed no later than the close of the first financial
      year subsequent to the acquisition pursuant to French Regulation 99-02.

F-32

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Patents, trademarks and customer relationships:

For acquisitions, Thomson carries out a purchase valuation assessment, including the assessment of the valuation of intangible assets. For material amounts, Thomson relies on independent experts to determine the amount of intangible assets. With respect to customer relationships, the valuation methodology used is generally based on the discounted future cash flows expected to be generated by the existing customer portfolio at the acquisition date. With respect to trademarks, the valuation methodology used is based on royalty rates which could reasonably be paid by third-party licensees on similar trademarks. Such intangibles are not amortized but are subject to periodic impairment tests using the same criteria as applied in the initial valuation.

Patents, trademarks and customer relationships consist mainly of:

| | - Trademarks of Technicolor® (€169 million at December
        31, 2004), Grass Valley® (€33 million at December 31, 2004),
        Recoton® (€22 million at December 31, 2004) and THOMSON®.
      - Customer relationships of Technicolor (€220 million), PDSC
        (€65 million), Screenvision Europe (€22 million), Southern
        Star Duplitek (€34 million) and Vidfilm (€33 million).
      - A license to use the RCA® trademark for consumer electronics
        products was obtained in 1988 and in 1999 an extended usage of the RCA®
        trademark was purchased from General Electric. Trademarks are no longer
        amortized.
      - In 2002 and 2003, license rights were acquired to use third-party
        patents in the Content and Networks segment. There is no value in Thomsons
        consolidated balance sheets for the majority of patents owned by the Group.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other intangible assets

Other intangible assets include mainly software and a customer relationship
  with DIRECTV.

(b) Property, plant and equipment:

|                         | 2002    |  | 2003    |  | 2004  | 
|------------------------ | ------- |  | ------- |  | ----- | 
|                         |         |  |         |  |       | 
|(€ in millions)          | Net     |  | Net     |  | Gross | 
|                         |         |  |         |  |       | 
|                         |         |  |         |  |       | 
|                         |         |  |         |  |       | 
|Land                     | 76      |  | 67      |  | 62    | 
|Buildings                | 281     |  | 278     |  | 474   | 
|Plant and equipment      | 983     |  | 850     |  | 2,621 | 
|Other fixed assets       | 282     |  | 279     |  | 378   | 
|                         |         |  |         |  |       | 
|                         |         |  |         |  |       | 
|Total                    | 1,622   |  | 1,474   |  | 3,535 | 
|                         |         |  |         |  |       | 
|                         |         |  |         |  |       | 
|Gross value              | 3,800   |  | 3,554   |  |       | 
|Accumulated amortization | (2,178) |  | (2,080) |  |       | 
|                         |         |  |         |  |       | 

F-33

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

As of December 31, 2004, 2003 and 2002 the accumulated depreciation includes
  €601 million, €56 million and €38 million, respectively, of
  write-downs that have been recognized within the framework of restructuring
  plans (note 18).

9.
  EQUITY INVESTMENTS

These investments represent companies engaged in activities similar to those of Thomsons consolidated subsidiaries.

Equity investments in unconsolidated affiliates are summarized below:

|(€ in millions)                      | % Interest |  | Investments |      | Income/(loss)
|------------------------------------ | ---------- |  | ----------- | ---- | -------------
|                                     | 2004       |  | 2002        | 2003 | 2004         
|                                     |            |  |             |      |              
|                                     |            |  |             |      |              
|TCL-Thomson Electronics (*)          | 33.0%      |  | -           | -    | 116          
|CTE El Athir (Tunisia)               | 30.0%      |  | 4           | 4    | 3            
|EasyPlug, S.A.S. (France)            | 50.0%      |  | -           | 3    | 3            
|EasyPlug, Inc. (U.S.)                | 50.0%      |  | -           | -    | -            
|Celstream Tech. Private Ltd. (India) | 44.8%      |  | -           | 1    | 1            
|MTEP (U.S.)                          | 12.5%      |  | -           | 1    | 1            
|Techfund Capital Europe (France)     | 20.0%      |  | -           | 2    | 3            
|Metric Line (France)                 | 40.0%      |  | -           | -    | -            
|Others                               |            |  | -           | -    | 1            
|                                     |            |  |             |      |              
|                                     |            |  |             |      |              
|Total                                |            |  | 4           | 11   | 128          
|                                     |            |  |             |      |              

|(*) | The goodwill as of December 31, 2004 of €133 million is shown separately in goodwill note 8.
|--- | --------------------------------------------------------------------------------------------

10. OTHER INVESTMENTS

|                          | 2002  |  | 2003 |  |       |  | 2004      |  |     |    
|------------------------- | ----- |  | ---- |  | ----- |  | --------- |  | --- | ---
|                          |       |  |      |  |       |  |           |  |     |    
|(€ in millions)           | Net   |  | Net  |  | Gross |  | Valuation |  | Net
|                          |       |  |      |  |       |  | allowance |  |    
|                          |       |  |      |  |       |  |           |  |     |    
|                          |       |  |      |  |       |  |           |  |     |    
|Investments in:           |       |  |      |  |       |  |           |  |     |    
|- listed securities (1)   | 5     |  | 14   |  | 36    |  | -         |  |     | 36 
|- unlisted securities (2) | 53    |  | 111  |  | 157   |  | (80)      |  |     | 77 
|                          |       |  |      |  |       |  |           |  |     |    
|                          |       |  |      |  |       |  |           |  |     |    
|Total                     | 58    |  | 125  |  | 193   |  | (80)      |  |     | 113
|                          |       |  |      |  |       |  |           |  |     |    
|                          |       |  |      |  |       |  |           |  |     |    
|Gross value               | 248   |  | 211  |  |       |  |           |  |     |    
|Accumulated amortization  | (190) |  | (86) |  |       |  |           |  |     |    
|                          |       |  |      |  |       |  |           |  |     |    

|(1) | Among which €13 million of shares has been pledged to
      a bank as collateral to hedge counterpart risk. This caption also includes
      common shares in a listed company strategic to the Group totalling €15 million at December 31, 2004 closing rate.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | This caption includes minority positions in unquoted companies
      strategic to the Group, including at December 31, 2004, a preference share
      investment totaling €73 million at December 31, 2004 closing rate.                                      

F-34

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

11. INVENTORIES

|                                              | 2002            |  | 2003 |  | 2004 | 
|--------------------------------------------- | --------------- |  | ---- |  | ---- | 
|                                              |                 |  |      |  |      | 
|                                              | (€ in millions) | 
|Raw materials                                 | 379             |  | 291  |  | 145  | 
|Work in process                               | 123             |  | 59   |  | 58   | 
|Finished goods and purchased goods for resale | 561             |  | 478  |  | 427  | 
|Sub-total                                     | 1,063           |  | 828  |  | 630  | 
|Less: valuation allowance                     | (101)           |  | (84) |  | (61) | 
|                                              |                 |  |      |  |      | 
|Total                                         | 962             |  | 744  |  | 569  | 
|                                              |                 |  |      |  |      | 

|As of December 31, 2004, approximately 81% (73%
      in 2003 and 76% in 2002) of inventories were valued by the FIFO method with
      the remainder valued by the weighted average cost method.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2004, 2003 and 2002 the accumulated depreciation includes
  €11 million, €9 million and €8 million, respectively, of write-downs
  recognized within the framework of restructuring plans.

12.
  TRADE ACCOUNTS AND NOTES RECEIVABLE, NET

|                                       | 2002            |  | 2003  |  | 2004  | 
|-------------------------------------- | --------------- |  | ----- |  | ----- | 
|                                       |                 |  |       |  |       | 
|                                       | (€ in millions) | 
|Trade accounts and notes receivable(1) | 1,742           |  | 1,363 |  | 1,222 | 
|Less: valuation allowance (2)          | (67)            |  | (48)  |  | (42)  | 
|                                       |                 |  |       |  |       | 
|Total                                  | 1,675           |  | 1,315 |  | 1,180 | 
|                                       |                 |  |       |  |       | 

|(1) | Including advances to suppliers. Sales deductions and price
      protection allowances are deducted from trade accounts and notes receivables
      gross for €230 million, €205 million and €235 million
      as of December 31, 2004, 2003 and 2002, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The valuation allowance includes a write-down of €2
      million in 2002 (nil in 2004 and 2003).                                                                                                                                                                     

Sales of receivables

The Group has in place a securitization program, since December 2002, which
  covers certain of its North American receivables. Under the program Thomson,
  Inc. entered into an agreement allowing the sale, on a revolving basis, of a
  senior undivided ownership interest in a designated pool of receivables up to
  a maximum of USD 300 million. In 2004 the amount of the program was reduced
  to USD 200 million (€147 million at the December 2004 closing rate).

No sales of receivables were outstanding at December 31, 2004, 2003 and 2002 under the securitization program.

F-35

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

13. OTHER RECEIVABLES

|                                                  | 2002            |  | 2003 |  | 2004 | 
|------------------------------------------------- | --------------- |  | ---- |  | ---- | 
|                                                  |                 |  |      |  |      | 
|                                                  | (€ in millions) | 
|Value added tax receivable (1)                    | 110             |  | 99   |  | 100  | 
|Other taxes receivable (2)                        | 232             |  | 56   |  | 62   | 
|Subsidies                                         | 23              |  | 23   |  | 19   | 
|Deferred taxes assets, net of valuation allowance | 283             |  | 292  |  | 280  | 
|Prepaid expenses                                  | 67              |  | 61   |  | 42   | 
|Other (3)                                         | 563             |  | 429  |  | 465  | 
|                                                  |                 |  |      |  |      | 
|                                                  |                 |  |      |  |      | 
|Total                                             | 1,278           |  | 960  |  | 968  | 
|                                                  |                 |  |      |  |      | 

|(1) | The value added tax receivable corresponds to the consolidated
      value added tax position generated in the normal course of the Thomson group's
      business.                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The significant tax receivable at the end of 2002 corresponds
      to the impact resulting from the worldwide tax consolidation Regime (note
      7).                                                                                                                                                                                                                                                                      
|(3) | As of December 31, 2004, 2003 and 2002, €117 million,
      €116 million and €122 million, respectively, are related to
      accrued royalty income. Thomson has acquired at year-end €98 million
      of receivables due from third parties (mainly retailers) to TTE to finance
      TTEs working capital requirement for a period not exceeding 24 months
      in application to the combination agreement (Note 23).

14.
  CONTRACT ADVANCES, NET

Contract advances primarily relate to customer contracts with Technicolor
  that conducts business with the majority of its customers under long-term contracts.
  These contracts award to Technicolor a customers business within a particular
  territory over the specified contract period (typically from 1 to 5 years).
  The contracts contain provisions that establish pricing terms for services and
  volumes to be provided and other terms and conditions. Consideration is typically
  paid as an advance to the customers in return for the customers various
  commitments over the life of the contracts.

Such advance payments are recorded as contracts advances, net and are amortized as a reduction of net sales on the basis of units of production or film processed. Technicolor customer advances amounted to €164 million, €188 million and €225 million as of December 31, 2004, 2003 and 2002, respectively. For the years ended December 31, 2004, 2003 and 2002, the company recorded a total of €134 million, €121 million and €66 million, respectively, of amortization of customer contracts advances.

As of December 31, 2004 advances paid on contracts on the Groups screen
  advertising joint ventures in the U.S. and Europe were €15 million (€17 million as of December 31, 2003). 
  The related amortization amounts to €10 million for year ended December
  31, 2004.

F-36

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

15.
  CASH AND CASH EQUIVALENTS

|                                      | 2002            |  | 2003  |  | 2004  | 
|------------------------------------- | --------------- |  | ----- |  | ----- | 
|                                      |                 |  |       |  |       | 
|                                      | (€ in millions) | 
|Cash and cash equivalents             | 1,463           |  | 2,383 |  | 1,906 | 
|Of which restricted cash deposits (1) | 89              |  | 76    |  | 55    | 
|                                      |                 |  |       |  |       | 

|(1) | Primarily a deposit by TCE Television Taiwan
      guaranteeing a loan to Thomson for the same amount
|--- | -----------------------------------------------------------------------------------------------------

16. SHAREHOLDERS EQUITY

Common stock and additional paid-in capital

|                             | 2002          |  | 2003          |  | 2004          | 
|---------------------------- | ------------- |  | ------------- |  | ------------- | 
|                             |               |  |               |  |               | 
|                             |               |  |               |  |               | 
|Outstanding number of shares | 280,613,508   |  | 280,613,508   |  | 273,308,032   | 
|Nominal value in            | 3.75          |  | 3.75          |  | 3.75          | 
|Thomson share capital in    | 1,052,300,655 |  | 1,052,300,655 |  | 1,024,905,120 | 
|                             |               |  |               |  |               | 

Treasury shares

|                               | 2002        |  | 2003        |  | 2004        | 
|------------------------------ | ----------- |  | ----------- |  | ----------- | 
|                               |             |  |             |  |             | 
|Treasury stock at cost (€)     | 156,490,328 |  | 211,322,802 |  | 55,307,575  | 
|                               |             |  |             |  |             | 
|                               |             |  |             |  |             | 
|Number of Treasury shares held | 3,373,070   |  | 6,373,070   |  | 3,082,766   | 
|                               |             |  |             |  |             | 
|Out of which                   |             |  |             |  |             | 
|purchased in the year          | -           |  | 3,000,000   |  | 4,157,010   | 
|attributed                     | -           |  | -           |  | (141,838)   | 
|cancelled                      | -           |  | -           |  | (7,305,476) | 
|                               |             |  |             |  |             | 

Since 2000, the shareholders meeting has authorized and renewed the
  authorization to the Board of Directors to repurchase ordinary shares in the
  market for multiple purposes (future exchange of shares for strategic partnerships,
  possible exchange with convertible bonds, stock option plans, etc).
  Pursuant to the authorization of November 10, 2000, the Group had repurchased
  3,267,850 Treasury shares as of December 31, 2002 in addition to 105,220 existing
  treasury shares. 
  At the end of 2003, Thomson held a total of 6,373,070 shares following the repurchase
  of 3 million shares the company made in November 2003. 
  Effective May 7, 2004 the shareholders meeting approved the renewal of
  the plan to repurchase approximately 10% of the share capital in the market
  for multiple purposes.

At December 31, 2004, the Group held a total of 3,082,766 shares as treasury shares on its balance sheet for a value of €55 million which is presented as a deduction of the equity. These were acquired pursuant to the following transactions as authorized by the Board of Directors:

Pursuant to the authorization of May 7, 2004, the group repurchased 4,157,010 Treasury shares during the year for a cost of €74 million.

F-37

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

On August 30, 2004, as agreed by the Board of Directors on July 22, 2003, a total of 141,838 shares have been attributed under specific conditions. A total of 403,441 shares remain to be attributed over 3 years to 27 beneficiaries.

On October 19, 2004, the Board decided to cancel 7,305,476 Treasury shares.

In addition, in December 2004, Thomson sold puts on its own shares with maturities in March, April and May 2005 for 2,000,000 shares.

From time to time, the Group may enter into financial transactions, notably lending, concerning treasury shares. As of December 31, 2004, no transaction were outstanding.

Stock option plans and dilutive potential ordinary shares

At December 31, 2004, stock option plans, created in accordance with the decision at the shareholders meeting on November 10, 2000, were as follows:

|                                | Plan 1            |  | Plan 2               |  | Plan 3               | 
|------------------------------- | ----------------- |  | -------------------- |  | -------------------- | 
|                                | Purchase options  |  | Subscription options |  | Subscription options | 
|                                |                   |  |                      |  |                      | 
|Boards decision                | December 18, 2000 |  | October 12, 2001     |  | September 22, 2004   | 
|                                | March 16, 2001    |  |                      |  |                      | 
|                                | July 23, 2001     |  |                      |  |                      | 
|                                |                   |  |                      |  |                      | 
|Number of Beneficiaries         | 463               |  | 556                  |  | 574                  | 
|                                |                   |  |                      |  |                      | 
|Number of options granted       | 4,018,500         |  | 3,540,300            |  | 7,366,590            | 
|                                |                   |  |                      |  |                      | 
|Exercise period                 | 50% as of         |  | 50% as of            |  | 50% as of            | 
|                                | December 18, 2003 |  | October 12, 2004     |  | September 22, 2007   | 
|                                | 50% as of         |  | 50% as of            |  | 50% as of            | 
|                                | December 18, 2004 |  | October 12, 2005     |  | September 22, 2008   | 
|                                |                   |  |                      |  |                      | 
|Plan life                       | 10 years          |  | 10 years             |  | 10 years             | 
|                                |                   |  |                      |  |                      | 
|Exercise price                  | 55.90 Euros       |  | 31.50 Euros          |  | 16.00 Euros          | 
|                                |                   |  |                      |  |                      | 
|Number of options cancelled     | 3,045,300         |  | 2,888,700            |  | 18,000               | 
|since the beginning of the plan |                   |  |                      |  |                      | 
|                                |                   |  |                      |  |                      | 
|Number of remaining             |                   |  |                      |  |                      | 
|participants                    | 74                |  | 58                   |  | 569                  | 
|                                |                   |  |                      |  |                      | 
|Number of options               |                   |  |                      |  |                      | 
|outstanding                     | 973,200           |  | 651,600              |  | 7,348,590            | 
|                                |                   |  |                      |  |                      | 

The board of Directors approved on September 22, 2004, a stock option subscription
  plan, for 574 beneficiaries, as follows: 
  358 beneficiaries of former stock option plans have accepted to cancel the options
  that were granted under Plan 1 and Plan 2 for a total number of 3,972,000 stock
  options in exchange for the granting of new options under plan 3. Under this
  plan, 852,700 options were granted to 216 employees who did not benefit from
  plan 1 and 2. The subscription option price was €16. Former employees and
  retirees were not eligible.

F-38

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

As of December 31, 2004, no stock options have been exercised from plan 1 and plan 2.

 BASA (Bon dAcquisition ou de Souscription dActions)

On September 15, 2004, the General Assembly approved a subscription plan (Bon
  dAcquisition ou de Souscription dActions BASA) for all
  individual shareholders which have fulfilled the two following conditions: 
  - Shareholders which have purchased or subscribed shares before June 30,
  2002 and, 
  - Which still own 80% of such shares as of July 21, 2004. 
  Such shareholder has the right to subscribe Thomson subscription certificate
  at €16 per certificate. The number of certificates subscribed amounts to
  12,471,368 at €1 each. Each certificate will be exercisable after the issuance
  of 2005 annual consolidated financial statement of Thomson beginning March 1,
  2006 and will expire on June 30, 2006. Thomson may choose to deliver new Thomson
  shares or existing treasury shares.

Common stock call option agreement in connection with the formation of TCL-Thomson Electronics(TTE)

In connection with the Combination Agreement with TCL Corporation (TCL Corp) to form TCL-Thomson Electronics (TTE), Thomson granted to TCL Corp the option to purchase from Thomson 2,500,000 common shares at an exercise price of €18.12 per share.

The Exercise period of this Call Option Agreement will start on the First Exercise Date (October 31, 2004), which is 3 months after the closing date of the Combination Agreement, and will end on October 31, 2006.

Earnings per share

The Group may issue 30,621,515 basic shares (weighted average number) in connection with its outstanding convertible/exchangeable bonds (note 20) and a maximum of 3,158,099 shares in connection with the promissory notes due to Carlton (note 22).

After consideration of the weighted average number of potential ordinary shares over the period and the restatement of financial charges net of tax (€19 million) associated with these two financial instruments and based on 2004 interest on the promissory notes, there is no dilutive effect on the earnings per share for the year ended December 31, 2004.

Minority interests

In 2004, the increase in minority interests is mainly due to the capital increase within Thomson Guangdong Display Company Ltd. (formerly Thomson Foshan Colour Picture Company Ltd.).

In 2003, the decrease of the minority interests is due to the acquisition by Thomson of the 50% minority interests in ATLINKS.

In 2002, the most significant component of minority interests (€38 million including net result) consisted mainly of the 50% equity investment in ATLINKS (€36 million) held by shareholders other than the Group.

F-39

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Cumulative translation adjustment

This item represents exchange differences arising from the translation of foreign subsidiaries financial statements.

Revaluation reserve

This item represents the Groups share in the revaluation of certain tangible fixed assets.

17.
  RESERVES FOR RETIREMENT BENEFITS

I- Summary of benefits

|                                     |     | 2002            |     | 2003 |         | 2004 | 
|------------------------------------ | --- | --------------- | --- | ---- | ------- | ---- | 
|                                     |     |                 |     |      |         |      | 
|                                     |     | (€ in millions) |    
|Pension plan (a)                     | 380 |                 | 365 |      | 358 (*) |     
|Post-retirement medical benefits (b) | 325 |                 | 288 |      | 231     |     
|                                     |     |                 |     |      |         |     
|Total reserves for employee benefits | 705 |                 | 653 |      | 589     |     
|                                     |     |                 |     |      |         |     

|(*) | In accordance with CNC opinion 2004-05, 
      jubilee awards are classified under Other creditors and accrued
      liabilities (€13 million in 2004). Prior years have not been
      restated.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

a) Pension plan

In some countries, Thomson pays contributions to governmental entities bearing the costs of retirement benefits. Such contributions are charged to expense as incurred. In other countries, mainly in Germany and in the U.S., Thomson provides defined benefits to employees upon their retirement.

- In Germany, employees have a non-funded pension plan granted and managed
    by Thomson.
- In the United States, the employees of Thomson, Inc. are covered under
    a defined benefit pension plan funded by a trust fund maintained by Thomson,
    Inc. The funding policy is to contribute on an annual basis an amount at least
    sufficient to meet the minimum requirements of the U.S. Employee Retirement
    Income Security Act of 1974 (ERISA). Benefits are equal to a percentage
    of the plan members earnings each year plus a guaranteed rate of return
    on earned benefits until retirement. Technicolor operates a defined benefit
    pension plan (the Technicolor Plan) that covers substantially
    all employees that are not covered by collective bargaining agreements.
- In Italy, according to local regulations, Thomson accrues indemnities
    for all employees (Trattemento di Fine Rapporto regulation) as
    if all employees would get indemnified at year-end. This indemnity is increased
    each year based on each employees seniority and an inflation factor.
- In France, contractual retirement indemnities are payable upon retirement
    of the employees and are due only if the employee is on Thomson payroll when
    he or she retires. Such indemnities are based and accrued on the employees
    estimated salary at retirement date and on his/her years of service. In some
    subsidiaries, jubilee awards are payable depending on the seniority
    of each employee in the Group.

F-40

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

b) Post-retirement medical benefits

Thomson Inc. and its subsidiaries provide health care coverage for retired employees who must meet seniority and age conditions.

Significant events occurred as follows:

- In November 2003, Thomson Inc announced a plan amendment to the postretirement
  medical plan that transferred more costs to the retirees through higher monthly
  premium payments, starting January 1, 2004. The plan re-measurement resulted
  in a USD 129 million (€95 million at closing exchange rate of December
  2004) unrecognised prior service gain which is deferred and recognized in gain
  over a period of time based upon expected future service years. 
  - By end of 2003, the US government passed legislation, the Medicare Prescription
  Drug, Improvement and Modernization Act of 2003 (The Act) related to postretirement
  medical plans. As a result of the Act, subsidies to be received are accounted
  as a reduction to the benefit obligation. A gain of USD 59 million (€43
  million at closing exchange rate of 2004) is recorded to actuarial gains/losses
  and it is being amortized over time. 
  - Thomson Inc closed during 2004 two Display plants located in the U.S.
  (Marion and Circleville). This resulted in a curtailment gain on the medical
  plan.

F-41

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

II - Analysis of the reserve for employee benefits

|(€ in millions)                 | Pension plan |  | Medical post- |  | Total benefits | 
|------------------------------- | ------------ |  | ------------- |  | -------------- | 
|                                |              |  |               |  |                | 
|                                |              |  |               |  |                | 
|                                | 2002         |  | 2003          |  | 2004           | 
|                                |              |  |               |  |                | 
|Present value                   |              |  |               |  |                | 
|of benefit obligation (*)       | (711)        |  | (682)         |  | (646)          | 
|Fair value of plan assets (*)   | 237          |  | 221           |  | 184            | 
|                                |              |  |               |  |                | 
|Funded status (I)               | (474)        |  | (461)         |  | (462)          | 
|                                |              |  |               |  |                | 
|                                |              |  |               |  |                | 
|Unrecognized actuarial          |              |  |               |  |                | 
|(gain) loss (II)                | 91           |  | 102           |  | 113            | 
|Unrecognized actuarial          |              |  |               |  |                | 
|prior service cost (III)        | 3            |  | (6)           |  | (4)            | 
|Amount not recognized           |              |  |               |  |                | 
|due to the Thomson              |              |  |               |  |                | 
|asset limitation rule (IV)      | -            |  | -             |  | (5)            | 
|                                |              |  |               |  |                | 
|Reserve for employee            |              |  |               |  |                | 
|benefits = -(I)-(II)-(III)-(IV) | 380          |  | 365           |  | 358            | 
|                                |              |  |               |  |                | 

|(*) | The detail of the change of the benefit obligation
      that are wholly or partly funded and the change of the fair value of assets
      is explained in the captions a) and b) as follows.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

a) Present value of benefit obligation

|                                 |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|-------------------------------- | ------------ |  | ------------- |  | -------------- |  | ------------------- |  | ----- |  | ----- |  | ------- |  | ------- |  | ------- | 
|(€ in millions)                  | Pension plan |  | Medical post- |  | Total benefits | 
|                                 |              |  |               |  |                |  | retirement benefits |  |       |  |       |  |         | 
|                                 |              |  |               |  |                |  |                     |  |       |  |       |  |         | 
|                                 | 2002         |  | 2003          |  | 2004           |  | 2002                |  | 2003  |  | 2004  |  | 2002    |  | 2003    |  | 2004    | 
|                                 |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|Benefit obligation               |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|at the beginning of the year     | (778)        |  | (711)         |  | (682)          |  | (423)               |  | (412) |  | (436) |  | (1,201) |  | (1,123) |  | (1,118) | 
|Reclassification of jubilee plan | -            |  | -             |  | 13             |  | -                   |  | -     |  | -     |  | -       |  | -       |  | 13      | 
|Service cost                     | (41)         |  | (33)          |  | (23)           |  | (7)                 |  | (8)   |  | (4)   |  | (48)    |  | (41)    |  | (27)    | 
|Interest cost                    | (46)         |  | (38)          |  | (33)           |  | (31)                |  | (27)  |  | (20)  |  | (77)    |  | (65)    |  | (53)    | 
|Amendment                        | -            |  | 6             |  | (3)            |  | (2)                 |  | -     |  | 103   |  | (2)     |  | 6       |  | 100     | 
|Business combination             | (7)          |  | (4)           |  | 9              |  | (2)                 |  | -     |  | -     |  | (9)     |  | (4)     |  | 9       | 
|Plan participants contribution   | -            |  | (1)           |  | (1)            |  | (3)                 |  | (3)   |  | (4)   |  | (3)     |  | (4)     |  | (5)     | 
|Curtailment/settlement           | 55           |  | 39            |  | 46             |  | -                   |  | 11    |  | 5     |  | 55      |  | 50      |  | 51      | 
|Actuarial gain (loss)            | (14)         |  | (33)          |  | (27)           |  | (39)                |  | (99)  |  | 17    |  | (53)    |  | (132)   |  | (10)    | 
|Benefits paid                    | 60           |  | 37            |  | 37             |  | 30                  |  | 22    |  | 19    |  | 90      |  | 59      |  | 56      | 
|Foreign currency exchange        |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|rate changes                     | 60           |  | 56            |  | 18             |  | 65                  |  | 80    |  | 22    |  | 125     |  | 136     |  | 40      | 
|                                 |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|Benefit obligation at the        |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 
|end of the year                  | (711)        |  | (682)         |  | (646)          |  | (412)               |  | (436) |  | (298) |  | (1,123) |  | (1,118) |  | (944)   | 
|                                 |              |  |               |  |                |  |                     |  |       |  |       |  |         |  |         |  |         | 

F-42

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|-------------------------------------------------------------------------------------------------------- | ------------ | ------------- | -------------- |  | ---- | ------------------- | ---- |  | ---- |  | ---- |  | ----- |  | ---- |  | ---- | 
|(€ in millions)                                                                                          | Pension plan | Medical post- | Total benefits | 
|                                                                                                         |              |               |                |  |      | retirement benefits |      |  |      |  |      |  |      
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|                                                                                                         | 2002         |               | 2003           |  | 2004 |                     | 2002 |  | 2003 |  | 2004 |  | 2002  |  | 2003 |  | 2004 | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|Fair value at the beginning                                                                              |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|of the year                                                                                              | 406          |               | 237            |  | 221  |                     | -    |  | 2    |  | -    |  | 406   |  | 239  |  | 221  | 
|Actuarial return on plan assets                                                                          | (68)         |               | 24             |  | 21   |                     | -    |  | -    |  | -    |  | (68)  |  | 24   |  | 21   | 
|Employer contribution                                                                                    | -            |               | 29             |  | 16   |                     | -    |  | -    |  | -    |  | -     |  | 29   |  | 16   | 
|Plan participant contribution                                                                            | -            |               | 1              |  | 1    |                     | -    |  | -    |  | -    |  | -     |  | 1    |  | 1    | 
|Curtailment/settlement                                                                                   | (52)         |               | (38)           |  | (55) |                     | -    |  | (2)  |  | -    |  | (52)  |  | (40) |  | (55) | 
|Business combination                                                                                     | 7            |               | 12             |  | (2)  |                     | 2    |  | -    |  | -    |  | 9     |  | 12   |  | (2)  | 
|Benefits paid                                                                                            | (8)          |               | (7)            |  | (8)  |                     | -    |  | -    |  | -    |  | (8)   |  | (7)  |  | (8)  | 
|Foreign currency exchange                                                                                |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|rate changes                                                                                             | (48)         |               | (37)           |  | (10) |                     | -    |  | -    |  | -    |  | (48)  |  | (37) |  | (10) | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|Fair value at the end                                                                                    |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|of the year                                                                                              | 237          |               | 221            |  | 184  |                     | 2    |  | -    |  | -    |  | 239   |  | 221  |  | 184  | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|III - Elements of thestatements
      of operations                                                      |              |               |                |  |      |                     |      |  |      |  |      |  |      
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|Total expense for pensions and other benefits for the years
      ended December 31, 2002, 2003 and 2004
|is detailed as follows:                                                                                  |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|(€ in millions)                                                                                          | Pension plan | Medical post- | Total benefits | 
|                                                                                                         |              |               |                |  |      | retirement benefits |      |  |      |  |      |  |      
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |      
|                                                                                                         | 2002         |               | 2003           |  | 2004 |                     | 2002 |  | 2003 |  | 2004 |  | 2002  |  | 2003 |  | 2004 | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |      
|Service cost                                                                                             | (41)         |               | (33)           |  | (23) |                     | (7)  |  | (8)  |  | (4)  |  | (48)  |  | (41) |  | (27) | 
|Interest cost                                                                                            | (46)         |               | (38)           |  | (33) |                     | (31) |  | (27) |  | (20) |  | (77)  |  | (65) |  | (53) | 
|Return on plan assets                                                                                    | 26           |               | 15             |  | 13   |                     | -    |  | -    |  | -    |  | 26    |  | 15   |  | 13   | 
|Amortization of unrecognized                                                                             |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|prior service costs                                                                                      | (6)          |               | (2)            |  | (1)  |                     | (1)  |  | (1)  |  | 6    |  | (7)   |  | (3)  |  | 5    | 
|Amortization of unrecognized                                                                             |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|gain or loss                                                                                             | -            |               | 1              |  | (4)  |                     | (1)  |  | (3)  |  | (7)  |  | (1)   |  | (2)  |  | (11) | 
|Effect of                                                                                                |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|settlement/curtailment                                                                                   | -            |               | (1)            |  | (16) |                     | -    |  | -    |  | 49   |  | -     |  | (1)  |  | 33   | 
|Thomson asset limitation                                                                                 |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|rule impact                                                                                              | -            |               | -              |  | 3    |                     | -    |  | -    |  | -    |  | -     |  | -    |  | 3    | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 
|Total expense                                                                                            | (67)         |               | (58)           |  | (61) |                     | (40) |  | (39) |  | 24   |  | (107) |  | (97) |  | (37) | 
|                                                                                                         |              |               |                |  |      |                     |      |  |      |  |      |  |       |  |      |  |      | 

IV - Plan assets

When defined benefit plans are funded, mainly in the U.S., U.K. and Canada, the investment strategy of the benefit plans aims to match the investment portfolio to the membership profile. Asset performance is reviewed on a quarterly basis and the asset allocation strategy is reviewed on an annual basis.

F-43

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

Thomson pension plans weighted-average asset allocations as at December 31, 2004 by asset category are as follows:

|Equity securities | 58%  | 
|----------------- | ---- | 
|Debt securities   | 39%  | 
|Other             | 3%   | 
|                  |      | 
|Total             | 100% | 
|                  |      | 

V - Information by geographic area

The following information summarizes (a) the reserve for employee benefits, (b) the benefit obligations, (c) the fair value of assets and (d) the unrecognized benefit obligation by geographic area.

|                                     | 2002            |  | 2003 |  | 2004 | 
|------------------------------------ | --------------- |  | ---- |  | ---- | 
|                                     |                 |  |      |  |      | 
|                                     | (€ in millions) | 
|                                     |                 |  |      |  |      | 
|Pension plan (1)                     |                 |  |      |  |      | 
|NAFTA (2)                            | 51              |  | 45   |  | 59   | 
|Germany                              | 230             |  | 232  |  | 226  | 
|France                               | 41              |  | 40   |  | 36   | 
|Other countries(2)                   | 58              |  | 48   |  | 37   | 
|                                     |                 |  |      |  |      | 
|Sub-total                            | 380             |  | 365  |  | 358  | 
|                                     |                 |  |      |  |      | 
|Medical post-retirement benefits     |                 |  |      |  |      | 
|NAFTA (2)                            | 325             |  | 288  |  | 231  | 
|                                     |                 |  |      |  |      | 
|Total reserves for employee benefits | 705             |  | 653  |  | 589  | 
|                                     |                 |  |      |  |      | 

|(1) | Pension plans in France and Italy relate to termination indemnities.                                                    
|--- | ------------------------------------------------------------------------------------------------------------------------
|(2) | NAFTA includes the U.S., Canada and Mexico. Other
      countries mainly relate to United Kingdom, Italy and Poland.

b) Actuarial present value of benefit obligations

|(€ in millions)       | Pension plan |  | Medical post- |  | Total benefits | 
|--------------------- | ------------ |  | ------------- |  | -------------- | 
|                      |              |  |               |  |                | 
|                      |              |  |               |  |                | 
|Present value         |              |  |               |  |                | 
|of benefit obligation | 2002         |  | 2003          |  | 2004           | 
|                      |              |  |               |  |                | 
|NAFTA affiliates      | (301)        |  | (247)         |  | (217)          | 
|German affiliates     | (264)        |  | (283)         |  | (288)          | 
|French affiliates     | (48)         |  | (45)          |  | (37)           | 
|Other affiliates      | (98)         |  | (107)         |  | (104)          | 
|                      |              |  |               |  |                | 
|Total                 | (711)        |  | (682)         |  | (646)          | 
|                      |              |  |               |  |                | 

F-44

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

c) Fair value of plan assets

|(€ in millions)           | Pension plan |  | Medical post- |  | Total plan | 
|------------------------- | ------------ |  | ------------- |  | ---------- | 
|                          |              |  |               |  |            | 
|                          |              |  |               |  |            | 
|Fair value of plan assets | 2002         |  | 2003          |  | 2004       | 
|                          |              |  |               |  |            | 
|NAFTA affiliates          | 187          |  | 175           |  | 134        | 
|German affiliates         | -            |  | -             |  | -          | 
|French affiliates         | -            |  | -             |  | -          | 
|Other affiliates          | 50           |  | 46            |  | 50         | 
|                          |              |  |               |  |            | 
|Total                     | 237          |  | 221           |  | 184        | 
|                          |              |  |               |  |            | 
|                          |              |  |               |  |            | 

|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|----------------------------- | ------------ |  | ------------- |  | -------------- |  | ------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- | 
|(€ in millions)               | Pension plan |  | Medical post- |  | Total benefits | 
|                              |              |  |               |  |                |  | retirement benefits |  |      |  |      |  |      | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Unrecognized (gain) or loss   | 2002         |  | 2003          |  | 2004           |  | 2002                |  | 2003 |  | 2004 |  | 2002 |  | 2003 |  | 2004 | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Unrecognized actuarial        |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|(gain) loss                   |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|NAFTA affiliates              | 63           |  | 27            |  | 24             |  | 85                  |  | 146  |  | 110  |  | 148  |  | 173  |  | 134  | 
|German affiliates             | 34           |  | 50            |  | 61             |  | -                   |  | -    |  | -    |  | 34   |  | 50   |  | 61   | 
|French affiliates             | 4            |  | 12            |  | 7              |  | -                   |  | -    |  | -    |  | 4    |  | 12   |  | 7    | 
|Other affiliates              | (10)         |  | 13            |  | 21             |  | -                   |  | -    |  | -    |  | (10) |  | 13   |  | 21   | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Sub-total                     | 91           |  | 102           |  | 113            |  | 85                  |  | 146  |  | 110  |  | 176  |  | 248  |  | 223  | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Unrecognized actuarial        |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|prior service cost (gain)     |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|NAFTA affiliates              | -            |  | -             |  | 1              |  | -                   |  | 2    |  | (43) |  | -    |  | 2    |  | (42) | 
|German affiliates             | -            |  | 1             |  | 1              |  | -                   |  | -    |  | -    |  | -    |  | 1    |  | 1    | 
|French affiliates             | 3            |  | (7)           |  | (6)            |  | -                   |  | -    |  | -    |  | 3    |  | (7)  |  | (6)  | 
|Other affiliates              | -            |  | -             |  | -              |  | -                   |  | -    |  | -    |  | -    |  | -    |  | -    | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Sub-total                     | 3            |  | (6)           |  | (4)            |  | -                   |  | 2    |  | (43) |  | 3    |  | (4)  |  | (47) | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Amount not recognized due     |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|to the Thomson asset          |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|limitation rule               |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|NAFTA affiliates              | -            |  | -             |  | (1)            |  | -                   |  | -    |  | -    |  | -    |  | -    |  | (1)  | 
|German affiliates             | -            |  | -             |  | -              |  | -                   |  | -    |  | -    |  | -    |  | -    |  | -    | 
|French affiliates             | -            |  | -             |  | -              |  | -                   |  | -    |  | -    |  | -    |  | -    |  | -    | 
|Other affiliates              | -            |  | -             |  | (4)            |  | -                   |  | -    |  | -    |  | -    |  | -    |  | (4)  | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Sub-total                     | -            |  | -             |  | (5)            |  | -                   |  | -    |  | -    |  | -    |  | -    |  | (5)  | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 
|Total unrecognized obligation | 94           |  | 96            |  | 104            |  | 85                  |  | 148  |  | 67   |  | 179  |  | 244  |  | 171  | 
|                              |              |  |               |  |                |  |                     |  |      |  |      |  |      |  |      |  |      | 

F-45

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

VI - Assumptions used in actuarial calculations

The following table details the assumption used for determining the benefit obligation:

|                                       | Pension plan |  | Medical post-retirement | 
|-------------------------------------- | ------------ |  | ----------------------- | 
|                                       |              |  |                         | 
|                                       |              |  |                         | 
|                                       | 2002         |  | 2003                    | 
|                                       |              |  |                         | 
|Discount rate                          | 6.30%        |  | 5.55%                   | 
|Return on plan assets                  | 9.25%        |  | 7.11%                   | 
|Average long term rate of compensation | 3.20%        |  | 2.97%                   | 
|                                       |              |  |                         | 

The long-term rates of return on plan assets have been determined for each plan in consideration of the investment policies, the expected return for each component of the investment portfolio and other local factors in the country of the plan.

The average assumption rate for the increase of the health care cost will be 9.07 % in 2005; 8.10 % in 2006; 7.00% in 2007; 6.03 % in 2008 and 4.58% thereafter.

The effect of a one point increase in the assumed health care cost trend rate
  would increase the accumulated medical post-retirement benefits as of September
  30, 2004 by €31 million at December 31, 2004 closing rate, and the service
  and interest cost components of the 2004 post-retirement benefit expense by
  €3 million at December 31, 2004 closing rate. The effect of a one point
  decrease in the assumed health care cost trend rate would decrease the accumulated
  medical post-retirement benefits as of September 30, 2004 by €-26
  million at December 31, 2004 closing rate, and the service and interest cost
  components of the 2004 post-retirement benefit expense by €-2 million at
  December 31, 2004 closing rate.

VII - Impact of IFRS

The net accruals as of December 31, 2003 in the accompanying consolidated balance sheets can be compared with balances determined under IFRS as follows:

|                                                            | Pension benefits  |  | Other benefits    |      
|----------------------------------------------------------- | ----------------- |  | ----------------- | -----
|                                                            |                   |  |                   |      
|(€ in millions)                                             | December 31, 2003 |  | December 31, 2003 |      
|                                                            |                   |  |                   |      
|                                                            |                   |  |                   |      
|Reimbursement rights recognized as a separate asset         | -                 |  |                   | 43   
|                                                            |                   |  |                   |      
|Total liability accrued for under IFRS                      | (495)             |  |                   | (371)
|                                                            |                   |  |                   |      
| Difference in timing of recognition of prior service cost | -                 |  |                   | (81) 
| Recognition of actuarial gains and losses as permitted    |                   |  |                   |      
|by IFRS 1                                                   | 103               |  |                   | 145  
| Reclassification from restructuring accruals              | 20                |  |                   | -    
| Others                                                    | 7                 |  |                   | 19   
|                                                            |                   |  |                   |      
|Total liability accrued for under French GAAP               | (365)             |  |                   | (288)
|                                                            |                   |  |                   |      

F-46

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

The same comparison of net accruals as of December 31, 2004 is as follows:

|                                                            | Pension benefits(*) |  | Other benefits    |      
|----------------------------------------------------------- | ------------------- |  | ----------------- | -----
|                                                            |                     |  |                   |      
|(€ in millions)                                             | December 31, 2004   |  | December 31, 2004 |      
|                                                            |                     |  |                   |      
|                                                            |                     |  |                   |      
|Reimbursement rights recognized as a separate asset         | -                   |  |                   | 43   
|                                                            |                     |  |                   |      
|Total liability accrued for under IFRS                      | (478)               |  |                   | (348)
|                                                            |                     |  |                   |      
| Difference in timing of recognition of prior service cost | 2                   |  |                   | (73) 
| Recognition of actuarial gains and losses as permitted    |                     |  |                   |      
|by IFRS 1                                                   | 98                  |  |                   | 140  
| Effect of 2004 curtailments/settlements                   | (6)                 |  |                   | 42   
| Reclassification from restructuring accruals              | 27                  |  |                   | -    
| Others                                                    | (1)                 |  |                   | 8    
|                                                            |                     |  |                   |      
|Total liability accrued for under French GAAP               | (358)               |  |                   | (231)
|                                                            |                     |  |                   |      

|(*) | In accordance with CNC opinion 2004-05, jubilee
      awards are classified under other creditors and debtors
      (€13 million in 2004). Prior years have not been restated under French
      GAAP.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18. RESTRUCTURING RESERVES

|                                                        |  | 2002            |  | 2003  |  | 2004  | 
|------------------------------------------------------- |  | --------------- |  | ----- |  | ----- | 
|                                                        |  |                 |  |       |  |       | 
|                                                        |  | (€ in millions) | 
|Reserves at the beginning of the year                   |  | 183             |  | 127   |  | 118   | 
|                                                        |  |                 |  |       |  |       | 
|                                                        |  |                 |  |       |  |       | 
|Current year expense (1)                                |  | 151             |  | 226   |  | 758   | 
|                                                        |  |                 |  |       |  |       | 
|Release of provision (1)                                |  | (10)            |  | (9)   |  | (16)  | 
|                                                        |  |                 |  |       |  |       | 
|Usage during the period                                 |  | (175)           |  | (173) |  | (200) | 
|                                                        |  |                 |  |       |  |       | 
|Change in perimeter (2)                                 |  | 34              |  | 22    |  | 32    | 
|                                                        |  |                 |  |       |  |       | 
|Currency translation adjustment and other movements (3) |  | (56)            |  | (75)  |  | (588) | 
|                                                        |  |                 |  |       |  |       | 
|                                                        |  |                 |  |       |  |       | 
|Reserves at the end of the year                         |  | 127             |  | 118   |  | 104   | 
|                                                        |  |                 |  |       |  |       | 

|(1) | Restructuring costs, net of release by segment
      are:
|--- | ---------------------------------------------------------

|                                            |  |                 |  |       |  |       | 
|------------------------------------------- |  | --------------- |  | ----- |  | ----- | 
|                                            |  | 2002            |  | 2003  |  | 2004  | 
|                                            |  |                 |  |       |  |       | 
|                                            |  | (€ in millions) | 
|Content & Networks (a)                      |  | (29)            |  | (48)  |  | (31)  | 
|Components (b)                              |  | (43)            |  | (100) |  | (690) | 
|Consumer Products (c)                       |  | (63)            |  | (49)  |  | (12)  | 
|Holdings (d)                                |  | (6)             |  | (20)  |  | (9)   | 
|                                            |  |                 |  |       |  |       | 
|                                            |  |                 |  |       |  |       | 
|Total restructuring expense net of reversal |  | (141)           |  | (217) |  | (742) | 
|                                            |  |                 |  |       |  |       | 

F-47

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

The restructuring expense includes for the periods ended as of December 31, 2004 and 2003 and 2002:

|                            | 2002            |  | 2003  |  | 2004  | 
|--------------------------- | --------------- |  | ----- |  | ----- | 
|                            |                 |  |       |  |       | 
|                            | (€ in millions) | 
|Termination costs           | (123)           |  | (175) |  | (135) | 
|Write off of assets         | (18)            |  | (42)  |  | (607) | 
|                            |                 |  |       |  |       | 
|                            |                 |  |       |  |       | 
|Total restructuring expense | (141)           |  | (217) |  | (742) | 
|                            |                 |  |       |  |       | 

|(a) | Restructuring costs of the Content & Networks
      segment are mainly driven by the following plans:                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | Restructuring costs of the Components Segment
      mainly relate to                                                                                                                                                                                                                                                                                                                                                                                                               
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | d.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(c) | Restructuring activities of Consumer Products
      mainly relates to                                                                                                                                                                                                                                                                                                                                                                                                              
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(d) | Reorganisation of the holding segment is mainly
      related to the reorganisation/downsizing of our corporate headquarters in
      Indianapolis, Indiana for which expenses charged to income during the period
      amount to €2 million. Other costs are related to ongoing expenses
      on the downsizing of certain research and development centres in France
      for €2 million and the re-organisation of our headquarters in Boulogne,
      France for €4 million.

As of December 31, 2003, the restructuring expense includes €-175 million of termination costs and other exit costs and €-42 million for the write-down of assets and is comprised of the following plans, by segment:

|(a) | Content and Networks:
|--- | ---------------------
|    | a.                   

F-48

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Restructuring programs related to acquired businesses in
      2001 and 2002 amounting to €-29 million. Such restructuring costs
      are expensed as incurred because they benefit the future activity of the
      Group (i.e., training, moving or harmonization costs).  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Components: mainly comprise in 2003 the adaptation
      of the production capacity:                                                                                                                                                                                          
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Closure of two tubes production lines in Marion and one glass
      production tank in Circleville amounting to €-60 million.                                                                                                                                                 
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Downsizing of the workforce of one plant in Italy amounted
      to €-14 million.                                                                                                                                                                                             
|    | c.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Downsizing of our facilities in the storage digital module
      business in Asia (€-8 million).                                                                                                                                                                              
|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Consumer Products: mainly comprise in 2003:                                                                                                                                                                                                                                   
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | New plans announced in 2003 including the Tune up/CPMax plans
      for adaptation of the segment costs structure to the business environment
      (€-13 million), the reorganization of certain Mexican facilities to
      improve the segment profitability (€-9 million).
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Restructuring costs of programs undertaken in 2002, which
      are mainly related to the closure of one plant in France (€-7 million),
      for which reliable estimates were not available at the time of the decision.                                                    
|    | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Holdings activities: mainly comprise in 2003:                                                                                                                                                                                                                                 
|    | a.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | The downsizing of certain research and development centers
      in France (€-9 million).                                                                                                                                                                                     
|    | b.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | The plan for adaptation of the corporate costs structure
      to the business environment (€-4 million).                                                                                                                                                                     
|(2) | As of December 31, 2004, the change in perimeter
      mainly includes the impact of the purchase price allocation of Fortune (note
      2) for €19 million, of Command Post (note 2) for an amount of €5 million and of HNS (note 2) for an amount of €8 million.
      As of December 31, 2003, the change in perimeter includes mainly the impact
      for purchase accounting of PDSC for €18 million. 
      As of December 31, 2002, the change in perimeter is due to the purchase
      accounting impact of PDSC (€31 million), Grass Valley (€27 million),
      BTS (€10 million), Thomson Broadband in ADSL activities (€6
      million) and Grundig (€1 million) together with a reversal for €-41 million on Technicolor.                                                                                                                                                                                                                                                                                                                   
|(3) | As of December 31, 2004, 2003 and 2002, this
      amount includes mainly write-down of assets and currency translation adjustments.
      
      At December 31, 2004, currency translation adjustments amount to €-3
      million (€-9 million and €-13 million in 2003 and 2002, respectively).
      Since January 1, 2002 and according to the new French Regulation 00-06 relating
      to the accounting for liabilities, all write-downs are reclassified against
      assets prior to disposals. The impact of this reclassification for years
      ended December 31, 2004, 2003 and 2002 amounts to €-612 million, €-65
      million and €-46 million, respectively. For years 2004, 2003 and 2002,
      the above-mentioned €-612 million, €-65 million and €-46
      million reclassification is broken down as follows :
      €-601 million, €-56 million and €-38 million for write-down
      of long lived assets, respectively (note 8) and €-11 million, €-9
      million and €-8 million of write-down of inventories (note 11).



F-49

---



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

|                                            | Warranty        |  | Losses on |                  | Others(2) |  | Total | 
|------------------------------------------- | --------------- |  | --------- | ---------------- | --------- |  | ----- | 
|                                            |                 |  |           | subsidiaries (1) |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            | (€ in millions) | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Balance at January 1, 2002                  | 113             |  |           | 52               |           |  | 81    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Current year expense                        | 167             |  |           | 8                |           |  | 44    | 
|Release of provision                        | (17)            |  |           | (1)              |           |  | (21)  | 
|Usage during the period                     | (165)           |  |           | (3)              |           |  | (42)  | 
|Currency translation adjustments and others | (6)             |  |           | (5)              |           |  | 11    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Balance at December 31, 2002                | 92              |  |           | 51               |           |  | 73    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Current year expense                        | 127             |  |           | 4                |           |  | 28    | 
|Release of provision                        | (4)             |  |           | -                |           |  | (17)  | 
|Usage during the period                     | (123)           |  |           | -                |           |  | (40)  | 
|Currency translation adjustments and others | (13)            |  |           | 4                |           |  | 24    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Balance at December 31, 2003                | 79              |  |           | 59               |           |  | 68    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Current year expense                        | 84              |  |           | -                |           |  | 65    | 
|Release of provision                        | (3)             |  |           | (1)              |           |  | (28)  | 
|Usage during the period                     | (93)            |  |           | (2)              |           |  | (32)  | 
|Currency translation adjustments and others | (17)            |  |           | (13)             |           |  | 10    | 
|                                            |                 |  |           |                  |           |  |       | 
|                                            |                 |  |           |                  |           |  |       | 
|Balance at December 31, 2004                | 50              |  |           | 43               |           |  | 83    | 
|                                            |                 |  |           |                  |           |  |       | 

|(1) | Primarily includes provisions for losses in excess of the
      Groups investments in unconsolidated companies.                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | At December 31, 2004, other reserves include mainly accruals for litigation risks for €17 million (€15 million and €20 million as of December 2003 and 2002, respectively) and contract risks for €5 million (€11 million and €13 million as of December 2003 and 2002, respectively).

F-50

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements



NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions
  of euro, unless otherwise stated

20.  FINANCIAL DEBT (SHORT-TERM AND LONG-TERM)

(a) Analysis by nature

|                                                 | 2002            |  | 2003  |  | 2004  | 
|------------------------------------------------ | --------------- |  | ----- |  | ----- | 
|                                                 |                 |  |       |  |       | 
|                                                 | (€ in millions) | 
|Debt due to financial institutions (1)           | 204             |  | 617   |  | 773   | 
|Convertible/exchangeable bond (October 2000) (2) | 782             |  | 782   |  | 611   | 
|Convertible/exchangeable bond (March 2002)       | 600             |  | 600   |  | 600   | 
|Convertible/exchangeable bond (September 2004)   | -               |  | -     |  | 367   | 
|Bank overdrafts                                  | 19              |  | 24    |  | 29    | 
|Other financial debt                             | 44              |  | 44    |  | 61    | 
|Accrued interest including premium (3)           | 45              |  | 61    |  | 60    | 
|                                                 |                 |  |       |  |       | 
|Total                                            | 1,694           |  | 2,128 |  | 2,501 | 
|                                                 |                 |  |       |  |       | 

|(1) | As of December 31, 2004, debt due to financial institutions
      includes the effect of the consolidation of the Mexicali synthetic lease
      for an amount of €165 million, of which €5 million was considered
      as a capital lease and was already consolidated as of December 31, 2003.
      This synthetic lease was reimbursed on January 24, 2005. Debt related to
      the synthetic lease in Poland of €138 million was reimbursed during
      2004.       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | In 2004, 2,350,553 convertible bonds due 2006 of €72.67
      nominal value each were repurchased and cancelled for an aggregate amount
      of €182 million, decreasing nominal debt by €171 million and
      accrued interest and premium amortization by €11 million.                                                                                                                                                                                                   
|(3) | At December 31, 2004, accrued interest has been broken down
      into (i) €48 million (€47 million in 2003) for the premium due
      at maturity on the October 2000 convertible bond which is recorded as a
      financial expense over the bond duration and (ii) €12 million (€14 million in 2003) of interest. Accrued interest on debt related
      to Technicolor acquisition (note 22) is included in the total debt
      related to Technicolor acquisition.

Convertible bonds

- In October 2000, Thomson issued 11,175,385 convertible/exchangeable bonds,
    with a nominal value of €72.67 each, due in 2006 for an aggregate amount
    of €812,115,228. The number of bonds outstanding at December 31, 2004
    is 8,411,832 and is explained as follows:
    - In 2004, 2,350,553 convertible bonds were repurchased at an average
    price of €77.604 and cancelled.
    - In June 2002, Thomson repurchased 413,000 bonds at an average price
    of €67.495. The repurchased bonds were cancelled.
    The convertible/exchangeable bonds issued in October 2000, may be redeemed
    by bondholders for Thomson ordinary shares beginning October 11, 2001. 
    The bonds bear interest at a rate of 1% per annum, payable in arrears on January
    1 of each year, with the first payment made on January 1, 2001. The bonds
    will mature and become due at a price of €79.71 per bond on January 1,
    2006, unless previously converted, exchanged, redeemed or cancelled. This
    price is 109.69% of the original issue price. The annual effective interest
    rate is 2.75%. 
    Each bondholder may elect to receive, in lieu of receiving payment of the
    principal, ordinary shares of Thomson of €3.75 par value each, at a ratio
    of one share for each bond, subject to adjustment upon occurrence of certain
    events.

F-51

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

> The bonds are redeemable at Thomsons option at any time on or after
>     January 1, 2004, in whole but not in part, at a price enabling the bondholder
>     to receive a gross redemption yield equal to the gross redemption yield that
>     would have been received at final maturity, which is 2.75%, if the share price
>     is greater than 120% of the bond redemption price for 20 consecutive days.
>     Thomson may also repurchase any number of bonds at any time at any price on
>     the Paris Bourse. Bonds so repurchased will be cancelled. The costs related
>     to the convertible bond offering (€18 million) are amortized over the
>     bond duration.

- On March 12, 2002 Thomson issued 14,814,815 convertible/exchangeable bonds,
    with a nominal value of €40.50 each, for an aggregate amount of €600 million. The bonds bear interest at a rate of 1% per annum, payable in
    arrears on January 1 of each year with the first payment made on January 1,
    2003. The bonds will mature and become due at a price of €40.50 per
    bond on January 1, 2008, unless previously converted, exchanged, redeemed
    or cancelled.
    The bonds are redeemable at Thomsons option at any time on or after
    November 1, 2003, at a price enabling the bondholder to receive the nominal
    value plus 1% interest for the period between the last interest payment date
    and the redemption if the share price is greater than 120% of the nominal
    price for 10 consecutive days within the 20 days before the announcement of
    the reimbursement. Bondholders have the option from March 12, 2002, and until
    7 days preceding the reimbursement date to convert one bond against one Thomson
    share (existing or new shares). Bondholders, who do not exercise the conversion
    option before 7 days preceding the reimbursement date, will receive the nominal
    amount plus interest as mentioned above. If at any time the remaining bonds
    outstanding represent less than 10% of total bonds initially issued, the Group
    may also redeem at nominal value plus interest all the remaining bonds. 
    The bonds are also redeemable on January 1, 2005, at the option of the bondholders
    at a price corresponding to the nominal value plus interest for the period
    January 1, 2004 to December 31, 2004. Of the original 14,814,815 bonds, 14,493,324
    bonds were redeemed on January 1, 2005, at the option of bondholders. 
    Thomson may also repurchase any number of bonds at any time at any price on
    the Euronext Paris S.A. Bonds so repurchased will be cancelled.

- On September 16, 2004, Thomson issued 23,084 convertible/exchangeable subordinated
    bonds to Silver Lake Partners LLC, with a nominal value of USD 21,660 each,
    for an aggregate amount of USD 499,999,440. The bonds bear interest at a rate
    of 3% per annum in arrears on January 1 and June 30 of each year except the
    first interest payment which was due and paid December 31, 2004. The bonds
    will mature and become due at a price of USD 21,660 per bond on September
    16, 2010, unless previously converted, exchanged, redeemed or cancelled. The
    bonds are subject to certain transfer restrictions.
    Bondholders have the option from the earlier of March 31, 2006, or the date
    Thomson publishes its audited financial results for 2005 or the date of certain
    other exceptional events to convert or exchange any or all bonds held at a
    conversion ratio of 1,000 shares for each bond. This conversion ratio is subject
    to adjustment under certain conditions. The shares issued upon conversion
    or exchange are subject to certain sale restrictions.

F-52

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

All bonds are redeemable in cash plus accrued interest at Thomsons option
  at any time if less than 10% of the bonds remain outstanding or at any time
  after September 16, 2007, if the average of the closing share price for 10 consecutive
  days within the 20 days before the redemption notice as well as the closing
  share price on the redemption notice date times the number of shares into which
  a bond would be convertible both exceed 150% of the par value of a bond.

Any or all bonds are redeemable in cash plus accrued interest at the option
  of the holder from September 16, 2008, upon written notice to Thomson.

Private Placement

On June 30, 2003, Thomson issued senior notes in a total amount of USD 406
  million (€298 million at the December 31, 2004 exchange rate) that were
  sold privately to institutional investors in the U.S. This private placement
  consisted of three series; a series of 7-year maturity notes in an amount of
  USD 96 million; a series of 10-year maturity notes in an amount of USD 192 million
  and a series of 12-year maturity notes in an amount of USD 118 million. The
  notes carry fixed interest rates of 4.13%, 4.74% and 4.84%, respectively, for
  the 7, 10 and 12-year maturity notes.

Thomson swapped USD 200 million of the total issue, changing the debt from
  fixed rate to floating rate. Thomson may, at its option, prepay at any time
  all, or from time to time any part, of the notes. The amount prepaid shall be
  allocated among all of the notes outstanding at the time in proportion to the
  respective unpaid principal amounts.

On December 18, 2003, Thomson issued an additional GBP 34 million (€48
  million at the December 31, 2004 exchange rate) of senior notes with a 10-year
  maturity and carrying a fixed rate of 6.11%; the entire amount of these additional
  notes were swapped to floating rate.

|                |                  |  |       |  |       | 
|--------------- | ---------------- |  | ----- |  | ----- | 
|                | 2002             |  | 2003  |  | 2004  | 
|                |                  |  |       |  |       | 
|                | (€ in millions ) | 
|Due within:     |                  |  |       |  |       | 
|One-year        | 262              |  | 263   |  | 904*  | 
|                |                  |  |       |  |       | 
|Two-years       | 6                |  | 17    |  | 664   | 
|Three-years     | 1                |  | 836   |  | 163   | 
|Four-years      | 818              |  | 10    |  | 13    | 
|Five-years      | 7                |  | 602*  |  | -     | 
|Thereafter      | 600*             |  | 400   |  | 757   | 
|Total long-term | 1,432            |  | 1,865 |  | 1,597 | 
|                |                  |  |       |  |       | 
|Total           | 1,694            |  | 2,128 |  | 2,501 | 
|                |                  |  |       |  |       | 

|* | The convertible bonds issued on March 12, 2002,
      are subject to an early redemption provision at the option of bondholders
      exercisable on January 1, 2005. Since notice of redemption had already been
      given in December 2004 by bondholders holding 14,493,324 bonds, this portion
      of the 2002 convertible was considered short-term debt at December 31, 2004.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-53

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(c) Analysis by currency

|            | 2002             |  | 2003  |  | 2004  | 
|----------- | ---------------- |  | ----- |  | ----- | 
|            |                  |  |       |  |       | 
|            | (€ in millions ) | 
|Euro        | 1,557            |  | 1,573 |  | 1,366 | 
|U.S. dollar | 18               |  | 388   |  | 884   | 
|Others      | 119              |  | 167   |  | 251   | 
|            |                  |  |       |  |       | 
|Total debt  | 1,694            |  | 2,128 |  | 2,501 | 
|            |                  |  |       |  |       | 

(d) Analysis by interest rate for long term debt

|                              |                  |  |       |  |       | 
|----------------------------- | ---------------- |  | ----- |  | ----- | 
|                              | 2002             |  | 2003  |  | 2004  | 
|                              |                  |  |       |  |       | 
|                              | (€ in millions ) | 
|Variable rate (LIBOR 1 month) | 6                |  | 5     |  | 160   | 
|Variable rate (LIBOR 3 month) | -                |  | 47    |  | 191   | 
|Variable rate (LIBOR 6 month) | -                |  | -     |  | 48    | 
|Fixed rates                   | 1,426            |  | 1,813 |  | 1,198 | 
|                              |                  |  |       |  |       | 
|Total long-term debt          | 1,432            |  | 1,865 |  | 1,597 | 
|                              |                  |  |       |  |       | 

Interest rates on most short-term debt is based on Euribor (Euro Interbank
  Offered Rate) for euro denominated debt, LIBOR (London Interbank Offered Rate)
  for U.S. dollar denominated debt and on similar short-term reference rates for
  other currencies.

|                                            |                  |  |      |  |       | 
|------------------------------------------- | ---------------- |  | ---- |  | ----- | 
|                                            | 2002             |  | 2003 |  | 2004  | 
|                                            |                  |  |      |  |       | 
|                                            | (€ in millions ) | 
|Committed credit lines                      | 1,192            |  | 832  |  | 1,801 | 
|of which used                               | -                |  | 27   |  | 51    | 
|Uncommitted credit lines                    | 1,331            |  | 983  |  | 945   | 
|of which used for debt                      | 105              |  | 118  |  | 178   | 
|                                            |                  |  |      |  |       | 
|Receivable sales agreement in North America | 286              |  | 238  |  | 147   | 
|of which used                               | -                |  | -    |  | -     | 
|                                            |                  |  |      |  |       | 

On July 5, 2004, Thomson closed a €1.75 billion committed credit facility
  with a consortium of banks. The facility has a five year maturity. Thomsons
  previous committed facility in an amount of 800 million was simultaneously
  cancelled.

Thomson has no financing agreements with rating triggers. Several of Thomson's
  financing agreements have covenants pertaining to Thomson's consolidated financial
  situation. These financings are:

- the senior notes issued privately to institutional investors in a total
    amount of €346 million and a €44 million Mexican capital lease
    which are subject to two financial covenants: maintenance of a minimum ratio
    of operating income to interest expense of 3 to 1 and a maximum ratio of net
    debt to net worth of 1 to 1;
- the €1.75 billion credit facility which is subject to one financial
    covenant: maintenance of a minimum ratio of operating income to interest expense
    of 3 to 1;

F-54

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

- the €165 million Mexican synthetic lease which is subject to two financial
    covenants: maintenance of a minimum ratio of EBIT (earnings before interest
    and tax) to net interest expense of 5 to 1 and maintenance of a maximum ratio
    of balance sheet net debt to net worth of 0.7 to 1 and; this lease was repaid
    on January 24, 2005.

At December 31, 2004, Thomson is in compliance with all of these financial
  covenants.

21.
  OTHER CREDITORS AND ACCRUED LIABILITIES

|                                                    | 2002             |  | 2003 |  | 2004 | 
|--------------------------------------------------- | ---------------- |  | ---- |  | ---- | 
|                                                    |                  |  |      |  |      | 
|                                                    | (€ in millions ) | 
|                                                    |                  |  |      |  |      | 
|Taxes payable                                       | 221              |  | 164  |  | 153  | 
|Deferred tax liabilities                            | 23               |  | 23   |  | 2    | 
|Royalties                                           | 223              |  | 214  |  | 262  | 
|Long lived assets acquisition balance               | 95               |  | 89   |  | 64   | 
|Thomson multimedia Polska sp.zo.o - Deferred Income | 85               |  | 85   |  | -    | 
|Other (1)                                           | 423              |  | 283  |  | 514  | 
|                                                    |                  |  |      |  |      | 
|Total                                               | 1,070            |  | 858  |  | 995  | 
|                                                    |                  |  |      |  |      | 

|(1) | Since 2002 the accruals related to consideration given to
      a customer are deducted from gross trade accounts receivable (note12).
|--- | --------------------------------------------------------------------------------------------------------------------------------------

22. DEBT RELATED TO TECHNICOLOR ACQUISITION

The promissory notes due to Carlton for the acquisition of Technicolor totalled
  USD 115 million, USD 224 million and USD 481 million, as of December 31, 2004,
  2003 and 2002, respectively, including accrued interest equivalent to €84 million, €178 million and €459 million, respectively, at the
  December 31, 2004, 2003 and 2002 exchange rates. Accrued interest amounted to
  €9 million, €15 million and €29 million at December 31, 2004,
  2003 and 2002, respectively. The final instalment on these notes is repayable
  in one remaining instalment on March 16, 2005. Thomson may elect to pay €61 million (USD 84 million) of the notes in Thomson shares (within the limit
  of 4 million shares as approved by the shareholders meeting).

On March 16, 2004, and March 14, 2003, respectively, €92 million and
  €149 million were paid in cash on the maturity date of the promissory
  note instalments consisting in year 2004 of €84 million for the nominal
  value and €8 million for the accrued interest since inception of the notes
  (€139 million for the nominal value and €10 million for the accrued
  interest in 2003).

On September 16, 2003, promissory notes for an amount of €84 million
  in nominal value, plus €7 million of interest, were paid early.

The remaining promissory note interest rates are based on six month LIBOR,
  plus a margin of 0.75% (for the two first maturities, the rate was based on
  three month LIBOR). The latest and final applicable quotation for six month
  LIBOR dated September 14, 2004, was 2.05813%.

F-55

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

23. ACQUISITION OF INVESTMENTS

|                                                | 2002             |  | 2003  |  | 2004  | 
|----------------------------------------------- | ---------------- |  | ----- |  | ----- | 
|                                                |                  |  |       |  |       | 
|                                                | (€ in millions ) | 
|Technicolor (1)                                 | (215)            |  | (224) |  | (83)  | 
|BTS                                             | (65)             |  | -     |  | -     | 
|Grass Valley                                    | (196)            |  | -     |  | -     | 
|Panasonic Disc Service Corporation              | (446)            |  | -     |  | -     | 
|Canal+ Technologies (2)acquired in January 2003 | (90)             |  | (102) |  | -     | 
|Cinecolor                                       | -                |  | (15)  |  | -     | 
|Digital cinema (complementary acquisition)      | -                |  | (15)  |  | -     | 
|Recoton                                         | -                |  | (50)  |  | -     | 
|ATLINKS                                         | -                |  | (69)  |  | -     | 
|Command Post                                    | -                |  | -     |  | (11)  | 
|Gyration                                        | -                |  | -     |  | (15)  | 
|Fortune                                         | -                |  | -     |  | (75)  | 
|Hughes Network Systems                          | -                |  | -     |  | (204) | 
|The Moving Picture Company                      | -                |  | -     |  | (78)  | 
|TTE (3)                                         | -                |  | -     |  | (115) | 
|Other                                           | (289)            |  | (133) |  | (96)  | 
|                                                |                  |  |       |  |       | 
|Acquisition of investment                       | (1,301)          |  | (608) |  | (677) | 
|                                                |                  |  |       |  |       | 
|Plus cash position of companies disposed of     | -                |  | -     |  | (16)  | 
|Less cash position of companies acquired        | 28               |  | 43    |  | 13    | 
|                                                |                  |  |       |  |       | 
|Acquisition of investment, net                  | (1,273)          |  | (565) |  | (680) | 
|                                                |                  |  |       |  |       | 

|(1)                                                                                                  | The consideration paid corresponds mainly to
      the repayment of the promissory notes (note 22) - together with a price
      adjustment for USD 2 million in 2003.                                                                                                                                                                                                                                                                                                                                                                                                        
|---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)                                                                                                  | Thomson acquired on January 31, 2003, 89% of
      Canal+ Technologies from the Canal+ Group for a gross amount of €190
      million. The €90 million cash payment in 2002 was an advance paid
      to the seller before the closing. In the December 31, 2002, balance sheet,
      the advance was recorded in loans and other non current assets.
      In 2003, Thomson paid €100 million at the closing together with an
      additional €2 million price adjustment. The businesses of Canal+ Technologies
      were sold by the end of year 2003 (notes 2 and 6).
|(3)                                                                                                  | TTE acquisition is analysed as follows in millions
      of euro:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Cash transferred net of cash received                                                                | (17)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Financing of TTE under a purchase of receivables
      agreement for a maximum duration of 24 months | (98)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Net cash disbursed                                                                                   | (115)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-56

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

24.
  CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The two tables presented below provide information regarding contractual obligations
  and commercial commitments as of December 31, 2004 for which the company is
  obliged to make future cash payments in accordance with the recommendation on
  this subject issued by the Autorité desMarchés
  Financiers (AMF), formerly Commission des Opérations
  de Bourse in February 2002. 
  These tables include firm commitments that would result in unconditional or
  contingent future payments, but exclude all options since the latter are not
  considered as firm commitments or obligations. When an obligation leading to
  future payments can be cancelled through a penalty payment, the future payments
  included in the tables are those that management has determined most likely
  to occur given the two alternatives. No material commitment is omitted in this
  note 24, in accordance with French GAAP.

Guarantees given by entities of the Group securing debt, capital leases, operating
  leases or any other obligations or commitments of other entities of the Group
  are not disclosed as the related obligations are already included in the two
  tables below.

|Contractual obligations                     |                  |  |       |  | Amount of commitments expiring per period |  |           
|------------------------------------------- | ---------------- |  | ----- |  | ----------------------------------------- |  | ----------
|                                            |                  |  |       |  |                                           |  |           
|                                            | 2003             |  | 2004  |  | Less than                                 |  | > 1 and   
|                                            | Total            |  | Total |  | 1 year                                    |  | =< 3 years
|                                            |                  |  |       |  |                                           |  |           
|                                            | (€ in millions ) | 
|Financial debt (1)                          | 2,128            |  | 2,501 |  | 904                                       |  |           
|Of which capital lease liability            | 61               |  | 51    |  | 14                                        |  |           
|Debt related to Technicolor acquisition (1) | 178              |  | 84    |  | 84                                        |  |           
|                                            |                  |  |       |  |                                           |  |           
|Unconditional future payments               |                  |  |       |  |                                           |  |           
|Operating leases (2)                        | 485              |  | 425   |  | 83                                        |  |           
|Other (3)                                   | 137              |  | 68    |  | 20                                        |  |           
|                                            |                  |  |       |  |                                           |  |           
|Unconditional purchase obligations          |                  |  |       |  |                                           |  |           
|Financial investments (4)                   | 28               |  | 16    |  | 15                                        |  |           
|Property, plant and equipment (5)           | 73               |  | 9     |  | 9                                         |  |           
|                                            |                  |  |       |  |                                           |  |           
|Contingent future payments                  |                  |  |       |  |                                           |  |           
|Guarantees given (6)                        | 65               |  | 181   |  | 26                                        |  |           
|Other conditional obligations (7)           | 63               |  | 71    |  | 17                                        |  |           
|                                            |                  |  |       |  |                                           |  |           

|(1) | Financial debt (note 20) and debt related to
      Technicolor acquisition (note 22) are reported for their principal amounts
      and accrued interest as of December 31, 2004. Future interest expense and
      the impact of interest rate swaps are not reported in this table. Currency
      swaps, hedging operations and foreign exchange options are described below
      in a separate table.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Operating leases are described below in (a) of
      this note.                                                                                                                                                                                                                                                                                                                                           
|(3) | Other unconditional future payments relate to
      information technology service agreements, general sponsoring agreements
      entered into in the U.S., guarantees given for assets disposal, and other
      contractual advances.                                                                                                                                                                  
|(4) | In November 2004, Thomson acquired a 3.2% stake
      in the Chinese television and mobile phone manufacturer Konka and has agreed
      to acquire an additional 4.8% subject to approval by the relevant Chinese
      authorities. This corresponds to a financial investment of  14
      million as of December 2004.                                                                               
|(5) | Unconditional purchase obligations comprise DVD
      plant expansions in the U.S. as well as equipment following the acquisition
      of Fortune.                                                                                                                                                                                                                                                       
|(6) | Guarantees given for disposal of assets.                                                                                                                                                                                                                                                                                                                                                                  
|(7) | Conditional obligations include contingent earn
      out payments related to the purchase of 20% of Technicolor Digital Cinema
      L.L.C. and other obligations.                                                                                                                                                                                                                                       

F-57

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|Commercial commitments              | Amount of commitments expiring per period
|----------------------------------- | -----------------------------------------
|                                    |                                          
|                                    | 2003                                     
|                                    | Total                                    
|                                    |                                          
|                                    | (€ in millions )                         
|Unconditional future payments       |                                          
|Royalties (1)                       | 2                                        
|Commercial purchase obligations (2) | 123                                      
|                                    |                                          
|                                    |                                          
|Contingent future payments          |                                          
|Guarantees given:                   |                                          
|- to suppliers                      | 5                                        
|- for legal court proceedings       |                                          
|and custom duties (3)               | 62                                       
|- other (4)                         | 19                                       
|                                    |                                          
|Total                               | 86                                       
|                                    |                                          
|                                    |                                          
|Standby letters of credit (5)       | 110                                      
|Other commercial commitments        | 10                                       
|                                    |                                          

|(1) | Royalties to be paid for which future amounts are fixed.
      Royalties to be paid for which the amount is based on a per unit basis are
      not included, except if a fixed minimum amount will be charged. These are
      mainly related to licensing fee agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Include commitments to buy advertising space for €69
      million in its cinema sale house activity, and other €72 million of
      commercial purchase obligations in the Content and Networks segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | These guarantees comprise:
        - Guarantees for customs duties amount to €43 million and comprise
        mainly duty deferment guarantees, required by the customs administration
        to benefit from a derogatory customs regime. Imported goods are normally
        taxed when they enter the territory. In the case of regular import flows,
        customs may grant a derogatory regime, under which a cumulated duty payment
        is made after a determined one-month credit period. The carrying value
        of this guarantee is to cover the duties to be paid during the credit
        period.
        - The Group also grants to customs administrations various operation
        guarantees to exempt from duties goods transiting through custom warehouses
        for re-exportation, and transit guarantees in order that taxes are paid
        on goods only at their final destination in the import country. The maturity
        of these bank guarantees match the one-month renewable term of the agreements.
        
        - Guarantees given for legal court proceedings amount to €22
        million, including a €14 million bank guarantee that Thomson gave
        to the Italian direct tax office in order to be allowed to pay by instalment
        its tax debt resulting from the reassessment of its taxable income from
        1993 to 1998 (note 27).
|(4) | Under the terms of many of its long-term contracts, the Group
      must provide to its clients performance guarantees issued by banks. As of
      December 31, 2004 and 2003 these guarantees amount to €9 million and
      €14 million respectively, mainly related to long-term contract in
      its broadcast activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(5) | Standby letters of credit relate mainly to guarantees in
      favor of suppliers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Commitments related to financial instruments held by the Group generate both
  future cash payments and receipts. Therefore they have not been disclosed in
  the two tables above. These commitments, including options, are disclosed in
  the following table for their related cash inflow and outflow amounts.

F-58

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                           | 2002             |  | 2003  |  | 2004  | 
|-------------------------- | ---------------- |  | ----- |  | ----- | 
|                           |                  |  |       |  |       | 
|                           | (€ in millions ) | 
|Currency swaps             | 1,609            |  | 2,106 |  | 1,581 | 
|Forward exchange contracts | 957              |  | 1,641 |  | 1,157 | 
|Interest rate swaps        | 95               |  | 237   |  | 195   | 
|Metals hedging contracts   | -                |  | -     |  | 8     | 
|Foreign exchange options   | 16               |  | 13    |  | -     | 
|                           |                  |  |       |  |       | 
|Total commitments given    | 2,677            |  | 3,997 |  | 2,941 | 
|                           |                  |  |       |  |       | 
|                           |                  |  |       |  |       | 
|Currency swaps             | 1,680            |  | 2,148 |  | 1,680 | 
|Forward exchange contracts | 988              |  | 1,667 |  | 1,157 | 
|Interest rate swaps        | 95               |  | 237   |  | 195   | 
|Metals hedging contracts   | -                |  | -     |  | 8     | 
|Foreign exchange options   | 16               |  | 13    |  | -     | 
|                           |                  |  |       |  |       | 
|Total commitments received | 2,779            |  | 4,065 |  | 3,040 | 
|                           |                  |  |       |  |       | 

In addition to the commitments mentioned above, the Group has unrecognized
  retirement benefit obligations amounting to €171 million, €244 million
  and €179 million as of December 31, 2004, 2003 and 2002, respectively
  (note 17).

Guarantees and commitments received amount to €2 million, €2 million,
  and €23 million at December 31, 2004, 2003 and 2002, respectively.

(a) Operating leases

Commitments related to future minimum and non-cancelable operating lease payments
  amount to 425 million as of December 31, 2004, and are detailed below
  (€ in millions ):

|2005       | 83  | 
|---------- | --- | 
|2006       | 65  | 
|2007       | 53  | 
|2008       | 42  | 
|2009       | 37  | 
|Thereafter | 145 | 
|           |     | 
|Total(1)   | 425 | 
|           |     | 

|(1) | The decrease versus 2003 (a total of €485
      million at end of 2003) is mainly due to the consolidation of two synthetic
      leases situated in Poland and Mexico in 2004 (see more detail thereafter).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The significant operating leases are as follows:

In 2000, two leases were contracted related to the sales of office buildings
  in Boulogne and Indianapolis and are accounted for as operating leases:

- Thomson S.A. sold an office building located in Boulogne-Billancourt,
  France for €91 million (€89 million net of costs) on February 29,
  2000. The building was leased back from the purchaser for a six-year period.
  The lease requires Thomson S.A. to pay customary operating and repair expenses
  and to observe certain operating restrictions and covenants. The lease contains
  renewal options at the end of the initial lease period.

F-59

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

- Thomson, Inc. sold a U.S. office building (administration and technical
  services buildings) in March 2000 for €57 million net of costs. The buildings
  were leased back from the purchaser for a twelve-year period. The lease requires
  Thomson, Inc. to pay customary operating and repair expenses and to observe
  certain operating restrictions and covenants. The lease contains renewal options
  at the end of the initial lease period.

Consolidation of Special Purpose Entities (SPEs)

In accordance with Article 133 of the French Law on Financial Security (Loi
  de Sécurité Financière or LSF) issued on August
  1, 2003 (note 1), two SPEs have been consolidated in 2004:

- In 2000, the Group entered into a lease agreement for the equipment
  and building of a television tube manufacturing facility located in Mexico.
  The manufacturing facility is owned by a special purpose entity (SPE) in which
  Thomson has no interest. The lease is an operating lease with a term of seven
  years. During the lease term and at the end of the term the Group has the option
  to purchase the facility for a purchase price equal to the expected fair market
  value which is the original purchase price less amortization (this price changes
  over time). For the Mexican transaction the Group provides a residual value
  guarantee, which may be due upon termination of the contract if the Group decides
  not to buy back the equipment. On January 24, 2005, Thomson repaid in advance
  the debt related to the lease (note 29 on subsequent events).

- In 2001, the Thomson Polish subsidiary (the Subsidiary)
  entered into a transaction with a SPE whereby it transferred ownership title
  of tube manufacturing equipment to the SPE; the Subsidiary received an amount
  of €138 million corresponding to the fair value of the equipment at transfer
  date (the Original Fair Value). The Subsidiary continued to use
  the equipment and paid an annual amount corresponding to approximately 19% of
  the Original Fair Value (recorded as rental expense until December 31, 2003).
  A deferred gain of €85 million was booked in the balance sheet. 
  The debt related to the synthetic lease in Poland of €138 million was reimbursed
  during 2004 and the synthetic lease thereby terminated.

As of December 31, 2003, these future lease payments totalled €42 million
  for Thomson Displays Mexicana, S.A. de C.V. and €13 million for Thomson
  multimedia Polska sp.zo.o.

These two SPEs have been consolidated as of January 1, 2004, retroactively
  with the impact booked to equity for €-43 million.

Following these SPEs consolidation, as of December 31, 2004, the Group
  no longer reports off-balance sheet future payments related to synthetic leases
  (note 1).

(b) Other commitments

Thomson has restricted cash deposits as disclosed in note 15. In addition,
  the Group received payments from clients in order to finance the development
  costs of certain long-term contracts. In order to guarantee the reimbursement
  of such payment if the Group does not fulfill its contractual obligations, the
  Group may set up, at the clients request, advance payment restitution
  guarantees. As of December 31, 2004 and 2003, these guarantees amount to €7 million and €22 million, respectively.

F-60

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

25.
  FINANCIAL INSTRUMENTS AND MARKET RELATED EXPOSURES

As indicated in note 1(d), the Group uses financial instruments to manage
  its exposure to currency and interest rate risks incurred in the normal course
  of business.

(a) Foreign currency exposure

Given the international nature of its business, the Group generates significant
  cash flows in foreign currencies.

The Group primarily uses currency forward contracts or currency options to
  manage this exposure.

The nominal value of the Groups forward operations and options outstanding
  as of December 31, 2004, 2003 and 2002 is as follows:

|                                                                    | 2002             |  | 2003    |  | 2004    | 
|------------------------------------------------------------------- | ---------------- |  | ------- |  | ------- | 
|                                                                    |                  |  |         |  |         | 
|                                                                    | (€ in millions ) | 
|Forward exchange contracts (including currency swaps)               |                  |  |         |  |         | 
|Euro                                                                | 2,199            |  | 2,561   |  | 1,873   | 
|Canadian dollar                                                     | -                |  | -       |  | 15      | 
|Pound sterling                                                      | 45               |  | 136     |  | 183     | 
|Hong Kong dollar                                                    | -                |  | 21      |  | 22      | 
|Japanese yen                                                        | 55               |  | 27      |  | 6       | 
|Mexican pesos                                                       | 52               |  | 53      |  | 33      | 
|Singapore dollar                                                    | 20               |  | 29      |  | 26      | 
|U.S. dollar                                                         | 156              |  | 674     |  | 577     | 
|Polish zloty                                                        | 110              |  | 269     |  | 88      | 
|Other currencies                                                    | 31               |  | 45      |  | 14      | 
|                                                                    |                  |  |         |  |         | 
|Total forward purchases                                             | 2,668            |  | 3,815   |  | 2,837   | 
|                                                                    |                  |  |         |  |         | 
|                                                                    |                  |  |         |  |         | 
|Euro                                                                | (295)            |  | (947)   |  | (785)   | 
|Canadian dollar                                                     | (46)             |  | (77)    |  | (52)    | 
|Pound sterling                                                      | (183)            |  | (256)   |  | (152)   | 
|Japanese yen                                                        | (78)             |  | (92)    |  | (29)    | 
|U.S. dollar                                                         | (1,880)          |  | (2,066) |  | (1,561) | 
|Other currencies                                                    | (84)             |  | (309)   |  | (159)   | 
|                                                                    |                  |  |         |  |         | 
|Total forward sales                                                 | (2,566)          |  | (3,747) |  | (2,738) | 
|                                                                    |                  |  |         |  |         | 
|                                                                    |                  |  |         |  |         | 
|Currency options contracts purchased                                |                  |  |         |  |         | 
|Put U.S. dollar/Call Japanese yen                                   | 16               |  | 13      |  | -       | 
|                                                                    |                  |  |         |  |         | 
|Total                                                               | 16               |  | 13      |  | -       | 
|                                                                    |                  |  |         |  |         | 
|                                                                    |                  |  |         |  |         | 
|Deferred hedging gains (losses) related to anticipated transactions | 6.3              |  | 24.7    |  | (1.8)   | 
|                                                                    |                  |  |         |  |         | 

In order to match the currencies that Thomson borrows with the currencies
  that are lent to affiliates the corporate treasury enters into currency swaps
  primarily to convert euro borrowings into USD which are lent to the Groups
  U.S. affiliates. At the December 31, 2004 exchange rate there was a mark to
  market currency gain on these swaps of €99 million. This amount is recognized
  in the balance sheet in Other receivables and offsets the reduction
  in the euro value of the foreign currency intercompany loans and advances.

F-61

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(b) Interest rate exposure

The main instruments used by the Group to manage interest rate risks are interest
  rate swaps, forward rate agreements and interest rate caps. 
  The Groups interest rate exposure is presented as follows, by maturity:

|                                                | December 31, 2004 |     
|----------------------------------------------- | ----------------- | ----
|                                                |                   |     
|                                                | 2005              | 2006
|                                                |                   |     
|                                                | (€ in millions )  |     
|Cash and cash equivalents  floating rate       | 1,906             | -   
|                                                |                   |     
|Financial debt:                                 |                   |     
|Floating rate                                   | 904               | -   
|Fixed rate                                      | -                 | 664 
|                                                |                   |     
|Interest rate swaps, from floating to fixed (1) | -                 | -   
|Interest rate swaps, from fixed to floating (1) | -                 | -   
|Caps, fixed rate                                | 37                | -   
|                                                |                   |     
|(1) U.S. dollar/euro = 0.733030                 |                   |     
|                                                |                   |     
|                                                | December 31, 2003 |     
|                                                |                   |     
|                                                | 2004              | 2005
|                                                |                   |     
|                                                | (€ in millions )  |     
|Cash and cash equivalents  floating rate       | 2,383             | -   
|                                                |                   |     
|Financial debt:                                 |                   |     
|Floating rate                                   | 263               | 5   
|Fixed rate                                      | -                 | 12  
|                                                |                   |     
|Interest rate swaps, from floating to fixed (2) | 79                | -   
|Interest rate swaps, from fixed to floating (2) | -                 | -   
|Caps, fixed rate                                | 40                | -   
|                                                |                   |     
|(2) U.S. dollar/euro = 0.791766                 |                   |     
|                                                |                   |     
|                                                | December 31, 2002 |     
|                                                |                   |     
|                                                | 2003              | 2004
|                                                |                   |     
|                                                | (€ in millions )  |     
|Cash and cash equivalents  floating rate       | 1,463             | -   
|                                                |                   |     
|Financial debt:                                 |                   |     
|Floating rate                                   | 262               | -   
|Fixed rate                                      | -                 | 6   
|                                                |                   |     
|Interest rate swaps, from floating to fixed(3)  | -                 | 95  
|Interest rate swaps, from fixed to floating (3) | -                 | -   
|                                                |                   |     
|(3) U.S. dollar/euro = 0.953562                 |                   |     

F-62

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Interest related to interest rate swaps at December 31, contracted by the
  Group is as follows:

|                   | 2002             |  | 2003 |  | 2004 | 
|------------------ | ---------------- |  | ---- |  | ---- | 
|                   |                  |  |      |  |      | 
|                   | (€ in millions ) | 
|Interest received: |                  |  |      |  |      | 
|Fixed rate         | -                |  | 4    |  | 10   | 
|Floating rate      | -                |  | -    |  | -    | 
|                   |                  |  |      |  |      | 
|Interest paid:     |                  |  |      |  |      | 
|Fixed rate         | -                |  | -    |  | -    | 
|Floating rate      | -                |  | (1)  |  | (6)  | 
|                   |                  |  |      |  |      | 
|Net interest       | -                |  | 3    |  | 4    | 
|                   |                  |  |      |  |      | 

The Group did not enter into any interest rate hedging operations in 2004.

In 2003, the Group entered into several interest rate swap transactions to
  convert its debt from fixed to floating rate (3 month LIBOR for USD debt, and
  6 month £-LIBOR for GBP one):

- its 12-year senior notes in an amount of USD 118 million; 
  - its 10-year senior notes in the amount of USD 82 million; and 
  - its 10-year senior notes in the amount of GBP 34 million. 
  These swap transactions are accounted for under hedge accounting treatment in
  accordance with French GAAP.

In 2002, the Group entered into an interest rate swap transaction and purchased
  an interest rate cap.

Under the interest rate swap, Thomson receives three month USD LIBOR and pays
  twelve month USD LIBOR in arrears with the latter being capped up to a knock-out
  interest rate which if reached cancels the cap until such time as interest rates
  drop below the knock-out rate. This interest rate swap is accounted for in accordance
  with French GAAP: it is marked-to-market and in case of loss a provision is
  taken. In 2002, Thomson booked a loss of €1 million on this swap. At December
  31, 2003, the marked-to-market valuation of this swap was a loss of €0.6
  million so the amount provisioned was reduced, thereby resulting in net positive
  financial income of €0.4 million in 2003 on this transaction. In 2004,
  this swap matured with a final total loss of €0.9 million thus an additional
  loss of €0.3 million was taken in financial result.

The interest rate cap that Thomson bought in 2002 provides that until 2005
  Thomson will receive the difference between 3 month USD LIBOR and the cap rate
  on a nominal amount of USD 50 million if three month USD LIBOR is above the
  cap rate and less than the knock-out rate. This cap is accounted for in the
  same way as the interest rate swap. Thomson recorded a loss in 2002 of €0.3
  million on this cap. At December 31, 2003, the fair value of this cap was a
  loss of €0.2 million so the amount provisioned was reduced thereby resulting
  in net positive financial income of €0.1 million in 2003 on this transaction.
  At December 31, 2004, the fair value of this cap was also a loss of €0.2
  million so that the financial result in 2004 of this cap was nil.

Because of the interest rate differential between the USD and the euro, the
  Group had in 2004 interest gains on the currency swaps used to convert to USD
  euros borrowed by Corporate Treasury which it lends to the U.S. affiliates.
  These swap gains are accounted for as a reduction of interest expense and are
  entirely included in Thomsons 2004 interest expense.

F-63

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The average interest rate on the Groups consolidated debt is as follows:

|                                                    | 2002  |  | 2003  |  | 2004  | 
|--------------------------------------------------- | ----- |  | ----- |  | ----- | 
|                                                    |       |  |       |  |       | 
|                                                    |       |  |       |  |       | 
|Average interest rate on borrowings                 | 2.42% |  | 2.39% |  | 2.74% | 
|Effective interest rate after interest rate hedging | 2.49% |  | 2.25% |  | 2.60% | 
|Effective interest rate after currency swaps        |       |  |       |  |       | 
|and interest rate hedging                           | 1.34% |  | 1.49% |  | 2.21% | 
|                                                    |       |  |       |  |       | 

The effective weighted average interest rate in 2004 on the Groups consolidated
  deposits was 1.41% (1.60% and 2.25% in 2003 and 2002, respectively).

The percentage of the Groups average debt at floating rates taking into
  account interest rate hedging operations is as follows :

|                            | 2002             |  | 2003  |  | 2004  | 
|--------------------------- | ---------------- |  | ----- |  | ----- | 
|                            |                  |  |       |  |       | 
|                            | (€ in millions ) | 
|Average debt                | 1,586            |  | 1,914 |  | 2,302 | 
|Percentage at floating rate | 17%              |  | 21%   |  | 30%   | 
|                            |                  |  |       |  |       | 

The Groups average deposits in 2004 amounted to €1,532 million,
  100% at floating rate.

A one-point variation in interest rates, applied to the floating rate debt
  and deposits would have had an impact on the Group annual financial expenses
  of approximately €9 million.

(c) Equity instruments

At December 31, 2004, Thomson had an outstanding equity forward sale and a
  call option on a quoted investment as well as puts on Thomson shares. The puts
  for 2,000,000 Thomson shares have maturities of March, April and May 2005 and
  were sold in December 2004 in the over the counter market for a premium of €1.6
  million. The puts have an exercise price of €18.75. The puts were sold
  in the framework of Thomsons share repurchase program and if they are
  exercised will be attributed to the utilisations foreseen in the objectives
  of the program.

(d) Financial counterpart risk

The financial instruments used by the Group to manage its interest rate and
  currency exposure are all undertaken with counterparts having an investment
  grade rating.

The percentage of outstanding foreign exchange operations by counterpart credit
  rating is as follows:

|Foreign exchange forwards:                            |  |        |  |        |  |        | 
|----------------------------------------------------- |  | ------ |  | ------ |  | ------ | 
|                                                      |  |        |  |        |  |        | 
|Counterparts rating (according to Standard & Poors) |  | 2002   |  | 2003   |  | 2004   | 
|                                                      |  |        |  |        |  |        | 
|                                                      |  |        |  |        |  |        | 
|A-1+                                                  |  | 87.8%  |  | 66.9%  |  | 91.3%  | 
|A-1                                                   |  | 12.2%  |  | 30.5%  |  | 2.0%   | 
|A-2                                                   |  | -      |  | 2.6%   |  | 6.7%   | 
|                                                      |  |        |  |        |  |        | 
|Total                                                 |  | 100.0% |  | 100.0% |  | 100.0% | 
|                                                      |  |        |  |        |  |        | 

F-64

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

All significant cash deposits are maintained with rated financial institutions.
  An amount of €816 million was invested in mutual funds as of December
  31, 2004.

The table below gives the percentage of outstanding cash deposits by counterpart
  credit rating:

|Cash deposit:                                         |        |  |        |  |        | 
|----------------------------------------------------- | ------ |  | ------ |  | ------ | 
|                                                      |        |  |        |  |        | 
|Counterparts rating (according to Standard & Poors) | 2002   |  | 2003   |  | 2004   | 
|                                                      |        |  |        |  |        | 
|                                                      |        |  |        |  |        | 
|A-1+                                                  | 80.2%  |  | 44.9%  |  | 44.8%  | 
|A-1                                                   | 11.9%  |  | 14.8%  |  | 6.2%   | 
|A-2                                                   | 6.0%   |  | 1.8%   |  | 2.0%   | 
|A-3                                                   | 0.4%   |  | -      |  | 1.1%   | 
|B                                                     | 1.0%   |  | 1.5%   |  | 2.6%   | 
|BB+                                                   | 0.1%   |  | -      |  | -      | 
|Money Market funds                                    | -      |  | 36.7%  |  | 42.8%  | 
|Non rated financial institutions                      | 0.4%   |  | 0.3%   |  | 0.5%   | 
|                                                      |        |  |        |  |        | 
|Total                                                 | 100.0% |  | 100.0% |  | 100.0% | 
|                                                      |        |  |        |  |        | 

Accordingly, the Group does not believe that there is a significant risk of
  non-performance by a major counterpart of the Thomson Group.

(e) Fair value of financial instruments

The fair value of interest rate swap contracts is calculated by discounting
  the future cash flows. However, for complex swaps, the marked-to-market value
  calculated by the banks is used.

The fair value of forward exchange contracts and currency swaps is computed
  by discounting the difference between the contract rate and the market forward
  rate and multiplying it by the nominal amount.

The fair value of currency options is calculated using standard option pricing
  software and verified with the banks.

The fair value of all current assets and liabilities (trade accounts receivable
  and payable, short term loans and debt, cash and bank overdrafts) is considered
  to be equivalent to net book value due to their short-term maturities.

The fair value of long-term debt is determined by estimating future cash flows
  on a borrowing-by-borrowing basis and discounting these future cash flows using
  the borrowing rates at year-end for similar types of borrowing arrangements.

F-65

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The fair value of listed investment securities is calculated using their last
  known market price at year-end.

|                                   | 2002             |  | 2003        |  | 2004     | 
|---------------------------------- | ---------------- |  | ----------- |  | -------- | 
|                                   |                  |  |             |  |          | 
|                                   | Net book         |  | Fair market |  | Net book | 
|                                   | value            |  | value       |  | value    | 
|                                   |                  |  |             |  |          | 
|                                   | (€ in millions ) | 
|Balance sheet:                     |                  |  |             |  |          | 
|Liabilities:                       |                  |  |             |  |          | 
|long-term debt                     | 18               |  | 16          |  | 436      | 
|convertible bonds                  | 1,414            |  | 1,326       |  | 1,429    | 
|Of which, short term portion       |                  |  |             |  |          | 
|of convertibles bonds              | -                |  | -           |  | -        | 
|Assets:                            | 5                |  | 5           |  | 14       | 
|                                   |                  |  |             |  |          | 
|Off-balance sheet:                 |                  |  |             |  |          | 
|Interest rate instruments          |                  |  |             |  |          | 
|                                   |                  |  |             |  |          | 
|Interest rate swap                 | (1)              |  | (1)         |  | -        | 
|FRA and CAP                        | -                |  | -           |  | (1)      | 
|Foreign exchange instruments       |                  |  |             |  |          | 
|                                   |                  |  |             |  |          | 
|Forward contracts                  | 20               |  | 26          |  | 6        | 
|Currency option contracts          | -                |  | -           |  | -        | 
|Equity instruments                 |                  |  |             |  |          | 
|                                   |                  |  |             |  |          | 
|Collars                            | -                |  | -           |  | -        | 
|Call option                        | -                |  | -           |  | -        | 
|Forward sale                       | -                |  | -           |  | -        | 
|Puts                               | -                |  | -           |  | -        | 
|Metal hedging instruments          |                  |  |             |  |          | 
|                                   |                  |  |             |  |          | 
|Metal forward purchase contracts - |                  |  | (1)         |  | -        | 
|                                   |                  |  |             |  |          | 
|                                   |                  |  |             |  |          | 

26. INFORMATION ON EMPLOYEES

The geographical breakdown of the number of employees in companies in the
  list of consolidated subsidiaries is as follows:

|                                                 |  | 2002   |  | 2003   |  | 2004   | 
|------------------------------------------------ |  | ------ |  | ------ |  | ------ | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|Europe (1)                                       |  | 17,464 |  | 17,277 |  | 16,609 | 
|North America                                    |  | 14,405 |  | 13,073 |  | 12,992 | 
|Asia(2)                                          |  | 20,268 |  | 17,015 |  | 12,842 | 
|Other countries (3)                              |  | 12,967 |  | 11,034 |  | 6,636  | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|Number of employees in consolidated subsidiaries |  | 65,104 |  | 58,399 |  | 49,079 | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|Number of employees in equity companies          |  | 383    |  | 664    |  | 32,354 | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|Total employees                                  |  | 65,487 |  | 59,063 |  | 81,433 | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|(1)Of which Poland                               |  | 5,256  |  | 5,697  |  | 5,416  | 
|(2)Of which People s Republic of China          |  | 17,195 |  | 13,454 |  | 10,609 | 
|(3)Of which Mexico                               |  | 11,974 |  | 10,048 |  | 5,647  | 
|                                                 |  |        |  |        |  |        | 
|                                                 |  |        |  |        |  |        | 
|Salary costs(€ in millions )                     |  | 1,841  |  | 1,692  |  | 1,574  | 
|                                                 |  |        |  |        |  |        | 

F-66

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Compensation of directors and principal executive officers:

Directors fees were voted by the shareholders meeting on November
  10, 2000. The amount paid in 2004, concerning year 2003, was €298,581.10.

In 2004, the aggregate amount of compensation paid by the Group to the members
  of its Executive Committee (17 persons) is €8.08 million (excluding the
  specific plan benefiting certain executive officers of the Components &
  Networks division and including variable compensation for an amount of €2.65 million).

In 2003, the aggregate amount of compensation paid to the members of the Executive
  Committee was €7.9 million (excluding the specific plan benefiting certain
  executive officers of the Components & Networks division and including
  variable compensation for an amount of €2.38 million).

The aggregate reserve for employee benefits granted to these executive officers
  was €1.7 million in 2004 and €1.6 million in 2003.

27.
  CONTINGENCIES

Legal Proceedings

In the normal course of the business, the Group is involved in legal proceedings
  and is subject to tax, customs and administrative regulation. The Groups
  general policy is to accrue a reserve when a risk of an obligation to a third-party
  is identified, the outcome of which may result in a potential liability that
  can be reasonably estimated.

U.S. customs

In January 1998, a grand jury investigation was initiated by the U.S. Attorneys
  Office in Baltimore, Maryland. This investigation was conducted by the U.S.
  Department of Justice relating to the transfer pricing used in the importation
  of picture tubes by Thomson, Inc. from an Italian subsidiary of the Group between
  1993 and June 1998. In October 2002, the U.S. government informed the Company
  that it has declined to prosecute the grand jury case.

A civil investigation was also initiated by the U.S. Customs Service, which
  issued pre-penalty notices on December 21, 1998. A pre-penalty notice means
  that a claim is being contemplated, and is typically a precursor to the issuance
  of a formal penalty notice. The pre-penalty notices alleged that certain subsidiaries
  of the Group and five of its employees intentionally undervalued television
  tubes imported by the Group from the Italian affiliate. The pre-penalty notices
  were later withdrawn against two of the individual employees. According to the
  original pre-penalty notices, the tubes at issue had an appraised domestic value
  of approximately USD 419 million (€307 million at December 31, 2004).
  On December 28, 2000, the Customs Service amended the pre-penalty notices and
  alleged an appraised domestic value of approximately USD 425 million (€312 million at December 31, 2004). In an agreement reached with the Customs
  Service in January 1999, all actions with respect to the pre-penalty notices
  were suspended for a period of one year in exchange for waivers of the statute
  of

F-67

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

limitations through January 2001. In July 2000, all of the parties who previously
  received pre-penalty notices agreed to waive the statute of limitations defense
  for an additional period of time in order to allow the U.S. government to complete
  its investigation and to seek resolution of the matter through administrative
  proceedings. The waivers were again extended in November 2001, October 2002,
  March 2003 and July 2004 and are now effective through September 6, 2005.

The amended pre-penalty notices estimated the loss of custom revenues at approximately
  USD 12.5 million. Under applicable statutes, penalties could be levied in an
  amount equal to the appraised domestic value of the merchandise and against
  each of the five employees concerned in an amount up to eight times the loss
  of revenue.

In addition, the Group indemnified the five employees for the monetary penalties.
  On May 30, 2003 the parties, including the Company, which received the pre-penalty
  notices submitted a joint Petition for Cancellation or Remission of Penalties
  (the Petition) to the Customs Service. Since this submission, the
  Companys counsel held various meetings with Customs officials advocating
  in particular the arguments made in the May 30, 2003 Petition. 
  On December 21, 2004 a Penalty notice was issued by the US Customs which withdraws
  allegations of fraud and any action on years 1997 and 1998 and which indicates
  that no penalty should be issued against individual officers and employees of
  Thomson. The Penalty notice lowers the loss of revenue from USD 12.5 million
  to USD 7.1 million and proposes a monetary penalty of USD 28.4 million. On January
  21, 2005, Thomson submitted a petition for cancellation or remission of penalties.
  The Group intends to continue to defend itself vigorously against any allegations
  of wrongdoing, while cooperating with Customs in an effort to resolve the matter.

Italian tax litigation

The Italian Guardia di Finanza tax police conducted a tax verification
  of the Italian subsidiary of the Group, Videocolor S.p.A, which had exported
  picture tubes to Thomson, Inc. during the years 1993 through 1998. In its report
  transmitted to the Italian Direct Taxes Local Office in December 1999, the Guardia
  di Finanza recommended increasing the prices of the tubes exported to Thomson,
  Inc., and, as a consequence, increasing the taxable income of Videocolor S.p.A.
  The taxable income increase, as proposed for the years 1993 through 1998, with
  regard to picture tube prices, amounts to €31 million. On December 28,
  1999, the Direct Taxes Local Office formally advised that an assessment would
  be due with regard to 1993 amounting to €5.6 million taxable income, resulting
  in (i) reversal of tax-loss carry-forwards and (ii) additional tax penalties
  and interest amounting to approximately €2.1 million. On March 21, 2000,
  Videocolor S.p.A. challenged this assessment before the competent tax jurisdiction
  of Frosinone in Italy.

On February 13, 2001, the Court of Frosinone rendered its decision regarding
  the 1993 tax assessment, it maintained part of the assessment based on 1993
  elements, yet it invalidated the valuation method of the exported tubes applied
  by the Italian Direct Taxes Local Office. On November 23, 2000, the Direct Taxes
  Local Office gave notice of an assessment with regard to 1994 amounting to €9.7 million taxable income. In February 2001, Videocolor S.p.A challenged this
  assessment before the Local Tax County Commission. As for 1993, the Group has
  challenged this assessment before the competent tax jurisdiction of Latina Frosinone
  which confirmed in March 2003 the initial judgment but without applying penalties.

F-68

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

On May 16, 2003 Videocolor S.p.A elected to apply for the new tax amnesty,
  enacted by the Italian Parliament in 2003. Videocolor applied for the years
  1993 and 1994 and not for the following years and paid a total amount of €1.35 million following this amnesty application. Videocolor is able to use all
  the tax losses originating from 1993 and the previous years.

With regard to the year 1995, the Direct Taxes Local Office gave notice in
  2001 of an assessment resulting in (i) additional taxes amounting to €4.2 million and (ii) tax penalties amounting to €4.2 million (before interest).
  The taxable income increase, as proposed for 1995, also mainly relates to picture
  tube prices. Videocolor S.p.A. appealed this assessment on October 25, 2001,
  before the competent tax jurisdiction of Frosinone in Italy, which made a decision
  on March 17, 2003 to reject almost all of the assessment of the Italian Tax
  authorities. Tax office appealed, on October 30, 2003 and before the court of
  Latina, this decision and Videocolor S.p.A. is now challenging this appeal.

On September 2002, the Direct Taxes Local Office gave notices of two assessments
  with regard to 1996 and 1997 fiscal years resulting in (i) additional taxes
  amounting to €3.5 million and €1.8 million, respectively and (ii)
  tax penalties amounting to €3.5 million and €1.8 million, respectively.
  Videocolor S.p.A. challenged the assessments before the competent tax jurisdiction
  of Frosinone on December 9, 2002, which decided, on November 15th, 2004 to reject
  almost all of the assessments of the Italian Tax authorities.

On December 17, 2003, the Direct Taxes Local Office gave notice of an assessment
  with regard to 1998 fiscal year resulting in (i) additional taxes amounting
  to €127,000 and (ii) penalties amounting to €127,000. Videocolor
  S.p.A. appealed this assessment on March 2nd, 2004 before the competent tax
  jurisdiction of Frosinone in Italy.

Taoyuan County Former RCA Employees Solicitude Association (the Association)

In April 2004, the Association filed a purported class action under Article
  41 of the Taiwan Code of Civil Procedure in the Taipei District Court, Taiwan,
  Republic of China against TCE Television Taiwan Ltd. and General Electric International,
  Inc. The complaint alleges that the defendants failed to provide employees with
  necessary instruction on how to protect themselves and failed to take measures
  to store or dispose of chemicals used in the operation of the Taoyuan electronics
  plant. The Association claims damages in the amount of TWD 2.4 billion (€59 million at May 26, 2004 noon buying rate) to compensate the members of the
  Association for the alleged higher-than-normal incidents of cancer and disease
  suffered by the former plant employees who worked at the facility during the
  period 1970-1992. Based on the information currently available, the Group is
  not in a position to estimate the liability and intends to vigorously defend
  the allegations set forth in the complaint.

Morris Reese

In May 2004, Morris Reese filed suit against ATLINKS USA, Inc. (a wholly owned
  subsidiary of Thomson) and numerous other manufacturers and distributors of
  telephone equipment in the U.S. District Court for the Eastern District of Texas,
  Marshall Division, alleging infringement of a U.S. patent n° 6,427,009 which
  relates to call waiting caller ID technology. In January 2005, the parties entered
  into a settlement, providing for a dismissal of the lawsuit and a past and future
  worldwide license in the field of caller ID technology.

F-69

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Superguide Corporation

In June 2000, Superguide Corporation filed suit in the U.S. District Court
  for the Western District of North Carolina against DIRECTV Enterprises, Inc.
  et al., Thomson, Inc. and Echostar Communications Corporation et al. alleging
  infringement with respect to three patents relating to program guide data retrieval,
  display, and program recordation. Gemstar Development Corporation was added
  as a defendant in March 2001. In July 2002, the U.S. District Court for the
  Western District of North Carolina granted summary judgment in favor of Thomson,
  DIRECTV and Echostar, finding that none of the three patents owned by Superguide
  Corporation were infringed. Superguide Corporation and its licensee, Gemstar
  Development Corporation, have appealed the District Courts decision with
  the U.S. Court of Appeals for the Federal Circuit in Washington D.C. Oral argument
  of the appeal was heard on July 10, 2003 in the U.S. Court of Appeals for the
  Federal Circuit. On February 12, 2004, the Court of Appeals issued a decision
  affirming in part and reversing in part the District Courts claim construction
  of the patents at issue. As a result, the Court of Appeals vacated the summary
  judgment ruling issued by the District Court in favor of the defendants. On
  February 26, 2004, Thomson Inc., joined by the other Appellees, filed a petition
  for Rehearing En Banc with the Court of Appeals. In April 2004, the Court of
  Appeals denied the petition and remanded the case back to the District Court
  for further proceedings.

Pegasus Development Corporation and Personalized Media Communications,
  L.L.C.

In December 2000, Pegasus Development Corporation and Personalized Media Communications,
  L.L.C. filed suit in the U.S. District Court for the District of Delaware against
  Thomson, Inc., DIRECTV, Inc., Hughes Electronics Corporation, and Philips Electronics
  North America Corporation alleging infringement with respect to seven patents
  relating to digital satellite signal processing. In November 2001, StarSight
  Telecast, Inc., TVG-PMC, Inc., and Gemstar-TV Guide International, Inc. (Gemstar)
  were added as third-party defendants and filed a counterclaim.

Subsequently, Thomson Inc. filed a Revised Second Amended Counterclaim and
  Amended Third-Party Complaint claiming violation of antitrust laws and unfair
  competition. Upon Thomson Inc.s motion, the antitrust and unfair competition
  claims were transferred to the U.S. District Court for the Northern District
  of Georgia by the Judicial Panel on Multi-District Litigation for inclusion
  in the coordinated or consolidated MDL-1274 pretrial proceedings occurring there
  involving Gemstar, Scientific Atlanta Inc. Pioneer Corp., EchoStar Communications
  Corp., and other parties. In June 2003, as part of a new commercial arrangement
  with Gemstar, the Company dismissed with prejudice its antitrust and unfair
  competition claims against Gemstar and Gemstar agreed to provide the Company
  with a limited indemnity with respect to the PMC patent litigation. In March
  2004, the U.S. District Court for the Northern District of Georgia remanded
  the antitrust and unfair competition claims back to the U.S. District Court
  for the District of Delaware, where, pursuant to an order of the U.S. District
  Court for the District of Delaware in May 2003, the case is subject to an indefinite
  stay pending the reexamination of the patents at issue by the U.S. Patent and
  Trademark Office.

Parental Guide of Texas

In December 2000, Parental Guide of Texas, Inc. filed suit against Thomson
  Inc. and numerous other consumer electronics manufacturers in the U.S. District
  Court for the Eastern District of Texas, Marshall Division, alleging infringement
  of a patent, which relates to inhibiting the intelligible output of

F-70

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

possibly undesirable sound and visual events of a television program. In October
  2002, Thomson Inc. entered into a Release and License Agreement with Parental
  Guide of Texas Inc. whereby the Company agreed to license Parental Guides
  V-Chip patents. The amount to be paid by Thomson was contingent upon the amount,
  if any, of the litigation royalty established by Parental Guide in the lawsuit.
  Thomson Inc. contended that all of the other defendants settled prior to trial
  and that it did not owe Parental Guide any further license payments. On February
  7, 2003, Parental Guide filed suit in the U.S. District Court for the Eastern
  District of Texas alleging that Thomson Inc. was in breach of the Release and
  License Agreement. In March 2004, Parental Guide and Thomson Inc. each filed
  summary judgment motions contending respectively that as a matter of law it
  should prevail in the lawsuit. On January 20, 2005, the Court issued an Order
  and Final Judgment in favor of Thomson Inc. On February 18, 2005, Parental Guide
  filed a notice of appeal.

James Stalcup and Mary Gick Class Action

On February 15, 2002, Mr. James Stalcup and Mrs. Mary Gick, filed a purported
  class action in the Third Judicial District, Madison County, Illinois pursuant
  to Section 5/2-801 of the Illinois Code of Civil Procedure on behalf of U.S.
  consumers who acquired certain television sets manufactured by Thomson, Inc.
  during the period between 1998 and 2001. The complaint alleged a defect in certain
  televisions which have a software-like integrated chip, which can
  cause temporary audio failure. The Company does not believe that the alleged
  televisions or the ICs, which it procures from third parties are
  defective.

Yet, the Company entered into a Settlement Agreement on December 17, 2003
  to resolve all of the alleged claims on a nationwide basis. On December 18,
  2003, the Third Judicial Circuit Court in Madison County, Illinois signed an
  Order preliminarily approving the proposed settlement and conditionally certifying
  a nationwide class consisting of U.S. residents who acquired one of the Companys
  televisions (with a CTC 195, 197 or 203 chassis) manufactured between November
  1, 1996 and March 31, 2001.

The proposed settlement provides for two alternative remedies: (i) cash reimbursement
  for any documented out-of-pocket costs paid to a qualified service company to
  repair or diagnose the alleged audio loss problem, or (ii) a Rebate Certificate
  applicable to the purchase of a new Thomson-branded television. The Company
  has agreed to pay the plaintiffs attorneys fees and costs, and the
  administrative costs of the settlement. On May 24, 2004 the Court conducted
  a fairness hearing which resulted in an Order from the Court granting final
  approval of the settlement and a judgment of dismissal with respect to Thomson
  Inc. Also, on May 2004, the court made an interim award of attorneys fees
  to plaintiffs counsel which was confirmed in a final order on January
  31, 2005.

IP Innovation and Technology Licensing Corp.

On January 14, 2003, IP Innovation LLC and Technology Licensing Corp. filed
  a complaint against Thomson Inc. in the U.S. District Court for the Northern
  District of Illinois, Eastern District, alleging infringement of four patents
  which cover the fields of video noise reduction, audio video synchronization,
  and audio in video technologies. The Court, after reviewing the complaint, dismissed
  it without prejudice for failure to establish jurisdiction or appropriate venue.
  On February 14, 2003, IP Innovation LLC and Technology Licensing Corp. filed
  a new complaint alleging infringement of the above described patents in the
  U.S. District court for the Southern District of Indiana. The Company

F-71

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

has filed an answer contesting the allegations. In May 2004, IP Innovation,
  TLC and Thomson Inc. entered into a settlement and license agreement resolving
  the Indiana case. The resolution provides for a past and future license to Thomson
  in the field of consumer electronics.

On June 20, 2003, Technology Licensing Corp. (TLC) filed a lawsuit
  in the U.S. District Court for the Eastern District of California alleging that
  certain Grass Valley Group products infringe its 524 patent. The
  Company intends to defend itself vigorously against the allegations.

Fisher v. Thomson, Inc.

In February 2004, Randy Fisher filed an individual and purported class action
  in the Twentieth Judicial Circuit, St. Clair County, Illinois alleging that
  Thomson Inc. failed to disclose to purchasers of certain models of Thomson High
  Definition Televisions that those televisions would develop numerous latent
  defects. In January 2005, the parties resolved the dispute whereby the allegations
  were withdrawn.

UGC Arbitration

Screenvision Holdings (Europe) Limited (Screenvision), a joint
  venture between Thomson and Carlton Communications Ltd, in which the Thomson
  group holds 50%, has filed an arbitration claim at the ICC Court in May 2003
  against UGC S.A., RMB International S.A. (RMB) and Regie Media Belge
  S.A. The claim was filed on the basis that UGC and RMB failed to comply with
  certain obligations under the agreement for the sale of a 51% stake in an Italian
  cinema advertising business to Screenvision. The claim amounts to €25
  million. Hearings took place in October 2004 and parties submitted their final
  position in January 2005. Screenvision has been advised that it has a strong
  case for recovery of all or parts of this amount. However, the ultimate outcome
  cannot be predicted with certainty and no asset has been recorded in respect
  of the outcome of this claim.

Anti-dumping on televisions manufactured by Thomson's Thailand unit

Customs authorities in seven European countries are assessing imports into
  the European Union by Thomson subsidiaries of televisions manufactured by Thomson
  in Thailand. These proceedings relate to different periods according to the
  different rules in each country, beginning at the earliest in 1997 and ending
  at the latest in August 2002. In accordance with the relevant procedures, Thomson
  received in May 2004, January and February 2005 various re-assessment notices
  relating to anti-dumping duty, excluding interest and any penalties applicable,
  in the United Kingdom, Germany, France, Italy, Spain, Denmark and Sweden in
  an aggregate amount of around €15.7 million. Thomson believes that it
  has correctly declared a paid duty on the imported televisions concerned and
  accordingly strongly disputes the grounds of these re-assessments.

Metabyte, Inc., versus Canal Plus Technologies, S.A.

In 2001, Metabyte, Inc. and Vivek Mehta (the plaintiffs) and Canal
  Plus Technologies, S.A. entered into several agreements which ultimately gave
  Canal Plus Technologies control over Metabyte Networks, Inc. (MNI),
  a company owned by plaintiffs. One of the agreements was a Put Option Agreement
  (POA) whereby the common shareholders of MNI could require Canal Plus Technologies
  to purchase their shares in three Tranches. The POA specifically provided that
  it would only be exercisable in the event that MNI first met certain technical
  and financial milestones which were to be

F-72

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

set by MNIs board and Canal Plus Technologies. No milestones were ever
  set. In 2002, Canal Plus Technologies rejected plaintiffs attempt to exercise
  the put option. Plaintiffs filed suit against Canal Plus Technologies in October
  2002 in U.S. District Court for the Northern District of California alleging
  breach of contract and breach of the covenant of good faith and fair dealing.
  In June 2004, the Court denied Canal Plus Technologies motion for summary
  judgment, which asserted that the POA was an unenforceable agreement to agree,
  ruling that material issues of fact exist with respect to several matters including
  whether Canal Plus Technologies, through the conduct of the individuals it placed
  on the MNI board, excused MNI from the condition precedent of setting and meeting
  milestones. A court-ordered mediation occurred on December 6, 2004 but was unsuccessful.
  Pursuant to the Stock Purchase Agreement of Canal Plus Technologies between
  Thomson and Groupe Canal+ S.A., Groupe Canal+ granted Thomson certain rights
  with respect to amounts that may become payable by Thomson in connection with
  this dispute. The matter is scheduled for trial on June 6, 2005.

Thomson Inc. v. Praxair

After closure of the Circleville, Ohio glass manufacturing facility in March
  2004, Thomson Inc. received a letter, dated March 25, 2004, from Praxair, Inc.,
  owner and operator of an onsite oxygen manufacturing plant constructed on the
  Circleville facility property in 1996, demanding assurances that Thomsons
  performance would be maintained for an alleged remaining seven years of the
  contract. Although the Circleville facility no longer uses oxygen, Praxair argues
  that the contract provides for the continuance of certain minimum payments and
  services. An initial meeting was conducted with Praxair representatives on May
  28, 2004, but no progress was made toward a resolution of the dispute. On July
  30, 2004, Thomson filed suit against Praxair in Cleveland, Ohio seeking a declaration
  from the Court that its remaining obligations under the contract, if any, are
  terminated. Thomson has also sued Praxair and its alliance partner, Corning,
  Inc., to recover certain damages Thomson contends it sustained as a result of
  certain misrepresentations which were made by Praxair/Corning concerning the
  operating efficiencies, benefits, and reduced costs involved in shifting production
  to an oxy-fueled system. Praxair has responded by filing a Counterclaim seeking
  a declaration that the contract continues to be valid and enforceable and seeking
  an award of damages to be proven at trial.

Compression Labs, Inc. v. Adobe Systems, et al.

In April 2004, Compression Labs (CLI) filed suit against Thomson
  S.A. and 27 other companies in the U.S. District Court for the Eastern District
  of Texas, Marshall Division, alleging infringement of U.S. patent 4,698,672
  which relates to a method and apparatus for processing signals used in video
  compression systems including the JPEG standard. Compression systems are typically
  utilized in products such as digital cameras, cellular phones, printers and
  scanners. The Federal Trade Commission (FTC) has undertaken a non-public
  antitrust investigation of CLI and its parent, Forgent Corporation, to determine
  whether CLI violated the FTC Act by reason of CLIs involvement in the
  JPEG standard-setting process.

Environmental matters

A certain number of Thomsons current and previously owned manufacturing
  sites have an extended history of industrial use. Soil and groundwater contamination,
  which occurred at some sites, may occur or be discovered at other sites in the
  future. Industrial emissions at sites that Thomson has built or acquired expose
  the Group to remediation costs. The Group has identified certain sites at which
  chemical contamination has required or will require remedial measures.

F-73

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Soil and groundwater contamination was detected near a former production facility
  acquired from General Electric and owned by Thomson from 1987 to 1992 in Taoyuan,
  Taiwan. Production activities at this site ceased after being sold by the Group.
  Thomson is currently working with the local Taoyuan Environmental Protection
  Bureau to perform an investigation and feasibility study relating to potential
  groundwater contamination issues. In accordance with an agreement for the acquisition
  of General Electric Companys consumer electronics business in 1987, General
  Electric Company has assumed or indemnified Thomson with respect to certain
  liabilities resulting from this issue, and should assume or indemnify the Group
  with respect to certain liabilities that could arise from the period prior to
  Thomsons acquisition of the property.

The Group believes that the amounts reserved and the contractual guaranties
  provided by its contracts for the acquisition of certain production assets will
  enable it to reasonably cover its safety, health and environmental obligations.
  Potential problems cannot be predicted with certainty, however, and it cannot
  be assumed that these reserve amounts will be precisely adequate. In addition,
  future developments such as changes in governments or in safety and health laws
  or the discovery of new risks could result in increased costs and liabilities
  that could have a material effect on the Groups financial condition or
  results of operations. Based on current information and the provisions established
  for the uncertainties described above, the Group does not believe it is exposed
  to any material adverse effects on its business, financial condition or result
  of operations arising from its environmental, health and safety obligations
  and related risks.

28.   RELATED PARTIES

 DIRECTV and its subsidiaries (DIRECTV)

DIRECTV was a shareholder of Thomson until August 21, 2002.

Eddy Hartenstein, Vice-Chairman of the Board of Directors of DIRECTV Inc.,
  is a member of the Board of Directors of Thomson.

In the normal course of the business and based on market conditions, Thomson
  entered into the following transactions with DIRECTV:

The Group sold digital decoders and satellite receivers, as well as services
  to DIRECTV for amounts of €374 million, €67 million and €40
  million during the years ended December 31, 2004, 2003 and 2002, respectively.

Thomson also sells to retailers a significant number of digital decoders and
  satellite receivers which are designed for prospective DIRECTV subscribers.

At December 31, 2004, 2003 and 2002, receivables from DIRECTV amounted to
  €35 million,  15 million and €83 million, respectively.

F-74

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Over the course of 2003 and 2004, Thomson and DIRECTV agreed on the following
  agreements: 
  - On April 14, 2003, Thomson signed a contract to supply DIRECTV with a
  significant number of encoders and control systems. 
  - On June 13, 2003, Canal+ Technologies, a subsidiary of the Group and
  DIRECTV signed a contract involving the supply by Canal+ Technologies to DIRECTV
  of its Media Highway interactivity system. Thomson has guaranteed the
  performance of the contract. 
  - On June 24, 2004, Thomson acquired the HNS set-top box manufacturing
  business of Hughes Network Systems (the manufacturing activity of Direct TV
  Group) and signed concurrently an agreement for the long-term development and
  supply of digital satellite set-top boxes (note 2).

 Microsoft and its subsidiaries (Microsoft)

Hank Vigil, Executive Vice President of Microsoft, is a member of the Board
  of Directors of Thomson.

In the course of its business and based on market conditions, Thomson sells
  products and services to Microsoft, including, mainly, duplication and distribution
  services and promotional services, optical kits and royalties. These sales amounted
  to €77 million, €119 million and €303 million for the years
  ended December 31, 2004, 2003 and 2002, respectively.

At December 31, 2004, 2003 and 2002, Thomson had accounts receivable from
  Microsoft amounting to €10 million, €6 million and €0 million,
  respectively.

 Carlton Communications Plc and its subsidiaries (Carlton)

From March 16, 2002 until September 22, 2004, Carlton has held a 5.5% interest
  in the share capital of Thomson. As a consequence and for practical reasons,
  Carlton is considered as a related party of Thomson through December 31, 2004.

In March 2001, Thomson partially financed the Technicolor acquisition (note
  2) by issuing promissory notes (the Notes) to Carlton (note 22)
  in the amount of 669 million (USD 600 million), based on the historical
  exchange rate). The Notes were repayable in four equal instalments on the first,
  second, third and fourth anniversaries of the transaction.

In March 2004, 2003 and 2002, Thomson repaid Carlton the annual instalments
  of the Notes, in amounts of €92 million, €149 million and €178
  million, respectively. These amounts include, respectively, €8 million,
  €10 million and €7 million of accrued interests. In addition, on September
  16, 2003, Thomson repaid €84 million in nominal value and €7 million
  of accrued interest prior to maturity. Thus, at December 31, 2004, 2003 and
  2002, the outstanding debt due to Carlton relating to the Technicolor acquisition
  amounts to €84 million, €178 million and 459 million, respectively.

Thomson incurred interest charges related to this debt of €3 million,
  €6 million and 10 million for years ended December 31, 2004, 2003
  and 2002, respectively.

F-75

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

On May 7, 2002, the Group created a new joint venture with Carlton, Screenvision
  Europe, in order to purchase and operate the cinema screen advertising businesses
  in UGC and RTBF theatres in Europe.

During 2004, 2003 and 2002, Carlton and Thomson shared equally in the financing
  of Screenvision Europes business. The debt due to Carlton by Screenvision
  Europe, consolidated by the proportional method in the Groups financial
  statements, amounted to €18 million, €18 million and €14 million
  at December 31, 2004, 2003 and 2002, respectively.

These loans bore interest at market rates, with Screenvision Europe incurring
  interest expense amounting to €0.5 million, €0.5 million, and €0.5 million for the years ended December 31, 2004, 2003 and 2002, respectively.

 France Telecom and its subsidiaries (FT)

On October 2, 2002, Thierry Breton was appointed chairman and CEO of FT. Following
  these appointments, he resigned from his position as Chairman and CEO of Thomson
  but was appointed a member of the Board of Directors of Thomson and Chairman
  of Thomsons Strategy Committee. As a consequence, FT has been considered
  as a related party and transactions between Thomson and FT since October 2,
  2002 are disclosed hereafter.

In the normal course of its business and based on market conditions Thomson
  entered into the following transactions with FT:

In December 2000, Thomson entered into a telecommunications outsourcing agreement
  with FT (Equant), pursuant to which FT will provide all of the Groups
  telecommunications requirements, including voice, data and videoconferencing.
  The agreement is known as Thomson Infrastructure Network Operations Services
  (TINOS). On November 7, 2002, with effect as of September 1, 2002,
  Thomson and FT amended the TINOS agreement in order to include within its scope
  all of the Groups recent acquisitions. For the year ended December 31,
  2004 and 2003 and the three-month period ended December 31, 2002, Thomson recorded,
  respectively, €34 million, €22 million and €6 million in operating
  expenses related to the TINOS contract (as amended in November 2002).

In the normal course of business, Thomson is a supplier of ADSL set top boxes
  and other telephone products to FT. For the year ended December 31, 2004 and
  2003 and the three-month period ended December 31, 2002, such sales amounted
  to €41 million, €23 million and €10 million, respectively. At
  December 31, 2004, 2003 and 2002, amounts due from FT to Thomson amounted to
  €9 million, €5 million and €13 million, respectively.

On July 31, 2004, Thomson and TCL Corporation formed TTE (note 2). Since this
  date, Thomson accounts for its investment in TTE using the equity method. As
  a consequence TTE is a related party of Thomson since August 1, 2004.

In the normal course of business, Thomson is a supplier of CRT tubes to TTE.
  In addition, Thomson licenses to TTE certain intellectual property and provides
  exclusive services to TTE. For the 5 month

F-76

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

period ended December 31, 2004, such sales amounted to €365 million.
  As of December 31, 2004 amounts due from TTE to Thomson amounted to €106
  million.

In addition, Thomson and TTE entered into a 24 months Receivable Purchase
  and Sale Agreement by which Thomson purchases TTEs receivables and collects
  them. As of December 31, 2004, Thomson loaned €99 million to TTE and recognized
  €4 million as financial income during the 5 months ending December 31,
  2004.

 Silver Lake Partners (SLP)

SLP has a representative at the Thomson Board of Directors since September
  15, 2004, and is therefore considered as a related party of Thomson since that
  date.

On September 16, 2004, Thomson issued convertible/exchangeable subordinated
  bonds to Silver Lake Partner LLC (note 20). As of December 31, 2004, Thomson
  has a financial debt toward SLP amounting to €366 million. Over the year
  2004, Thomson recognized interest expenses and certain other charges in an amount
  of €4 million.

Although TSA significantly reduced its share capital in Thomson in November
  2003, TSA is considered as a related party of Thomson as of December 31, 2004
  since Thierry Breton (member of the Board of Directors of Thomson) was chairman
  of the Board of TSA until March 1, 2005. Therefore, transactions with TSA through
  December 31, 2004 are disclosed hereafter. TSA is wholly owned by the French
  State.

Thomson and TSA entered into an agreement on July 1997 defining the relations
  between Thomson, TSA and Thales S.A. (formerly Thomson-CSF), with respect to
  the management and the use of certain intellectual property rights. By amendments
  signed in 2000 and 2002, the parties have agreed to clarify and simplify the
  use of such intellectual property rights.

By the amendment effective in December 2000 and expiring in July 2006, Thales
  S.A. and TSA have granted to Thomson Licensing S.A. (a wholly owned subsidiary
  of Thomson) an exclusive right to grant licenses to third parties on their patents
  covering optical disk technologies and have also authorized Thomson Licensing
  S.A. to negotiate and sign such licensing agreements.

In addition in June 2002 retroactive to July 1, 2001, TSA agreed to transfer
  all of the patents covered by the contract signed in July 1997 to Thomson Licensing
  S.A., who was already the beneficiary of all revenues derived from such rights.

 Alcatel and its subsidiaries (Alcatel)

Until July 2002, Alcatel was a shareholder of Thomson, holding up to 3.4%
  of Thomsons share capital, and had one representative at the Board of
  Directors of Thomson. As a result, until July 2002, Alcatel was a related party
  of Thomson, and transactions with Alcatel up to June 30, 2002 are disclosed
  hereafter.

F-77

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

In the normal course of its business and based on market conditions, Thomson entered into the following transactions with Alcatel:

Thomson purchased from Alcatel different services and products, primarily communication products, and trademark royalties totalling €26 million for the six-month period ended June 30, 2002.

Also, the Group sold products (mainly modems) to Alcatel for €97 million for the six-month period ended June 30, 2002

Thomsons trade account liabilities to Alcatel amounted to €5 million at June 30, 2002. At the same date, the Group had receivables from Alcatel amounting to €25 million.

Since the creation of the ATLINKS joint venture, Alcatel and Thomson have, consistent with the terms of the joint venture agreement entered into in 1999, shared equally in financing its operations. On a consolidated basis, the debt due to Alcatel by ATLINKS amounted to €14 million at June 30, 2002.

Furthermore, Alcatel had an option to sell its interest in the ATLINKS joint venture, exercisable from October 2002. Thomson and Alcatel reached an agreement in February 2003 on the conditions of the exercise of this option, which involved a cash payment by Thomson of €68 million in consideration for the 50% interest in ATLINKS held by Alcatel.

 NEC Corporation and its subsidiaries (NEC)

Until June 2002, NEC was a shareholder of Thomson, holding up to 5% of its
  share capital, and had one representative at the Board of Directors of Thomson.
  Until June 2002, NEC was a related party of Thomson, and, therefore, the transactions
  with NEC up to June 30, 2002 are disclosed hereafter.

In the normal course of its business and based on market conditions Thomson entered into the following transactions with NEC:

The Group purchased from NEC components for DVD drives and Plasma displays
  in the amounts of 1 million for the six-month period ended June 30, 2002.

The Group sold products (mainly DVD drives) and services (notably patent licenses)
  to NEC in the amounts of €18 million over the first six months of 2002.

At June 30, 2002, receivables from NEC to Thomson amounted to €1 million. As of the same date, amounts due to NEC were negligible.

In 2001, the Group acquired certain patents relating to plasma screen technology and the related know-how for USD 50 million (€57 million), including USD 5 million (€6 million) in withholding taxes paid to the French Treasury, with the objective of setting up a joint venture dedicated to plasma screen manufacturing. At the end of 2002, the parties renounced the original agreement and cancelled the related commercial agreements. As a consequence, NEC paid the Group €47.2 million.

F-78

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

 A Novo Comlink Espana (A NOVO)

As of December 31, 2002, Thomson is no longer a shareholder of A NOVO (note
  2). Prior to the exit of A NOVO from the Groups scope of consolidation
  in the second half of 2002, the Group accounted for its interest in A NOVO using
  the equity method. 
  In the normal course of its business and based on market conditions, the Group
  purchased equipment, spare parts and raw materials from A NOVO, such purchases
  amounting to €62 million for the year ended December 31, 2002. The Group
  owed €15 million to A NOVO at December 31, 2002.

29.
  SUBSEQUENT EVENTS

On January 1, 2005, a total of 14,493,324 bonds (€587 million) of the original 14,814,815 bonds of the OCEANE issued on March 2002, were redeemed at the option of bondholders.

On January 24, 2005, Thomson repaid in advance the debt related to the Mexicali lease for an amount of USD 227 million (the Aggregate Acceleration Option Price). The repayment has been made pursuant to the Conditional Agreements of the initial lease.

Since December 31, 2004, Thomson has continued to advance its partnership
  project for its Displays business. At the end of February, the first phase of
  the project was completed, with multiple indications of interest from strategic
  and from financial partners. In addition, on February 28, 2005, Thomsons
  Videocolor subsidiary comprising its Anagni tube production site was formally
  sold to the Indian company, Videocon, for €10. Prior to disposal, Thomson
  recapitalized the business with €103 million of cash. Estimated cash and
  non-cash costs related to these subsequent events could reach up to €365
  million of which €195 million has been recorded in Thomsons 2004
  accounts (note 18) and the rest will be recorded into 2005.

F-79

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

30.
  LIST OF CONSOLIDATED SUBSIDIARIES

|                                                                                  | % share held by Thomson(1) | 
|--------------------------------------------------------------------------------- | -------------------------- | 
|                                                                                  |                            | 
|COMPANY - (Country)                                                               | December 31,              
|                                                                                  | 2002                       | 
|                                                                                  |                            | 
|1) Fully consolidated                                                             |                            | 
|Thomson (France) (formerly Thomson multimedia)                                    | Parent company             | 
|ATLINKS Communications Canada, Inc. (Canada)                                      | 50.0                       | 
|ATLINKS Telecommunication (Guangzhou) Cie Ltd. (Peoples Republic
      of China) | 50.0                       | 
|ATLINKS Hong Kong Ltd. (Hong Kong)                                                | 50.0                       | 
|ATLINKS USA, Inc. (U.S.)                                                          | 50.0                       | 
|Baja Hughes S. de R.L. de C.V. (Mexico)                                           | -                          | 
|Comercializadora de Productos Electronicos del Norte, S.A. de C.V. (Mexico)       | 100.0                      | 
|Deutsche Thomson Brandt GmbH (Germany)                                            | 99.9                       | 
|Direct Solutions, Inc. (U.S.)                                                     | -                          | 
|European Audio Products (HK) Ltd. (Hong Kong)                                     | 100.0                      | 
|European Thai Electronic Company Ltd. (Thailand)                                  | -                          | 
|GALLO 1 S.A. (France)                                                             | -                          | 
|GALLO 3 S.A. (France)                                                             | -                          | 
|GALLO 4 S.A. (France)                                                             | -                          | 
|Gallo 7 (France)                                                                  | -                          | 
|Gallo 15 (France)                                                                 | -                          | 
|Gallo 18 (France)                                                                 | -                          | 
|Gallo 19 (France)                                                                 | -                          | 
|Gyration, Inc. (U.S.)                                                             | -                          | 
|Homefront DSL, Inc. (U.S.)                                                        | 100.0                      | 
|Immobilière LE GALLO (France)                                                     | 100.0                      | 
|J2T Holding GmbH (Germany)                                                        | 100.0                      | 
|Laboratories Thomson Ltd. (Switzerland)                                           | -                          | 
|Manufacturas Avanzadas, S.A. de C.V. (Mexico)                                     | 100.0                      | 
|Multimedia Insurance Brokerage (France)                                           | -                          | 
|Nextream S.A. (France)                                                            | 75.0                       | 
|Nextream France S.A. (France)                                                     | 75.0                       | 
|Productos Electronicos de la Laguna, S.A. de C.V. (Mexico)                        | 100.0                      | 
|PT Thomson Batam (Indonesia) (formerly Thomson Batam)                             | -                          | 
|RCA Componentes, S.A. de C.V. (Mexico)                                            | 100.0                      | 
|RCA Trademark Management S.A. (France)                                            | 100.0                      | 
|S.A. Immobilière Cesson (France)                                                  | 100.0                      | 
|Servi-Centro Electronico de Mexico, S.A. de C.V. (Mexico)                         | -                          | 
|Singingfish.com, Inc. (U.S.)                                                      | 100.0                      | 
|Société Tonnerroise d'Electronique Industrielle - STELI
      (France)            | 100.0                      | 
|Société Française dInvestissement et dArbitrage
      - Sofia (France)          | 100.0                      | 
|TAK S.A.S. (France)                                                               | 80.6                       | 
|TCE Purchasing Company Taiwan (Taiwan)                                            | -                          | 
|TCE Purchasing Company Japan (Japan)                                              | -                          | 
|TCE Purchasing Company Korea (South Korea)                                        | -                          | 
|TCE Television Taiwan Ltd. (Taiwan)                                               | 100.0                      | 
|Thomson Media Solutions Malaysia Sdn Bhd (Malaysia)                               |                            | 
|(formerly Thomson Audio Muar Sdn Bhd)                                             | 100.0                      | 
|Thomson Asia Pacific Holdings Pte Ltd. (Singapore)                                |                            | 
|(formerly Thomson multimedia Asia Pacific Pte Ltd.)                               | 100.0                      | 

F-80

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated



|                                                                    | % share held by Thomson(1) | 
|------------------------------------------------------------------- | -------------------------- | 
|                                                                    |                            | 
|COMPANY - (Country)                                                 | December 31,              
|                                                                    | 2002                       | 
|                                                                    |                            | 
|                                                                    |                            | 
|Thomson Asia Pacific Investments Pte Ltd. (Singapore)               |                            | 
|(formerly Thomson multimedia Asia Pte Ltd.)                         | 100.0                      | 
|Thomson Broadcast & Media Solutions Ltd. (United Kingdom)           |                            | 
|(formerly Thomson Broadcast Ltd.)                                   | 100.0                      | 
|Thomson Broadcast & Media Solutions S.A.                            |                            | 
|(formerly Thomson Broadcast Systems S.A.) (France)                  | 100.0                      | 
|Thomson Consumer Electronics International S.A. (France)            | 100.0                      | 
|Thomson Crown Wood Products Company (U.S.)                          | 100.0                      | 
|Thomson Displays & Components Holding S.A.S. (France)               | -                          | 
|Thomson Displays & Components Singapore Pte Ltd. (Singapore)        |                            | 
|(formerly Thomson Television Singapore Pte Ltd.)                    | 100.0                      | 
|Thomson Displays Mexicana, S.A. de C.V. (Mexico)                    | 100.0                      | 
|Thomson Display R&D (Peoples Republic of China)                    | -                          | 
|Thomson Fund Management, Inc. (U.S.)                                |                            | 
|(formerly Thomson Management Growth Fund)                           | -                          | 
|Thomson Guangdong Display Company Ltd. (Peoples Republic of China) |                            | 
|(formerly Thomson Foshan Colour Picture Company Ltd.)               | 55.0                       | 
|Thomson Holding Germany GmbH & Co. O.H.G. (Germany)                 |                            | 
|(formerly Thomson multimedia Sales Germany GmbH & Co O.H.G.)        | 99.9                       | 
|Thomson Hong Kong Holdings Ltd. (Hong Kong)                         |                            | 
|(formerly Thomson multimedia Hong Kong Ltd.)                        | 100.0                      | 
|Thomson India Private Ltd. (India)                                  | 89.0                       | 
|Thomson Industry (Shenzhen) Co Ltd (Peoples Republic of China)     |                            | 
|(formerly Thomson Shenzen Industry Ltd. )                           | -                          | 
|Thomson Investments Group Limited (BVI)                             | -                          | 
|Thomson Japan KK (Japan)                                            | -                          | 
|Thomson Licensing, Inc. (U.S.)                                      | 100.0                      | 
|Thomson Licensing S.A. (France)                                     | 100.0                      | 
|Thomson Manufacturing Operation Co., Ltd (Thailand)                 |                            | 
|(formerly Thomson multimedia Operations Co., Ltd)                   | 100.0                      | 
|Thomson Marketing Australia Pty Ltd. (Australia)                    | -                          | 
|Thomson MPH LLC (U.S.)                                              | -                          | 
|Thomson multimedia (Dongguan) Ltd. (People s Republic of China)    | 100.0                      | 
|Thomson Multimedia Digital Holding (BVI) Limited                    | -                          | 
|Thomson multimedia Chile S.A. (Chile)                               | 100.0                      | 
|Thomson multimedia Czech, S.r.o. (Czech Republic)                   | 100.0                      | 
|Thomson multimedia Digital France (France)                          | 100.0                      | 
|Thomson multimedia Engineering Laboratories Ltd. (Japan)            | -                          | 
|Thomson multimedia Hungary K.f.t. (Hungary)                         | 100.0                      | 
|Thomson, Inc. (U.S.) (formerly Thomson Consumer Electronics,        |                            | 
|Inc. & Thomson multimedia, Inc.)                                    | 100.0                      | 
|Thomson Kulim Sdn Bhd (Malaysia) (formerly Thomson multimedia       |                            | 
|Kulim Sdn Bhd)                                                      | 100.0                      | 
|Thomson multimedia Ltd. (Canada) (formerly Thomson Consumer         |                            | 
|Electronics Canada, Inc.).                                          | 100.0                      | 
|Thomson Maroc (Morocco) (formerly Thomson multimedia Maroc)         | -                          | 
|Thomson multimedia Netherlands B.V. (Netherlands)                   | -                          | 
|Thomson Pensionsverwaltungs GmbH (Germany) (formely Thomson         |                            | 
|multimedia Pensionsverwaltungs GmbH)                                | 99.9                       | 

F-81

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                         | % share held by Thomson(1) | 
|------------------------------------------------------------------------ | -------------------------- | 
|                                                                         |                            | 
|COMPANY - (Country)                                                      | December 31,              
|                                                                         | 2002                       | 
|                                                                         |                            | 
|                                                                         |                            | 
|Thomson multimedia Polska sp.zo.o. (Poland)                              |                            | 
|(formerly Thomson Polkolor sp.zo.o.)                                     | 100.0                      | 
|Thomson R&D France S.N.C. (France)                                       |                            | 
|(formerly Thomson multimedia R&D France S.N.C.)                          | 100.0                      | 
|Thomson multimedia Sales Europe (France)                                 |                            | 
|(formerly Thomson multimedia Marketing France)                           | 100.0                      | 
|Thomson multimedia Sales France (France)                                 | 100.0                      | 
|Thomson multimedia Sales Germany and Austria GmbH (Germany)              | 99.9                       | 
|Thomson multimedia Sales International S.A.S. (France)                   | 100.0                      | 
|Thomson multimedia Sales Italy S.p.A. (Italy)                            | 100.0                      | 
|Thomson multimedia Sales Spain S.A. (Spain)                              | 100.0                      | 
|Thomson multimedia Sales UK Ltd. (United Kingdom)                        | 100.0                      | 
|Thomson multimedia Scandinavia A.B. (Sweden)                             | 100.0                      | 
|Thomson multimedia Switzerland A.G. (Switzerland)                        | 100.0                      | 
|Thomson multimidia do Brazil Ltda. (Brazil)                              | 100.0                      | 
|Thomson OKMCO (Shenzen) Co., Ltd. (Peoples Republic of China)           | 100.0                      | 
|Thomson O.O.O. (Russia)                                                  | -                          | 
|Thomson Plasma S.A.S. (France)                                           | 100.0                      | 
|Thomson Receivables Corporation (U.S.)                                   | 100.0                      | 
|Thomson Servicios Corporativos S.A. de C.V. (Mexico)                     | -                          | 
|Thomson Silicon Components S.A.S. (France) (formerly Gallo 17 S.A.S.)    | -                          | 
|Thomson Telecom Australia Pty Ltd (Australia)                            |                            | 
|(formerly ATLINKS Australia Pty Ltd.)                                    | 50.0                       | 
|Thomson Telecom España S.A. (Spain) (formerly ATLINKS España
      S.A.) | 50.0                       | 
|Thomson Telecom México S.A. de C.V. (Mexico)                             |                            | 
|(formerly ATLINKS Mexico, S.A. de C.V.                                   | 50.0                       | 
|Thomson Telecom S.A. (France) (formerly ATLINKS Telecom S.A.)            | 50.0                       | 
|Thomson Television Angers (France)                                       | 100.0                      | 
|Thomson Television Components France (France)                            | 100.0                      | 
|Thomson Television España S.A. (Spain)                                   | 100.0                      | 
|Thomson Television Germany GmbH (Germany)                                | 99.9                       | 
|Thomson Televisiones de Mexico S.A. de C.V. (Mexico)                     | 100.0                      | 
|Thomson Tube Components Belo Horizonte Ltda. (Brazil)                    | 100.0                      | 
|Thomson Tube Components de Mexico S.A. de C.V. (Mexico)                  | 100.0                      | 
|Thomson Tubes & Displays Ltd (Hong Kong)                                 |                            | 
|(formerly Thomson multimedia Tubes & Displays Ltd.)                      | 100.0                      | 
|Thomson Tubes & Displays S.A. (France)                                   | 100.0                      | 
|Thomson Videoglass (France)                                              | 100.0                      | 
|Total Technology Company Ltd. (Hong Kong)                                | 75.0                       | 
|Videocolor S.p.A. (Italy)                                                | 100.0                      | 
|Vingt Huit Centelec (France) (formerly Ex Camera)                        | -                          | 
|                                                                         |                            | 
|Technicolor affiliates                                                   |                            | 
|Colorado International Corporation (U.S.)                                | 100.0                      | 
|CD Manufacturing (UK) Ltd. (United Kingdom)                              | 100.0                      | 
|Central Video, Inc. (U.S.)                                               | 100.0                      | 
|Consolidated Independent Television (USA), Inc. (U.S.)                   | 100.0                      | 
|Claymont Investments, Inc. (U.S.)                                        | 100.0                      | 

F-82

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                                        | % share held by Thomson(1) | 
|--------------------------------------------------------------------------------------- | -------------------------- | 
|                                                                                        |                            | 
|COMPANY - (Country)                                                                     | December 31,              
|                                                                                        | 2002                       | 
|                                                                                        |                            | 
|                                                                                        |                            | 
|Complete Post Production Center, Inc. (U.S.)                                            | 100.0                      | 
|Consolidated Film Industries, LLC (U.S.)                                                | 100.0                      | 
|Consumer Products Sales Company, Inc. (U.S.)                                            | 100.0                      | 
|Corinthian Television Facilities Ltd (United Kingdom)                                   | -                          | 
|Direct Home Entertainment Ltd. (United Kingdom)                                         | 100.0                      | 
|Euronimbus GmbH (Germany)                                                               | 100.0                      | 
|Euronimbus S.A. (Luxembourg)                                                            | 100.0                      | 
|Gallo 8 S.A.S. (**) (France)                                                            | 100.0                      | 
|Interecord (Italy)                                                                      | -                          | 
|International Recording S.r.l. (Italy)                                                  | -                          | 
|Kay Holdings Ltd (United Kingdom)                                                       | -                          | 
|La Luna de Madrid Digital, S.L. (Spain)                                                 | -                          | 
|Metrocolor Laboratories (UK) Ltd. (United Kingdom)                                      | 100.0                      | 
|Metrocolor London Ltd. (United Kingdom)                                                 | -                          | 
|Miles OFun, Inc. (U.S.)                                                                | 100.0                      | 
|Naamans Finance Corporation (U.S.)                                                      | 100.0                      | 
|New CCI, Inc. (U.S.)                                                                    | 100.0                      | 
|Nimbus CD International, Inc. (U.S.)                                                    | 100.0                      | 
|Nimbus International Sales Corporation (Barbados)                                       | 100.0                      | 
|Nimbus Manufacturing, Inc. (U.S.)                                                       | 100.0                      | 
|Nimbus Manufacturing (UK) Ltd. (United Kingdom)                                         | 100.0                      | 
|Nimbus Software Services, Inc. (U.S.)                                                   | 100.0                      | 
|Primacor B.V. (Netherlands)                                                             | 100.0                      | 
|Real Image Digital, LLC (U.S.)                                                          | 100.0                      | 
|Technicolor Audio Visual Systems (Rentals) Ltd. (United Kingdom)                        | 100.0                      | 
|Technicolor Audio Visual Systems Ltd. (United Kingdom)                                  | 100.0                      | 
|Technicolor Australia Investments Ltd. (United Kingdom)                                 | 100.0                      | 
|Technicolor Canada Acquisition Corp. (Canada)                                           | 100.0                      | 
|Technicolor Canada, Inc. (Canada)                                                       | 100.0                      | 
|Technicolor Cinema Distribution, Inc. (U.S.)                                            |                            | 
|(formerly Technicolor Acquisition, Inc.)                                                | 100.0                      | 
|Technicolor Creative Services Canada, Inc. (Canada) (formerly Covitec,
      Inc.)      | 100.0                      | 
|Technicolor Creative Services Ltd (Thailand)                                            |                            | 
|(formerly Thomson multimedia Marketing Co., Ltd.)                                       | -                          | 
|Technicolor Creative Services USA, Inc. (U.S.)                                          | -                          | 
|Technicolor Digital Cinema, Inc. (U.S.)                                                 | 100.0                      | 
|Technicolor Digital Cinema, LLC (U.S.)                                                  | -                          | 
|Technicolor Distribution Services France S.A.R.L. (France)                              |                            | 
|(formerly Euronimbus S.A.R.L.)                                                          | 100.0                      | 
|Technicolor East Coast, Inc. (U.S.)                                                     | 100.0                      | 
|Technicolor Entertainment Services, S.L. (Spain) (formerly Madrid Film
      Lab, S.L.) | -                          | 
|Technicolor Home Entertainment Services de Mexico, S.A. de R.L. de C.V.                 |                            | 
|(Mexico)                                                                                | 100.0                      | 
|Technicolor Holdings B.V. (Netherlands)                                                 | 100.0                      | 
|Technicolor Holdings of Canada, Inc. (Canada)                                           | 100.0                      | 
|Technicolor Holdings, Inc. (U.S.)                                                       | 100.0                      | 
|Technicolor Holdings Ltd. (United Kingdom)                                              | 100.0                      | 

F-83

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                            | % share held by Thomson(1) | 
|--------------------------------------------------------------------------- | -------------------------- | 
|                                                                            |                            | 
|COMPANY - (Country)                                                         | December 31,              
|                                                                            | 2002                       | 
|                                                                            |                            | 
|                                                                            |                            | 
|Technicolor Holdings S.A. de C.V. (Mexico)                                  | 100.0                      | 
|Technicolor Imaging Ltd. (United Kingdom)                                   | 100.0                      | 
|Technicolor Investments Co., Inc. (U.S.)                                    | 100.0                      | 
|Technicolor Laboratory Canada, Inc. (Canada)                                | 100.0                      | 
|Technicolor Mexico Acquisition S.A. de C.V. (Mexico)                        | 100.0                      | 
|Technicolor Milan S.p.A. (Italy)                                            | 100.0                      | 
|Technicolor One Hour Photo, Inc. (U.S.)                                     | 100.0                      | 
|Technicolor Pty Ltd. (Australia)                                            | 100.0                      | 
|Technicolor Scandinavia A/S (Denmark)                                       | 100.0                      | 
|Technicolor Spain, S.A. (Spain)                                             | 100.0                      | 
|Technicolor (Thaïland) Ltd (formerly Cinecolor Lab Co., Ltd.)               | -                          | 
|Technicolor USA Holdings, Inc. (U.S.)                                       | 100.0                      | 
|Technicolor Video Services (UK) Ltd. (United Kingdom)                       | 100.0                      | 
|Technicolor Video Servicios de Mexico, S.A. de C.V. (Mexico)                | 100.0                      | 
|Technicolor Videocassette Holdings Ltd. (UK) (United Kingdom)               | 100.0                      | 
|Technicolor Videocassette of Michigan, Inc. (U.S.)                          | 100.0                      | 
|Technicolor Videocassette B.V. (Netherlands)                                | 100.0                      | 
|Technicolor Home Entertainment Services, Inc. (U.S.)                        |                            | 
|(formerly Technicolor Videocassette, Inc.)                                  | 100.0                      | 
|Technicolor Vidtronics Ltd. (United Kingdom)                                | 100.0                      | 
|Technicolor B.V. (Netherlands)                                              | 100.0                      | 
|Technicolor, Inc. (U.S.)                                                    | 100.0                      | 
|Technicolor Ltd. (UK) (United Kingdom)                                      | 100.0                      | 
|Technicolor S.p.A. (Italy)                                                  | 100.0                      | 
|Technique, LLC (U.S.)                                                       | 100.0                      | 
|Technivision Ltd. (UK) (United Kingdom)                                     | 100.0                      | 
|VCA Technicolor, Inc. (U.S.)                                                | 100.0                      | 
|Vidfilm International Digital Ltd. (United Kingdom)                         | 100.0                      | 
|Vidfilm International Digital Subtitling Ltd. (United Kingdom)              | -                          | 
|Vidfilm Services, Inc. (U.S.)                                               | 100.0                      | 
|                                                                            |                            | 
|The Moving Picture Company affiliates                                       |                            | 
|The Moving Picture Company Blondes Films Limited (United Kingdom)           | -                          | 
|The Moving Picture Company Digital Films Limited (United Kingdom)           | -                          | 
|The Moving Picture Company Holdings Limited (United Kingdom)                | -                          | 
|The Moving Picture Company Liar Liar Pants on Fire Limited (United Kingdom) | -                          | 
|The Moving Picture Company Limited (United Kingdom)                         | -                          | 
|The Moving Picture Company Picasso Pictures Limited (United Kingdom)        | -                          | 
|The Moving Picture Company Printed Pictures Limited (United Kingdom)        | -                          | 
|The Moving Picture Production Company Limited (United Kingdom)              | -                          | 
|                                                                            |                            | 
|Broadcast affiliates                                                        |                            | 
|Broadcast Television Systems Ltd. (United Kingdom)                          | 100.0                      | 
|Broadcast Television Systems Australia Pty Ltd. (Australia)                 | 100.0                      | 
|Broadcast Television Systems (S), Pty Ltd. (Singapore)                      | 100.0                      | 
|BTS France S.A.S. (France)                                                  | 100.0                      | 
|MNC Australia Pty Ltd. (Australia)                                          | 100.0                      | 

F-84

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                  | % share held by Thomson(1) | 
|----------------------------------------------------------------- | -------------------------- | 
|                                                                  |                            | 
|COMPANY - (Country)                                               | December 31,              
|                                                                  | 2002                       | 
|                                                                  |                            | 
|                                                                  |                            | 
|Thomson Broadcast & Media Solutions GmbH (Germany)                |                            | 
|(formerly BTS Media Solutions GmbH)                               | 100.0                      | 
|Thomson Broadcast & Media Solutions Nederlands B.V. (Netherlands) |                            | 
|(formerly Broadcast & Media Solutions Netherlands B.V.)           | 100.0                      | 
|Thomson Broadcast Solutions do Brazil Ltda. (Brazil)              | -                          | 
|Thomson multimedia Broadcast Solutions (Spain)                    |                            | 
|(formerly Thomson multimedia Broadcast Solutions Iberica, S.A.)   | 100.0                      | 
|Thomson multimedia Broadcast Solutions, Inc. (U.S.)               | 100.0                      | 
|Thomson multimedia Broadcast Solutions Belgium N.V. (Belgium)     | 100.0                      | 
|Thomson multimedia Broadcast Solutions Italy S.r.l. (Italy)       | 100.0                      | 
|Thomson multimedia Distribution B.V. (Netherlands)                | 100.0                      | 
|Thomson Optical Components Ltd (Hong Kong)                        |                            | 
|(formerly Broadcast Television Systems HK Ltd.)                   | 100.0                      | 
|                                                                  |                            | 
|Grass Valley affiliates                                           |                            | 
|Grass Valley GmbH (Germany)                                       | 100.0                      | 
|Grass Valley Group, Inc. (U.S.)                                   | 100.0                      | 
|Grass Valley Group Japan, Ltd. (Japan)                            | 100.0                      | 
|Grass Valley Ltd. (Hong Kong)                                     | 100.0                      | 
|Grass Valley Ltd. (United Kingdom)                                | 100.0                      | 
|Grass Valley Pte Ltd. (Singapore)                                 | 100.0                      | 
|Grass Valley S.A.R.L. (France)                                    | 100.0                      | 
|GVG Pty Ltd. (Australia)                                          | 100.0                      | 
|Thomson Broadcast & Media Solutions, Inc. (U.S.)                  |                            | 
|(formerly Grass Valley (US), Inc.)                                | 100.0                      | 
|                                                                  |                            | 
|PDSC affiliates                                                   |                            | 
|Technicolor Export de Mexico, S.A. de R.L. de C.V. (Mexico)       | 100.0                      | 
|Technicolor Mexicana, S.A. de R.L. de C.V. (Mexico)               | 100.0                      | 
|Technicolor Home Entertainment Services Ireland Ltd. (Ireland)    | 100.0                      | 
|Technicolor Home Entertainment Services of America LLC (U.S.)     | 100.0                      | 
|Technicolor Universal Media Services LLC of America (U.S.)        | 60.0                       | 
|Technicolor Disc Services International Ltd. (United Kingdom)     | 100.0                      | 
|Technicolor Disc Services Corp. (U.S.)                            | 100.0                      | 
|                                                                  |                            | 
|DSL affiliates                                                    |                            | 
|Thomson multimedia Broadband S.A.S. (France)                      | 100.0                      | 
|Thomson multimedia Broadband France S.A. (France)                 | 100.0                      | 
|Thomson Telecom Belgium N.V. (Belgium)                            |                            | 
|(formerly Thomson multimedia Broadband Belgium N.V.)              | 100.0                      | 
|                                                                  |                            | 
|Digital Intermedia System affiliates                              |                            | 
|Thomson Broadband UK Ltd. (United Kingdom)                        | 100.0                      | 
|Thomson Broadband, Inc. (U.S.) (formerly GDS, Inc.)               | 93.5                       | 
|                                                                  |                            | 
|Canal+ Technologies affiliates                                    |                            | 
|Canal+ Technologies, Inc. (U.S.)                                  | -                          | 
|Mediabright Ltd. (United Kingdom)                                 | -                          | 

F-85

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                                      | % share held by Thomson(1) | 
|------------------------------------------------------------------------------------- | -------------------------- | 
|                                                                                      |                            | 
|COMPANY - (Country)                                                                   | December 31,              
|                                                                                      | 2002                       | 
|                                                                                      |                            | 
|                                                                                      |                            | 
|Metabyte Networks, Inc. (U.S.)                                                        | -                          | 
|Nagra Thomson Licensing (France) (formerly Canal+ Technologies S.A.)                  | -                          | 
|                                                                                      |                            | 
|                                                                                      |                            | 
|2) Consolidated by pro rata method                                                    |                            | 
|3DCD LLC (U.S.)                                                                       | 50.0                       | 
|Cinema Billboard Network, LLC (U.S.)                                                  | 50.0                       | 
|Easyplug S.A.S. (France)                                                              | 50.0                       | 
|Easyplug, Inc. (U.S.)                                                                 | 50.0                       | 
|KeyMRO S.A.S. (France)                                                                | -                          | 
|La Luna Titra, S.L. (Spain)                                                           | -                          | 
|Nagra Thomson Licensing (France) (formerly Canal+ Technologies S.A.)                  | -                          | 
|Screenvision Acquisitions 10, Inc. (U.S.)                                             | -                          | 
|Screenvision Acquisitions 20, LLC (U.S.)                                              | -                          | 
|Screenvision Cinema Network, LLC (U.S.)                                               | 50.0                       | 
|Screenvision Direct, Inc. (U.S.) (formerly Val Morgan Cinema Advertising,
      Inc.) | 50.0                       | 
|Technicolor Cinema Advertising LLC (U.S.)                                             | 50.0                       | 
|Technicolor Cinema Billboard, Inc. (U.S.)                                             | 50.0                       | 
|Technicolor Digital Cinema LLC (U.S.)                                                 | 80.0                       | 
|Technicolor Screen Advertising, Inc. (U.S.)                                           | 50.0                       | 
|Technicolor Screen Services, Inc. (U.S.)                                              | 50.0                       | 
|Thomson Broadcast and Media Solutions Nordic A/S (Denmark)                            | -                          | 
|Thomson CITIC Digital Technology (Peoples Republic of China)                         | -                          | 
|Thomson Zhao Wei Multimedia Co., Ltd. (Peoples Republic of China)                    | 55.0                       | 
|                                                                                      |                            | 
|Screenvision Europe affiliates                                                        |                            | 
|Cinema Publicitaire Belgium S.A. (Belgium)                                            | 50.0                       | 
|Cinespot S.A. (Spain)                                                                 | 50.0                       | 
|Dansk Reklame Films A/S (Denmark) (formerly RMB Dansk Reklame Films A/S)              | -                          | 
|Entertainment B.V.B.A. (Belgium) (formerly Twice)                                     | 35.5                       | 
|Nordic Media Link A.B. (Sweden)                                                       | -                          | 
|RMB Contractors S.r.o. (Czech Republic)                                               | 50.0                       | 
|RMB Denmark A/S (Denmark)                                                             | -                          | 
|RMB Entertainment S.A. (Belgium)                                                      | 25.0                       | 
|RMB Italia S.r.l. (Italy)                                                             | 50.0                       | 
|RMB Norway (Norway)                                                                   | -                          | 
|RMB Sweden A.B. (Sweden)                                                              | -                          | 
|Screenvision Belgium (Belgium) (formerly RMB Cinema)                                  | 50.0                       | 
|Screenvision Czech S.r.o. (Czech Republic) (formerly RMB Czech Arcona
      S.r.o.)   | 50.0                       | 
|Screenvision Europe S.A.S. (France) (formerly Gallo 11 S.A.S.)                        | 50.0                       | 
|Screenvision Finance S.A.S. (France)                                                  | 50.0                       | 
|Screenvision Finland Oy (Finland) (formerly RMB Finland Oy)                           | -                          | 
|Screenvision France S.A.S. (France) (formerly Circuit A SAS)                          | 50.0                       | 
|Screenvision Group (Europe) Ltd. (United Kingdom) (formerly RMBI II)                  | 50.0                       | 
|Screenvision Holdings (Europe) Ltd. (United Kingdom)                                  | 50.0                       | 
|Screenvision Holdings S.A.S. (France)                                                 | 50.0                       | 

F-86

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                          | % share held by Thomson(1) | 
|------------------------------------------------------------------------- | -------------------------- | 
|                                                                          |                            | 
|COMPANY - (Country)                                                       | December 31,               | 
|                                                                          | 2002                       | 
|                                                                          |                            | 
|                                                                          |                            | 
|Screenvision Netherlands B.V. (Netherlands) (formerly RMB Netherlands)    | 50.0                       | 
|Screenvision Portugal (Portugal) (formerly RMB Portugal)                  | 50.0                       | 
|Screenvision Spain S.A. (Spain) (formerly RMB España Multimedia
      SA) | 50.0                       | 
|Screenvision Slovakia S.r.o. (Slovakia) (formerly RMB Slovakia S.r.o.)    | -                          | 
|Vandam KH S.A. (Belgium)                                                  | 50.0                       | 
|                                                                          |                            | 
|                                                                          |                            | 
|3) Consolidated by equity method                                          |                            | 
|Celstream Technologies Private Ltd. (India)                               | -                          | 
|CTE El Athir (Tunisia)                                                    | 30.0                       | 
|Easyplug S.A.S. (France)                                                  | -                          | 
|Easyplug, Inc. (U.S.)                                                     | -                          | 
|Metric Line (France)                                                      | -                          | 
|MTEP (U.S.)                                                               | -                          | 
|RF Film, S.A. (Spain)                                                     | -                          | 
|Singingfish.com, Inc. (U.S.)                                              | -                          | 
|Techfund Capital Europe (France)                                          | -                          | 
|Thomson Pacific Consumer Electronics Co. Ltd. (Taiwan)                    | 50.0                       | 
|Total Technology Company Ltd. (Hong Kong)                                 | -                          | 
|T.T.E Corporation                                                         | -                          | 

|(1)   | Percentage rounded to one decimal.          
|----- | --------------------------------------------
|(*)   | Entities merged into others.                
|(**)  | Holding companies of Technicolor affiliates.
|(***) | Entities transferred to T.T.E. Corporation. 

F-87

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|31. | SUMMARY OF DIFFERENCES
      BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES
      GENERALLY ACCEPTED IN THE UNITED STATES
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Thomsons accounting policies comply with French GAAP. Elements of Thomson accounting policies which differ significantly from accounting principles generally accepted in the United States (U.S. GAAP) are described below:

Items affecting Net Income and Shareholders Equity

(a) Investment securities

Thomson holds equity securities that have readily determinable fair values and are classified as Other investments in the consolidated balance sheets. Other investments are carried at the lower of cost or market value. French GAAP does not permit upward adjustments in the value of these securities to reflect their market value. For U.S. GAAP purposes, the Group has classified these investments as available for sale, measured at fair value, with unrealized gains and temporary declines in the value excluded from earnings and reported as a component of shareholders equity, and declines in the value which are other than temporary accounted for as realized losses.

In 2002, Thomson disposed of its remaining equity securities of Gemstar for which under U.S. GAAP the unrealized gain was€227 million as of December 31, 2001, which amount subsequently decreased to€10 million at the time the sale took place. The recognized gains on the disposal of all these equity securities were computed based on weighted average prices.

In 2002, Thomson acquired certain equity securities that have
  been classified as held for sale under French GAAP. Such investment is carried
  at the lower of costs or market value, with decrease in value being charged
  to income. Under U.S. GAAP, related equity securities have been classified as
  available for sale. At the end of 2002, the decrease in value of the related
  investment were determined to be other than temporary, resulting in the recognition
  of an impairment charge under U.S. GAAP, when under French GAAP a valuation
  allowance for the same amount has been recognized. As a result, there is no
  difference between U.S. GAAP and French GAAP in the 2002 Consolidated Income
  Statement related to this investment. During 2003, the market value
  of such investment increased resulting under French
  GAAP in the reversal of the 2002 valuation allowance. Under
  U.S. GAAP, the new cost basis applied and the upward change
  in the market value has been excluded from earnings and recorded in Other Comprehensive
  Income.

During 2004, additional equity securities have been acquired
  and classified as available for sale under U.S. GAAP and
  held for sale under French GAAP.

Over the year 2004, the market value of available for sale securities held by Thomson increased. SuchIncreases have been reported as a component of the shareholders equity under U.S. GAAP, while not reported under French GAAP.

As a result, as of December 31, 2004 under U.S. GAAP, the fair value and the carrying value of marketable securities available for sale held by Thomson amounted to€62 million (€20 million and

The accompanying notes are an integral part of the consolidated financial statements.

F-88

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

€5million as of
  year end 2003 and 2002, respectively). The fair value of these marketable securitieshas increased by€20
  million during the period from December 31, 2004 to May 27, 2005.

As of December 31, 2004 none of the Thomsons available for sale equity securities is in an unrealized loss position for which other-than-temporary impairment has not been recognized.

(b) Restructuring

Under French GAAP, since January 1, 2002, Thomson records restructuring
  liabilities according to the new French regulation n°2000-06 of the Comité
  de la Réglementation Comptable relating to the accounting for liabilities.
  Under this new French regulation, a reserve for restructuring must meet certain
  conditions, which are very similar to U.S. GAAP requirements. These conditions
  include (i) theexistence of a formalized restructuring
  plan with the approval by appropriate level of management ofthe
  operations and activities to be restructured, (ii) a public announcement of
  such plan prior to balance sheet date and (iii) the existence of a commitment
  for the Group for all restructuring plans conditioned by a financial operation
  (purchase or sale transaction). Moreover, under French GAAP, similar to U.S.
  GAAP, costs associated with an exit plan recorded in the balance sheet are recognized
  as restructuring reserves only if the related costs are not associated with
  or do not benefit continuingactivities of the Group. Finally,
  under this regulation, write-downs of assets are no longer part of the restructuring
  reserve but are presented as a deduction of the corresponding assets. Prior
  to January 1, 2002, Thomson recorded restructuring liabilities
  during the period when restructuring plans hadbeen approved
  by the appropriate level of management.

Under U.S. GAAP, Thomson has applied the provisions of Statement of Financial Accounting Standards No. 88 (SFAS 88) Employers Accounting for Settlement and Curtailment of Defined Benefit Pension Plans and for Termination Benefits, No. 112 (SFAS 112) Employers Accountingfor Post employment Benefits and No. 146 (SFAS 146) Accounting for Costs Associated with Exitor Disposal Activities, initiated after December 31, 2002, which nullifies Emerging Issues Task Force Issue No. 94-3 (EITF 94-3) Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).

Even though differences in the recognition of restructuring accruals
  have been reduced since the implementation of the new French regulation n°2000-06
  on liability recognition, U.S. GAAP continues to apply additional criteria in
  comparison with French GAAP to permit the recognition of a liability. Inparticular,
  French GAAP do not require that the communication of the benefit arrangement
  include sufficient details to enable employees to determine the type and amount
  of benefits they will receive if they are terminated (non
  specific benefits). These differences in accounting principles createtiming differences in the recognition of liabilities including
  (i) restructuring charges accrued under U.S. GAAP that were recorded for French
  GAAP purposes in a prior period, (ii) accrual of non specific benefits under
  French GAAP which are not eligible under U.S. GAAP and (iii) reclassification
  of write-downs of assets which occurred in 2002 under French
  GAAP. In addition, and without altering the ending restructuring balance, the
  presentation of movements of reserve under French GAAP are reversed under U.S.
  GAAP for costs recorded as incurred and associated to or benefiting continuing
  activities.

The accompanying notes are an integral part of the consolidated financial statements.

F-89

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

For restructuring related to business combinations accounted for as purchases, Thomson applies the French regulation 99-02 Consolidated Financial Statements of Commercial Enterprises and Public Companies. Under such regulation, the acquiring company shall record restructuring liabilities in the purchase business combination if the following conditions are met: (i) the reorganization programs are clearly defined by management and their costs are reasonably estimated; (ii) a public announcement of these plans has been made prior to the end of the fiscal year following the year when the purchase was consummated. Furthermore under French GAAP, the acquiring company may record restructuringliabilities related to duplicate facilities of the acquirer as part of the cost of acquisition in a business combination accounted for as purchase.

Under U.S. GAAP, Thomson applies the Emerging Issues Task
  Force consensus on issue No. 95-3 (EITF 95-3)
  Recognition of Liabilities in Connection with a Purchase Business Combination
  in accounting for all restructuring plans related to its acquisitions. Under
  EITF 95-3, reserve for restructuring an activity of an acquired company must
  meet specific conditions which include the following: (i) As of the consummation
  date management, having the appropriate level of authority, begins to assess
  and formulate a plan and commit the combined company to the plan as soon as
  possible after the consummation date; (ii) the finalization of the plan must
  occur prior to the end of period of one year after the consummation date of
  the acquisition; (iii) the restructuring costs must not have any future economic
  benefit to the combined company, they must be incremental to other costs incurred
  by either the acquired or the acquiring company in the conduct of activities
  prior to the consummation date and they must be incurred as a direct result
  of the plant to exit an activity of the acquired company.

In addition, under EITF 95-3 restructuring costs related to the acquiring company are not considered in the purchase price allocation.

Thus, timing differences exist between (i) the French GAAP and U.S. GAAP restructuring charges, since U.S. GAAP do not allow costs incurred by the acquiring company to be recognized as a liability assumed as of the consummation date of the acquisition, and (ii) the French GAAP and U.S. GAAP window periods, since U.S. GAAP limits the window period to twelve months following the consummation date of the business combination whereas French GAAP extends this window period to the closing date of the fiscal year following the one in which the business combination occurred.

The accompanying notes are an integral part of the consolidated financial statements.

F-90

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

b i) The impact of U.S. GAAP adjustments related to restructuring is as follows:

|                                         | December 31,    |  | Current |         | Cash     |  | Release of |  | Net       |      | Change in |  | Reclassification |               | December 31, |            
|---------------------------------------- | --------------- |  | ------- | ------- | -------- |  | ---------- |  | --------- | ---- | --------- |  | ---------------- | ------------- | ------------ | -----------
|                                         | 2003            |  | Year    |         | Payments |  | Reserve    |  | Change    |      | Scope of  |  | in deduction     |               | 2004         |            
|                                         |                 |  |         | Expense |          |  |            |  | to Income |      |           |  |                  | Consolidation |              | of tangible
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         | ( in millions) |  |        
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|French GAAP restructuring reserve        | 118             |  |         | 758     |          |  | (200)      |  |           | (16) |           |  | 542              |               |              | 32         
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|CASA and ATZ plans addressed by the      |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|pension adjustment under U.S. GAAP       | (15)            |  |         | (14)    |          |  | 10         |  |           | -    |           |  | (4)              |               |              | -          
|Non specific voluntary termination       |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|offer not accepted at balance sheet date | (8)             |  |         | 5       |          |  | -          |  |           | -    |           |  | 5                |               |              | -          
|Non specific involuntary                 |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|termination arrangements                 | (1)             |  |         | (2)     |          |  | -          |  |           | -    |           |  | (2)              |               |              | -          
|Future loss on non ceased contract       | (8)             |  |         | 2       |          |  | 2          |  |           | -    |           |  | 4                |               |              | -          
|Cost to move inventory or tangible       |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|assets to another location               | (1)             |  |         | (1)     |          |  | 1          |  |           | -    |           |  | -                |               |              | -          
|Reengineering and consulting costs       | (1)             |  |         | (5)     |          |  | 5          |  |           | -    |           |  | -                |               |              | -          
|Other and adjustment on non eligible     |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|assets write-downs (*)                   | (7)             |  |         | 18      |          |  | 4          |  |           | 2    |           |  | 24               |               |              | (19)       
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|Total U.S. GAAP adjustments              | (41)            |  |         | 3       |          |  | 22         |  |           | 2    |           |  | 27               |               |              | (19)       
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|Reclassification of assets write downs   | (1)             |  |         | (598)   |          |  | -          |  |           | 2    |           |  | (596)            |               |              | (5)        
|Reclassification to other cost of Sales  | -               |  |         | (11)    |          |  | -          |  |           | -    |           |  | (11)             |               |              | -          
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|Total U.S. GAAP reclassifications        | (1)             |  |         | (609)   |          |  | -          |  |           | 2    |           |  | (607)            |               |              | (5)        
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|Total U.S. GAAP                          |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            
|Adjustments and reclassifications        | (42)            |  |         | (606)   |          |  | 22         |  |           | 4    |           |  | (580)            |               |              | (24)       
|U.S. GAAP restructuring reserve          | 76              |  |         | 152     |          |  | (178)      |  |           | (12) |           |  | (38)             |               |              | 8          
|                                         |                 |  |         |         |          |  |            |  |           |      |           |  |                  |               |              |            

|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|----------------------------- | --------------- |  | ------- | ------- | -------- |  | ---------- |  | --------- | ---- | ----------- |  | ------------ | ----------- |  | ---------- |  |  | -- |  | 
|                              | December 31,    |  | Current |         | Cash     |  | Release of |  | Change in |      | Currency    |  | December 31, |            
|                              | 2003            |  | Year    |         | Payments |  | Reserve    |  | perimeter |      | Translation |  | 2004         |            
|                              |                 |  |         | Expense |          |  |            |  | to Income |      |             |  |              | Adjustments |  |            |  | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  | and Others |  |  |    | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|                              | ( in millions) |  |        
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|Employee termination benefits | 65              |  |         | 107     |          |  | (159)      |  |           | (7)  |             |  | 4            |             |  | 19         |  |  | 29 |  | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|Other costs                   | 11              |  |         | 45      |          |  | (19)       |  |           | (5)  |             |  | 4            |             |  | 2          |  |  | 38 |  | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 
|TOTAL                         | 76              |  |         | 152     |          |  | (178)      |  |           | (12) |             |  | 8            |             |  | 21         |  |  | 67 |  | 
|                              |                 |  |         |         |          |  |            |  |           |      |             |  |              |             |  |            |  |  |    |  | 

|The column currency translation
      adjustments and others includes translation adjustments generated by foreign
      subsidiaries on variations of the reserves and reclassifications of reserves.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*)                                                                                                                                                                                                   
|                                                                                                                                                                                                      



The accompanying notes are an integral part of the consolidated financial statements.

F-91

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                               | December 31,          |  | Current |         | Cash     |  | Release of |  | Net       |     | Change in |  | Currency    |               | December 31, |            
|---------------------------------------------- | --------------------- |  | ------- | ------- | -------- |  | ---------- |  | --------- | --- | --------- |  | ----------- | ------------- | ------------ | -----------
|                                               | 2002                  |  | Year    |         | Payments |  | Reserve    |  | Change    |     | Scope of  |  | Translation |               | 2003         |            
|                                               |                       |  |         | Expense |          |  |            |  | to Income |     |           |  |             | Consolidation |              | Adjustments
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|                                               | (€ in
      millions) |  |        
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|French GAAP restructuring reserve              | 127                   |  |         | 226     |          |  | (173)      |  |           | (9) |           |  | 44          |               |              | 22         
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|CASA plans addressed by the                    |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|pension adjustment under U.S. GAAP             | (8)                   |  |         | (10)    |          |  | 6          |  |           | 1   |           |  | (3)         |               |              | -          
|Non specific voluntary
      termination       |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|offer not accepted at balance
      sheet date | (8)                   |  |         | 2       |          |  | -          |  |           | 1   |           |  | 3           |               |              | -          
|Non specific involuntary                       |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|termination arrangements
      (*)             | (41)                  |  |         | 28      |          |  | -          |  |           | 2   |           |  | 30          |               |              | 3          
|Future loss on non ceased
      contract       | -                     |  |         | (9)     |          |  | -          |  |           | -   |           |  | (9)         |               |              | 1          
|Cost to move inventory
      or tangible       |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|assets to another location                     | (1)                   |  |         | (10)    |          |  | 11         |  |           | -   |           |  | 1           |               |              | -          
|Reengineering and consulting
      costs       | (1)                   |  |         | (5)     |          |  | 4          |  |           | -   |           |  | (1)         |               |              | 1          
|Other and adjustment on
      non eligible     |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|assets write-downs (**)                        | (12)                  |  |         | 3       |          |  | 18         |  |           | -   |           |  | 23          |               |              | (18)       
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|Total U.S. GAAP adjustments                    | (71)                  |  |         | (1)     |          |  | 41         |  |           | 4   |           |  | 44          |               |              | (13)       
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|Reclassification of assets
      write downs   | (1)                   |  |         | (51)    |          |  | -          |  |           | -   |           |  | (51)        |               |              | (5)        
|Reclassification to other
      cost of Sales  | (1)                   |  |         | (9)     |          |  | 2          |  |           | -   |           |  | (7)         |               |              | -          
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|Total U.S. GAAP reclassifications              | (2)                   |  |         | (60)    |          |  | 2          |  |           | -   |           |  | (58)        |               |              | (5)        
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|Total U.S. GAAP                                |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            
|Adjustments and reclassifications              | (73)                  |  |         | (61)    |          |  | 43         |  |           | 4   |           |  | (14)        |               |              | (18)       
|U.S. GAAP restructuring
      reserve          | 54                    |  |         | 165     |          |  | (130)      |  |           | (5) |           |  | 30          |               |              | 4          
|                                               |                       |  |         |         |          |  |            |  |           |     |           |  |             |               |              |            

|                              | December 31,    |  | Current |         | Cash     |  | Release of |  | Change in |     | Currency    |  | December 31, |            
|----------------------------- | --------------- |  | ------- | ------- | -------- |  | ---------- |  | --------- | --- | ----------- |  | ------------ | -----------
|                              | 2002            |  | Year    |         | Payments |  | Reserve    |  | perimeter |     | Translation |  | 2003         |            
|                              |                 |  |         | Expense |          |  |            |  | to Income |     |             |  |              | Adjustments
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|                              | (€ in millions) | 
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|Employee termination benefits | 35              |  |         | 137     |          |  | (103)      |  |           | (5) |             |  | 4            |            
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|Other costs                   | 19              |  |         | 28      |          |  | (27)       |  |           | -   |             |  | -            |            
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            
|TOTAL                         | 54              |  |         | 165     |          |  | (130)      |  |           | (5) |             |  | 4            |            
|                              |                 |  |         |         |          |  |            |  |           |     |             |  |              |            

|The column currency translation adjustments and
      others include translation adjustments generated by foreign subsidiaries
      on variations of the reserves and reclassifications of reserves.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*)                                                                                                                                                                                                  
|(**)                                                                                                                                                                                                 

The accompanying notes are an integral part of the consolidated financial statements.

F-92

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                               | December 31,2001      |  | CurrentYearExpense |      | CashPayments |  | Release ofReserveto Income |  | NetChange |      | Change
      inScope ofConsolidation |  | CurrencyTranslationAdjustmentsand Others |  | December 31,2002 |     
|---------------------------------------------- | --------------------- |  | ------------------ | ---- | ------------ |  | -------------------------- |  | --------- | ---- | ------------------------------------ |  | ---------------------------------------- |  | ---------------- | ----
|                                               |                      
|                                               |                      
|                                               |                      
|                                               | (€ in
      millions) |  |                   
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|French GAAP restructuring
      reserve        | 183                   |  |                    | 151  |              |  | (175)                      |  |           | (10) |                                      |  | (34)                                     |  |                  | 34  
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|CASA plans addressed by
      the              |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|pension restatement under
      U.S. GAAP      |                       |  |                    | (8)  |              |  |                            |  |           |      |                                      |  | (8)                                      |  |                  |     
|Non specific voluntary
      termination       |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|offer not accepted at balance
      sheet date | (5)                   |  |                    | (3)  |              |  | -                          |  |           | -    |                                      |  | (3)                                      |  |                  | -   
|Non specific involuntary
      termination     |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|arrangements and plans
      not announced     |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|at balance sheet date                          | (16)                  |  |                    | (7)  |              |  | -                          |  |           | 1    |                                      |  | (6)                                      |  |                  | (22)
|Cost to move inventory
      or tangible       |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|assets to another location                     | (3)                   |  |                    | (7)  |              |  | 7                          |  |           | -    |                                      |  | -                                        |  |                  | 2   
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Reengineering and consulting
      costs       | (6)                   |  |                    | (8)  |              |  | 8                          |  |           | -    |                                      |  | -                                        |  |                  | 3   
|Other and adjustment on
      non eligible     |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|assets write-downs (*)                         | (24)                  |  |                    | (13) |              |  | 28                         |  |           | 1    |                                      |  | 16                                       |  |                  | 7   
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Total U.S. GAAP adjustments                    | (54)                  |  |                    | (46) |              |  | 43                         |  |           | 2    |                                      |  | (1)                                      |  |                  | (10)
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Reclassification of assets
      write downs   | (38)                  |  |                    | (25) |              |  | 2                          |  |           | 4    |                                      |  | (19)                                     |  |                  | 5   
|Reclassification to other
      cost of Sales  | (8)                   |  |                    | (5)  |              |  | 9                          |  |           | -    |                                      |  | 4                                        |  |                  | (9) 
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Total U.S. GAAP reclassifications              | (46)                  |  |                    | (30) |              |  | 11                         |  |           | 4    |                                      |  | (15)                                     |  |                  | (4) 
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Total U.S. GAAP                                |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|Adjustments and reclassifications              | (100)                 |  |                    | (76) |              |  | 54                         |  |           | 6    |                                      |  | (16)                                     |  |                  | (14)
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     
|U.S. GAAP restructuring
      reserve          | 83                    |  |                    | 75   |              |  | (121)                      |  |           | (4)  |                                      |  | (50)                                     |  |                  | 20  
|                                               |                       |  |                    |      |              |  |                            |  |           |      |                                      |  |                                          |  |                  |     

|                              | December 31,2001 |  | CurrentYearExpense |    | CashPayments |  | Release ofReserveto Income |  | Change
      inperimeter |     | CurrencyTranslationAdjustmentsand Others |  | December 31,2002
|----------------------------- | ---------------- |  | ------------------ | -- | ------------ |  | -------------------------- |  | ------------------------ | --- | ---------------------------------------- |  | ----------------
|                              |                  |  |                    |    |              | 
|                              |                  |  |                    |    |              | 
|                              |                  |  |                    |    |              | 
|                              |                  |  |                    |    |              |  |                            |  |                          |     |                                          |  |                 
|                              | (€ in millions)  | 
|                              |                  |  |                    |    |              |  |                            |  |                          |     |                                          |  |                 
|Employee termination benefits | 73               |  |                    | 53 |              |  | (90)                       |  |                          | (4) |                                          |  | 6               
|                              |                  |  |                    |    |              |  |                            |  |                          |     |                                          |  |                 
|Other costs                   | 10               |  |                    | 22 |              |  | (31)                       |  |                          | -   |                                          |  | 14              
|                              |                  |  |                    |    |              |  |                            |  |                          |     |                                          |  |                 
|TOTAL                         | 83               |  |                    | 75 |              |  | (121)                      |  |                          | (4) |                                          |  | 20              
|                              |                  |  |                    |    |              |  |                            |  |                          |     |                                          |  |                 

|The column currency translation adjustments and
      others include translation adjustments generated by foreign subsidiaries
      on variations of the reserves and reclassifications of reserves.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*)                                                                                                                                                                                                  



The accompanying notes are an integral part of the consolidated financial statements.

F-93

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

b ii) The total amount of costs accrued, net of reversal, for
  each reportable segment is as follows:

|                   | For the year ended |  | For the year ended |    
|------------------ | ------------------ |  | ------------------ | ---
|                   | December 31, 2003  |  | December 31, 2004  |    
|                   |                    |  |                    |    
|                   |                    |  |                    |    
|Content & Networks | 60                 |  |                    | 28 
|                   |                    |  |                    |    
|Components         | 50                 |  |                    | 97 
|                   |                    |  |                    |    
|Consumer Product   | 38                 |  |                    | 9  
|                   |                    |  |                    |    
|Holdings           | 12                 |  |                    | 6  
|                   |                    |  |                    |    
|                   |                    |  |                    |    
|Total              | 160                |  |                    | 140
|                   |                    |  |                    |    

The accompanying notes are an integral part of the consolidated financial statements.

F-94

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|b iii) A description of the disposal activities has been more fully described
        in note 18. The restructuring plans adopted in 2004 and not associated
        with any business combination recorded under U.S. GAAP for €761 million include the following major actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Restructuring 
        costs
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                             
|The cost of restructuring plan in the U.S. amounts to€412 million of which€5
        million are voluntary termination benefits,€65 million are involuntary termination benefits,
        €30 million are other exit costs
        and€312 million are write-down
        of assets, and is broken down as follows: - The Displays Business
        new strategy that led to reassess the carrying value of all fixed assets
        in Mexico, Torreon, Marion, Lancaster and Belo Horizonte resulted in the
        recognition of a non-cash impairment charge amounted to€233 million. - The closure of the glass plant
        in Circleville, resulted in€30
        million of involuntary termination costs (532 people),€56 million of write-down of fixed assets,€6 million of other exit costs; and the tube plant
        in Marion, resulted in€30
        million of involuntary termination costs (587 people),€19 million of other exit costs, €12 million of write-down of fixed assets and€11 million of write-down of inventories. - The restructuring at Mexicali
        resulting in€2 million
        of involuntary termination costs (341 people) and€1 million of voluntary termination costs. - The restructuring of Grass Valley
        for€2 million of involuntary
        termination costs (41 people) and€1
        million of other exit costs. - The closure of Virginia Optical
        plant (Charlottesville) resulting in€1
        million of voluntary termination costs (93 people), and€1 million of loss on ceased contracts. - The consolidation of creative
        services operations resulting in€1
        million of involuntary termination costs (16 people). - The Tune up and CP Max plans for
        adaptation of the costs structure to the US business environment representing€1 million of voluntary
        termination costs. - The TV Business exit generating€1 million of voluntary
        termination costs. - The restructuring plan in Juarez
        (end of TTM TV activity) generating€1
        million of voluntary termination
        costs. - The termination of leasing contracts
        on two buildings in Indianapolis resulting in  1million of loss on ceased contracts. - The closing of a New York
        Film lab and the consolidation with the newly opened NY Post
        Production facility nearby resulting in€1
        million of loss on ceased contracts. - The Scranton closure
        resulted in€1 million of
        litigation fees. |  | 412                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                             
|The cost of restructuring plan in Poland amounts to€144 million and relates to the Displays
      Business new strategy that led to reassess the carrying value of all fixedassets at Piaseczno resulted in
      the recognition of a non-cash impairment charge amounted to€144 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | 144                         

The accompanying notes are an integral part of the consolidated financial statements.

F-95

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|The cost of restructuring plan in Italia
      amounts to€114
      million of which€5millionare voluntary termination benefits,€5 million are involuntary termination benefits,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Restructuring
        costs
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------
|€5 million are other exit costs,
        and€99 million are write-down
        of assets, and relates to the following program: - The Displays Business new
        strategy that led to reassess the carrying value of all fixed assets at
        Anagni resulted in the recognition of a non-cash impairment charge amounted
        to€99 million. The downsizing
        of this plant resulted in€5
        million of voluntary termination benefits (121 people). - The VHS consolidation plan resulting
        in€5 million of involuntary
        termination benefits (215 people) and€4
        million of loss on ceased contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 114                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                            
|Cost of plans incurred by French entities amounted to€73 million of which€9
        million are voluntary termination benefits,€7 million are involuntary termination costs,
        €3 million are other exit costs
        and€54 million are write-down
        of assets and is broken down as follows: - The Displays Business new
        strategy that led to reassess the carrying value of all fixed assets at
        Bagneaux, Genlis and Gray resulted in the recognition of a non-cash impairment
        charge amounted to€54 million.
        - The reorganization of Thomson
        Tubes & Displays generating€5
        million of voluntary termination benefits (68 people) and€2 million of other exit costs. - Holdings costs include involuntary
        termination benefits (€4
        million) for the restructuring in France, Germany, Asia and America (27
        people). - The restructuring of Television
        Components generating€2
        million of voluntary termination costs (43 people). - Thomson Telecom:€1 million of voluntary termination benefits (19 people).
        - In connection with the reorganization
        of Thomson Broadcast activities, Thomson incurred€1 million of voluntary termination benefits (6 people).
        - The restructuring of the Angers
        plant resulting in€1 million
        of involuntary termination costs (56 people). - The restructuring of R&D France
        generating€1 million of
        involuntary termination costs (7 people). - Nextream France:€1 million of involuntary termination benefits.
        - The downsizing of the research
        & development center in Moirans resulting in  1
        million of loss on ceased contracts. |  | 73                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                            
|Cost of German plans amounts to€5 million relates to the following programs:
        - The Weiterstadt, Greisheim globalisation
        plans (Broadcast business) for€2
        million of involuntary termination costs (13 people). - The downsizing of VRF Villingen
        for€1 million of voluntary
        termination costs (20 people) and€1
        million of loss on ceased contracts. - Other projects which represent€1 million of involuntary
        termination costs (6 people).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 5                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                            
|The costs of restructuring program in Spain amounts to€4 million and relates to the VHS consolidation plan
      resulting in€2 million of
      involuntary termination benefits (70 people) and€2 million of loss on ceased contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 4                          

The accompanying notes are an integral part of the consolidated financial statements.

F-96

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|Cost of plans incurred in Asia relates to the reorganisation
      in Hong Kong, China and Taïwan: 
      €2 million of voluntary termination benefits (6 832 people) and
      €2 million of other exit costs.                                                                                                                                                                                                                                                |   | Restructuring 
      costs
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 4
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           
|Cost of British plans amounts to €3 million and relates to: 
        - The headcount reduction at Thomson Multimedia Sales UK affecting
        20 people: 
        1 million of involuntary termination costs. 
        - In connection with the reorganisation of Thomson Broadcast activities,
        Thomson incurred €1 million of loss on ceased contracts. 
        - The VHS consolidation plan resulting in €1 million of other
        exit costs. |   | 3                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           
|Cost of plans incurred in North Africa relates to TV business in Maroc:
      €1 million of voluntary severance costs (16 people) and €1 million
      of other exit costs.                                                                                                                                                                                                                                                                                    |   | 2                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           
|Total restructuring costs.                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 761                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           
|Less fixed assets and inventories write-downs included in the above-mentioned
      plans                                                                                                                                                                                                                                                                                                                                                                      |   | (609)                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           
|Current year accrued restructuring expenses.                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 152                       

The accompanying notes are an integral part of the consolidated financial statements.

F-97

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|The restructuring plans adopted in 2003 not associated with
      any business combination and recorded under U.S. GAAP for€225 million include the following major actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Restructuring 
      costs
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                           
|Cost of North American plans amount to€123 million of which€13
        million are voluntary termination benefits,€41 million are involuntary termination benefits,
        €14 million are other exit costs
        and€55 million are write-down
        of assets, and is broken down as follows: - The adaptation of the
        production capacity of two plants in the US that led to the closure of
        two tubes production lines in Marion, resulted in€14 million of involuntary termination costs (879 people),€15 million of write-down
        of fixed assets and€1 million
        of write-down of inventories; and one glass production tank in Circleville,
        resulted in€10 million
        of involuntary termination costs (406 people),4 million of other exit costs,€8
        million of write-down of fixed assets and 8 million
        of write-down of inventories.- The closure of Virginia Optical
        plant (Charlottesville) resulting in€3
        million of involuntary termination costs (578 people),€6 million of loss on ceased contracts and related
        costs and€17 million of
        write-down of fixed assets. - The Tune up and CP Max plans for
        adaptation of the costs structure to the US business environment representing€9 million of voluntary
        severance costs and  3
        million of involuntary costs (204 people). - The closure of Crown Wood (TV)
        resulting in€2 million
        of involuntary termination costs (106 people) and€4 million of write-down of fixed assets. - The restructuring plan in Juarez
        (end of TTM TV activity and transfer El Paso warehouse into TTM facility)
        generating€3 million of
        involuntary termination costs (1,138 people) and€3 million of write-down of fixed assets. - The second phase of the
        reorganisation of the Lancaster centre representing 3
        million of write-down of fixed assets (Costs to vacate Indianapolis facility).
        - The reorganisation program of
        the TV and video product development for€3
        million of involuntary termination costs (52 people). - The closure of the Toluca
        plant in Mexico resulting in€2
        million of voluntary termination benefits (380 people). - The termination of leasing
        contracts on two buildings in Indianapolis resulting in 2million of
        loss on ceased contracts. - The restructuring
        of Grass Valley for€1 million
        of involuntary termination costs(14 people) and€1
        million of loss on ceased contracts. - The downsizing of North
        Hollywood plants resulted in€1
        million of loss on ceased contracts. - The closure of the Englewood facility
        and the executive offices in Burbank resulting in€1 million of loss on ceased contracts. - The Scranton closure resulted
        in€1 million of involuntary
        termination costs. |  | 123                       

The accompanying notes are an integral part of the consolidated financial statements.

F-98

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated



|Cost of plans incurred by French entities
      amounts to€48
      million of which€13
      millionare voluntary termination benefits,€29 million are involuntary termination costs,
      €3 million are other exit costs and€3 million are write-down
      of assets, and is broken down as follows: - The closure of the Steli plant resulting
      in€3 million of voluntary
      termination benefits, €10
      million of involuntary termination costs (327 people) and€1 million of other exit costs. - The downsizing of certain research
      & development centers: (1) Rennes (R&D DSL) resulting in€7 million of involuntary termination costs (45 people),
      (2) Moirans resulting in€3
      million of involuntary termination costs (62 people) and€3 million for write-down of assets. - In connection with the reorganisation
      of Grass Valley and Thomson Broadcast activities, Thomson incurred€1 million of voluntary termination benefits and
       1 million of involuntary termination
      costs (28 people). - The restructuring of the Angers
      plant resulting in€1million
      of voluntary termination benefits. - The reorganization of Thomson Tubes
      & Displays generating€1
      million of voluntary termination benefits. |  | Restructuring 
      costs
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                           
|Other holdings costs include voluntary termination
        benefits (€1 million) and
        involuntary termination costs (€2
        million) for the restructuring in France, Germany and Asia - The restructuring of Television
        Components generating€2
        million of involuntary termination costs (48 people); R&D:€1 million of voluntary termination benefits and
        €1 million of involuntary termination
        costs (4 people); Atlinks:€1
        million of voluntary termination benefits (13 people) and€1 million of loss on ceased contracts; Videoglass:€1 million of voluntary
        termination benefits (13 people). - The downsizing of the Marketing
        and Sales activities for€1
        million (9 people).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 48                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                           
|Cost of German plans amounts to€24 million relates to the following programs:
        - The Weiterstadt, Greisheim globalisation
        plans (Broadcast business) for€14
        million: involuntary termination costs (€11
        million), loss on ceased contracts (€1
        million) and other exit costs (€2
        million). - The downsizing of VRF Villingen
        for€7 million of voluntary
        termination costs (45 people). - Other projects which represent€2 million of involuntary
        termination costs (15 employees) and€1
        million of other exit costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 24                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                           
|Cost of Italian plans amounts to€10 million and relates to the following program:
        - The downsizing of one plant in
        Anagni (Tubes plant) resulting in€9
        million of voluntary termination benefits (206 people) and€1 million for write-down of inventories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 10                        

The accompanying notes are an integral part of the consolidated financial statements.

F-99

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|Cost of British plans amounts to €8 million and relates
      to the following program:
      - The downsizing of the optical plant in Cork affecting 266 people (€3
      million of involuntary termination costs, €1 million of loss on ceased
      contract and €1 million of other costs). 
      - The reorganisation of the Marketing & Sales services resulting in €3
      million of other exit costs. |  | Restructuring 
      costs
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|8                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Cost of plans incurred in Asia amounts to €5 million and includes
      €1 million of voluntary termination benefits, €2 million of involuntary
      termination costs, €1 million of loss on ceased contracts and €1
      million of other exit costs.                                                                                                                                                         |  | 5                         
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Cost of Spanish plans amounts to €4 million and includes voluntary
      severance expenses (€2 million) for the optimisation of Marketing &
      Sales services and involuntary termination costs (€2 million) for the
      rationalization of the Residential phone activity and impact 18 people.                                                                                                            |  | 4                         
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Cost of plans incurred in the Netherlands relates to (1) the VHS activity
      and amounts to €1 million of involuntary severance costs and €1
      million of loss on ceased contracts; And (2) the restructuring of the Breda
      plant for €1 million of involuntary severance costs.                                                                                                                      |  | 4                         
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Total restructuring costs.                                                                                                                                                                                                                                                                                                                                                                                        |  | 225                       
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Less fixed assets and inventories write-downs included in the above-mentioned
      plans.                                                                                                                                                                                                                                                                                                                        |  | (60)                      
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                           
|Current year accrued restructuring expenses.                                                                                                                                                                                                                                                                                                                                                                      |  | 165                       

The accompanying notes are an integral part of the consolidated financial statements.

F-100

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated



|The restructuring plans adopted in 2002 not associated with any business
      combination and recorded under U.S. GAAP for €105 million include the following
      major actions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Restructuring 
      costs
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                           
|Cost of plans incurred by North American legal entities amount
      to€40 million of which€2 million of voluntary termination benefits,€21 million of involuntary termination benefits,€10 million of other exit costs and€7 million write-down of assets, including the following:
      - Reorganisation program for TV and
      video product development for€4
      million (35 people). - The Indianapolis downsizing
      resulted in€1 million of
      involuntary termination costs,  2
      million of idle facility costs and€1
      million of write-down of fixed assets. - Marketing and Sales downsizing
      program generated voluntary severance costs for  1
      million (5 people). - Programs involving TV Operations
      in Mexico represented€5 million
      of involuntary costs affecting 665 people and€2 million of write-down of fixed assets. The closure
      of the Deptford plant resulted in€1
      million write-down of fixed assets and€1
      million write-down of receivables. - The reorganisation of the
      Lancaster center represents€4
      million (54 people). The Scranton closure resulted in idle facility costs
      for€6 million write down
      of inventories and fixed assets for€2
      million. - Other involuntary severance programs
      include the Spider resize program for  3
      million (52 people), the Tiger program for€1
      million. Within Digital Media Solutions, the downsizing of North Hollywood
      plants includes both voluntary (€1
      million) and involuntary termination costs (€1
      million) affecting 200 people, and the restructuring of Grass Valley for€2 million. - Reserves for other exit costs of€2 million cover future contract termination losses following
      the discontinuation of the Philips Automation activities and a closure in
      Holland. |  | 40                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                           
|Cost of plans incurred by French entities totals€38 million of which€17
      million of involuntary termination
      costs,€4 million of other
      exit costs and€17 million
      for write-down of assets, which include the following: - The closure
      of the Steli plant has generated€7
      million of involuntary severancecosts
      affecting 349 people,€1
      million of other exit costs and€3
      million of write-off of fixed assets and inventories. - The reorganization
      of the Grass Valley Group and Thomson Broadcast activities,resulted
      in€3 million of involuntary
      expenses,€3 million of other
      exit costs and 4 million of
      write down of assets. - Additionally, the restructuring
      of an Atlinks facility in Mexico accrued by Atlinks French
      legal entity has resulted in€10
      million of write-down of assets.- Other minor expenses include involuntary
      termination benefits for the downsizing of the Japanese, Korean
      and French purchase activities (€3
      million) affecting 24 people; downsizing
      of the Marketing and Sales activities (€3
      million) related to 36 people and the downsizing of the Residential phone
      activity (€1 million) affecting
      16 people.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 38                        

The accompanying notes are an integral part of the consolidated financial statements.

F-101

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|Cost of German plans for €10 million relates to the
      following programs:
      - The Weiterstadt and Greisheim and globalisation plans for €9 million:
      involuntary termination costs (€4-6 million) concerning 92 people
      and other exit costs (€3 million).
      - Other plans incurred €1 million of voluntary termination costs (4
      people). |    | Restructuring 
      costs
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | --------------------------
|                                                                                                                                                                                                                                                                                                                                                                      | 10
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Cost of plans incurred in Asia amounts to €7 million and includes
      the restructuring of one of its plant and the continuation of the SAFE program.
      The costs mainly consist in involuntary termination costs, €3 million
      affecting 2,687 people and €4 million of fixed assets write-downs.                                                          |    | 7                         
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Cost of plans incurred in the Netherlands relates to the restructuring
      of the Breda plant for €2 million of involuntary severance costs (21
      employees).                                                                                                                                                                                                   |    | 2                         
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Cost of British plans in connection with voluntary and involuntary programs
      for €2 million (26 employees). Other exit cost were related to idle
      facility expenses for €4 million.                                                                                                                                                                         |    | 6                         
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Cost of Polish plans (€1 million) for involuntary severance expenses
      following the TIGER program (122 employees).                                                                                                                                                                                                                                               |    | 1                         
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Cost of Spanish plans for €1 million due to voluntary severance
      expenses concerns 8 people.                                                                                                                                                                                                                                                                     |    | 1                         
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Total restructuring costs.                                                                                                                                                                                                                                                                                                                                            |    | 105                       
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Less fixed assets and inventories write-downs included in the above-mentioned
      plans.                                                                                                                                                                                                                                                                            |    | (30)                      
|                                                                                                                                                                                                                                                                                                                                                                      |    |                           
|Current year accrued restructuring expenses.                                                                                                                                                                                                                                                                                                                          |    | 75                        

The accompanying notes are an integral part of the consolidated financial statements.

F-102

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

b iv) For acquisitions in the year 2004, plans decided included
  the following:

HNS

HNS, a manufacturing STB (satellite decoder) business, for which
  the facility is located in Tijuana, has been acquired, Mexico, on June 24th,
  2004, and closed down on December 15th,
  2004. All production employees have been released, and fixed assets written
  off. HNS accrued an initial restructuringliability of€2
  million that met the accounting criteria required under EITF 95-3 for accrual.
  The total restructuring accruals recorded as a liability in the purchase business
  combination were related to employee termination benefits due to the closure
  of the facility (affecting 385 people in 2004).€1 million has been paid out as of December
  31, 2004. In addition to this restructuring accrual, the company recognized
  a fair value adjustment on fixed assets acquired, decreasing the carrying value
  of related assets in the amount of€5
  million.

Command Post

In connection with the acquisition of Command Post on May 13th2004, the Group consolidated Creative Services operations
  in Canada. The Company accrued an initial restructuring liability of
  €5 million that met the accounting criteria
  required under EITF 95-3 for accrual. Of the total restructuring accrual recorded
  as a liability in the purchase business combination,€2
  million were related to redundancies (affecting 15 people in 2004), and€4
  million were related to lease overhang halfmillion euro has been paid out for severances.

Parkervision

In connection with the acquisition of Parkervision on May 15th
  2004, the Group has implemented a plan of integration and accrued an initial
  restructuring liability of€1 million
  that met the accounting criteria required under EITF 95-3 for accrual. Of the
  total restructuring accrual recorded as a liability in the purchase business
  combination,halfmillion eurowere related to retention packages, andhalfmillion eurowere related to legal fees, totally paid out
  as of December 31, 2004.

b v) Regarding the prior year acquisitions, the reserves are analyzed below:

PDSC

In connection with the acquisition of Panasonic Disc Services
  Corporation (PDSC) in June 2002, the Group
  has implemented several plans to restructure the operations. As part of the
  restructuring plans,PDSC accrued an
  initial restructuring liability of€15.3
  million. During 2003, the Company accrued an additional liability of€6.8
  million that met the accounting criteria required under
  EITF 95-3 for accrual.As of December 31st,
  2003, the net total restructuring liability for PDSC amounted
  to€22.1 million. This restructuring
  accrual related to costs to exit the Cork, Ireland optical plant and to lay
  off employees. Such amounts were recognized as liabilities
  assumed in the purchase price allocation of PDSC.

Of the total restructuring accrual recorded as a liability in
  the purchase business combination, approximately€6.5
  million were related to work force reductions and to employee
  termination benefits

The accompanying notes are an integral part of the consolidated financial statements.

F-103

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

due to the closure of facilities and services reorganisation
  across Europe (affecting 266 people in 2003).

In addition to the restructuring accrual, the company recognized an impairment of fixed assets and inventories in the amount of€6.4 million.

The restructuring accrual also included exit costs for approximately€9.2 million. These incremental exit costs included idle facility costs and contract termination obligations for leasehold payments. At December 31st, 2003, it remained a€5 million restructuring reserve, utilized for€1 million and reversed for€4 million during 2004.

Selected information relating to the restructuring costs included in the allocation of the cost to acquire PDSC is as follows:

|             | Reserve at      | Cash Payments   | Currency    | Reserve at   | Additional   | Cash Payments /  | Reserve at   | Cash Payment /   | Reserve at  
|------------ | --------------- | --------------- | ----------- | ------------ | ------------ | ---------------- | ------------ | ---------------- | ------------
|             | June 25,        | During the      | Translation | December 31, | Accrual      | Reclassification | December 31, | Reclassification | December 31,
|             | 2002            | period from     | Adjustment  | 2002         | According to | During year      | 2003         | During           | 2004        
|             |                 | June 25, 2002   |             |              | EITF 95-3    | 2003             |              | year 2004        |             
|             |                 | to December 31, |             |              |              |                  |              |                  |             
|             |                 | 2002            |             |              |              |                  |              |                  |             
|            
|             | ( in millions)
|             |                 |                 |             |              |              |                  |              |                  |             
|Employee     |                 |                 |             |              |              |                  |              |                  |             
|termination  |                 |                 |             |              |              |                  |              |                  |             
|costs        | -               | -               | -           | -            | -            | -                | -            | -                | -           
|             |                 |                 |             |              |              |                  |              |                  |             
|Other exit   |                 |                 |             |              |              |                  |              |                  |             
|costs        | 8               | -               | (1)         | 7            | 1            | (3)              | 5            | (5)              | -           
|             |                 |                 |             |              |              |                  |              |                  |             
|Fixed assets |                 |                 |             |              |              |                  |              |                  |             
|impairments  | 1               | (1)             | -           | -            | 6            | (6)              | -            | -                | -           
|            
|Total        | 9               | (1)             | (1)         | 7            | 7            | (9)              | 5            | (5)              | -           
|            
|             |                 |                 |             |              |              |                  |              |                  |             
|GVG          |                 |                 |             |              |              |                  |              |                  |             

In connection with the acquisition of Grass Valley Group (GVG) in March 2002, the Group has implemented several plans to reorganize and restructure some of the operations and eliminate dual capacities between Grass Valley activities and Thomson Broadcast activities in North America.

GVG accrued an initial restructuring liability of€7 million mainly related to the closure of the Automation division in Nevada. During 2003, the company accrued an additional liability of€2 million that met the accounting criteria required under EITF 95-3 for accrual. As a result as of acquisition date, the net total restructuring liability for GVG amounted to€8 million. Such amounts were recognized as liabilities assumed in the purchase business combination and included in the allocation of the cost to acquire GVG.

Of the total restructuring accrual recorded as a liability in
  the purchase business combination, €1
  million are asset impairments. This restructuring reserve was mainly related
  to the closure of the Automation division in Nevada including€5 million of involuntary severance costs,€1 million of litigation fees and€1 million of other exit costs.

The accompanying notes are an integral part of the consolidated financial statements.

F-104

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

In 2002,€3million was paid out for employee termination benefits,€1million against other exit costsand the€1 million asset impairments were entirely utilized.

In 2003,€2 million was paid out for employee termination benefits,€2 million against other exit costs and€1 million of other exit costs have been reversed. As of year end 2003, the total restructuring liability on this acquisition has been consumed.

Technicolor

The Company accrued an initial restructuring liability of approximately€35 million as of March 16, 2001, the date of the acquisition. During 2002, an additional liability of approximately€1 million hasbeen recognized. Thus the net total restructuring liability for Technicolor amounted to€36 million, using March 16, 2001 exchange rate, related to costs to exit and consolidate certain activities, costs for the impairment of assets as well as costs to terminate employees across various business units: approximately€9 million were related to work force reductions and represented employee termination benefits. Employee termination costs occurred across all the Technicolor business units. The total number of employees initially identified to be involuntarily terminated or relocated approximated 670 people. In 2003 all of them had occurred (closure and downsizing of the entities). Termination payments of approximately€6 and€2 million were made in 2002 and 2001. Payments of the remaining liability of approximately€1 million have been made in 2003.

The restructuring accrual also included approximately€1 million associated with lease and contract termination costs. All such costs were fully paid out in 2002.

The restructuring accrual comprised finally impairments for fixed assets,€26 million that were booked at acquisition date.

Broadcast

The Company accrued an initial restructuring liability of approximately€15 million and during 2002 an additional amount of€8 million. This reserve, which related to involuntary termination benefits, write-down of inventories and fixed assets, and idle facility costs, was totally consumed as of December 31, 2003.

b vi) The number of employees to be terminated is analyzed below:

The remaining€29 million reserve for employee termination benefits at December 31, 2004 relates to approximately employees to be terminated including:

|             | Number of Employees | 
|------------ | ------------------- | 
|             |                     | 
|US plan      | 373                 | 
|French plans | 133                 | 
|German plans | 42                  | 
|Other        | 16                  | 
|             |                     | 
|TOTAL        | 564                 | 
|             |                     | 

The accompanying notes are an integral part of the consolidated financial statements.

F-105

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(c) Pensions

In accordance with the laws and practices of each country, the Thomson Group participates in employee benefits pension plans offering death and disability, retirement and special termination benefits. Those plans provide benefits of various types from flat currency amounts per year of service to final pay plans integrated with social security and multi-employer plans.

For defined contribution plans, expenses correspond to the contributions paid. For defined benefit pension plans, accruals and prepaid expenses are determined using the projected unit credit method.

Disclosures in accordance with SFAS 132, are as follows:

|                                               | Pension benefits |  | Other benefits | 
|---------------------------------------------- | ---------------- |  | -------------- | 
|                                               |                  |  |                | 
|                                               | 2002             |  | 2003           | 
|                                               |                  |  |                | 
|                                               | (€ in millions)  | 
|Change in Benefit Obligation                   |                  |  |                | 
|Benefit Obligation at beginning of year        | (800)            |  | (736)          | 
|Reclassification of early retirement plans     |                  |  |                | 
|and jubilee awards under other reserves (*)    |                  |  |                | 
|Service cost                                   | (41)             |  | (33)           | 
|Interest cost                                  | (46)             |  | (40)           | 
|Amendments                                     | (21)             |  | 2              | 
|Business combinations                          | (7)              |  | (4)            | 
|Plan participants contributions                | -                |  | (1)            | 
|Curtailment / Settlement                       | 52               |  | 39             | 
|Actuarial (loss) gain                          | 8                |  | (31)           | 
|Benefits paid                                  | 60               |  | 40             | 
|Others (foreign currency translation)          | 59               |  | 57             | 
|Benefit Obligation at end of year              | (736)            |  | (707)          | 
|                                               |                  |  |                | 
|Change in Plan Assets                          |                  |  |                | 
|Fair value of plan assets at beginning of year | 406              |  | 237            | 
|Actual return on plan assets                   | (68)             |  | 24             | 
|Thomson contribution                           | -                |  | 29             | 
|Plan participants contributions                | -                |  | 1              | 
|Curtailment / Settlement                       | (52)             |  | (38)           | 
|Business combinations                          | 7                |  | 12             | 
|Benefits paid                                  | (8)              |  | (7)            | 
|Others (foreign currency translation)          | (48)             |  | (37)           | 
|Fair value of plan assets at end of year       | 237              |  | 221            | 
|                                               |                  |  |                | 
|Funded status of the plan                      | (499)            |  | (486)          | 
|Unrecognized actuarial (gains) or losses       | 106              |  | 109            | 
|Unrecognized actuarial prior service cost      | 8                |  | (3)            | 
|Unrecognized actuarial transition obligation   | 3                |  | 2              | 
|                                               |                  |  |                | 
|Accrued (prepaid) benefit cost                 | (382)            |  | (378)          | 
|                                               |                  |  |                | 

|(*) Jubilee awards and early retirement plans
      are classified under other reserves. Prior years have not been
      restated.
|------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated financial statements.

F-106

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

For all defined benefit pension plans, the accumulated benefit obligation was in excess of plan assets at December 31, 2004. The accumulated benefit obligation was equal to€614 million at December 31, 2004.

Amounts recognized in the consolidated balance sheet are as follows:

|                                          | Pension benefits |  | Other benefits | 
|----------------------------------------- | ---------------- |  | -------------- | 
|                                          |                  |  |                | 
|                                          |                  |  | December 31,   | 
|                                          | 2002             |  | 2003           | 
|                                          |                  |  |                | 
|                                          | ( in millions)  | 
|Accrued benefit liability (including MLA) | (491)            |  | (471)          | 
|Prepaid benefit cost                      | 12               |  | 6              | 
|Net amount accrued for under U.S. GAAP    | (479)            |  | (465)          | 
|                                          |                  |  |                | 
|                                          |                  |  |                | 
|Minimum Liability Ajustment (MLA)         |                  |  |                | 
|Including in other comprehensive income   | 97               |  | 85             | 
|Including in Intangible asset             | -                |  | 2              | 
|                                          |                  |  |                | 
|Total Minimum Liability Ajustment         | 97               |  | 87             | 
|                                          |                  |  |                | 

Amounts recognized in the income statement are as follows:

|                                                | Pension benefits |  | Other benefits | 
|----------------------------------------------- | ---------------- |  | -------------- | 
|                                                |                  |  |                | 
|                                                | 2002             |  | 2003           | 
|                                                |                  |  |                | 
|                                                | ( in millions)  | 
|Annual cost under U.S. Gaap                     |                  |  |                | 
|Service cost                                    | (41)             |  | (33)           | 
|Expected interest cost                          | (46)             |  | (40)           | 
|Expected return on plan assets                  | 26               |  | 15             | 
|Amortization of unrecognized prior service cost | (14)             |  | (9)            | 
|Amortization of actuarial net losses or (gains) | 4                |  | (5)            | 
|Amortization of net transition obligation       | -                |  | (1)            | 
|Effect of curtailment/settlement                | (1)              |  | (2)            | 
|Net periodic benefit cost                       | (72)             |  | (75)           | 
|                                                |                  |  |                | 

Annual costs under French GAAP are as follows:

|                              | Pension benefits |  | Other benefits | 
|----------------------------- | ---------------- |  | -------------- | 
|                              |                  |  |                | 
|                              | 2002             |  | 2003           | 
|                              |                  |  |                | 
|Annual cost under French GAAP | (67)             |  | (58)           | 
|                              |                  |  |                | 

The difference between these amounts and the annual costs under US GAAP results from differences in timing of amortizations of the initial transition liability and from the difference of method of recognition of excess funding by certain companies.

The accompanying notes are an integral part of the consolidated financial statements.

F-107

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The net accruals as of December 31, 2004, 2003 and 2002 in the
  accompanying consolidated balance sheets can be compared with balances determined
  under US GAAP as follows:

|                                                     | Pension benefits |  | Other benefits | 
|---------------------------------------------------- | ---------------- |  | -------------- | 
|                                                     |                  |  |                | 
|                                                     | 2002             |  | 2003           | 
|                                                     |                  |  |                | 
|                                                     | ( in millions)  | 
|Net amount accrued for under US GAAP                 | (479)            |  | (465)          | 
| Difference of method of absence of recognition     |                  |  |                | 
|of excess funding by certain companies               | (11)             |  | (9)            | 
| Impacts of transition obligation, of prior service |                  |  |                | 
|cost and of actuarial gains recognized with          |                  |  |                | 
|a different timing under local regulations           | 12               |  | -              | 
| Reclassification                                   | -                |  | 23             | 
| Minimum Liability Adjustment (MLA)                 | 97               |  | 87             | 
|Net amount accrued for in consolidated               |                  |  |                | 
|financial statements                                 | (381)            |  | (364)          | 
|                                                     |                  |  |                | 

The measurement date of the main part of the projected benefit
  obligation is December 31, 2004 (some US plans are measured at September 30,
  2004).

Actuarial assumptions have been determined on a country by country
  basis and scheme by scheme. The average assumptions are:

|                                       | Pension benefits |  | Other benefits | 
|-------------------------------------- | ---------------- |  | -------------- | 
|                                       |                  |  |                | 
|                                       | 2002             |  | 2003           | 
|                                       |                  |  |                | 
|Benefit obligation discount rate       | 6.3%             |  | 5.5%           | 
|Estimated annual rate of increase      |                  |  |                | 
|in future compensation                 | 3.2%             |  | 3.0%           | 
|Expected rate of return on plan assets | 9.0%             |  | 7.1%           | 
|                                       |                  |  |                | 

The long-term rates of return on plan assets have been determined
  for each plan in consideration of the investment policies, the expected return
  for each component of the investment portfolio and other local factors in the
  country of the plan.

Health care costs are assumed to increase by 9.07 % in 2005,
  8.10% in 2006, 7.00% in 2007 and 6.03% in 2008 and 4.58% thereafter.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-108

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Regarding the other than pension postretirement benefits plans,
  a one-percentage-point change in assumed health care cost trend rates would
  have the following effects:

|                                                              |  | 1-Percentage-Point |  | 1-Percentage-Point |     
|------------------------------------------------------------- |  | ------------------ |  | ------------------ | ----
|                                                              |  | Increase           |  | Decrease           |     
|                                                              |  |                    |  |                    |     
|                                                              |  | (€ in millions)    | 
|Effect on total of service
      and interest cost components |  | 3                  |  |                    | (2) 
|Effect on the postretirement
      benefit obligation         |  | 31                 |  |                    | (26)
|                                                              |  |                    |  |                    |     

In 2004, the Group includes the effects of the subsidy to be
  received linked to the Medicare Prescription Drug, Improvement and Modernization
  Act of 2003 in measuring the accumulated benefit obligation. The reduction in
  the accumulated benefit obligation for the subsidy related to benefitsattributed
  to past service is 38 million euros. The effect of the subsidy on the measurement
  of net periodic postretirement benefit cost for the current period is a reduction
  of€5 million.

The reduction linked to the subsidy receipt is expected to be€1 million in 2006,€1
  million in 2007, 2 million in
  2008 and€2 million in 2009.

When defined benefit plans are funded, mainly in the U.S., U.K.
  and Canada, the investment strategy of the benefit plans aims to match the investment
  portfolio to the membership profile. Asset performance is reviewed on a quarterly
  basis and assets allocation strategy is reviewed on an annual basis.

Thomson pension plans weighted-average asset allocations as at
  December 31, 2004 by asset category are as follows:

|                  |     |  |      | 
|----------------- | --- |  | ---- | 
|Equity securities | 58% | 
|Debt securities   | 39% | 
|Other             |     |  | 3%   | 
|                  |     |  |      | 
|Total             |     |  | 100% | 
|                  |     |  |      | 

Thomson expects to contribute €20 million to its pension plans in 2005.

The following benefit payments, which reflect expected future services are
  expected to be paid for the next five years:

|     |  | Pension benefits |  |  | Other benefits | 
|---- |  | ---------------- |  |  | -------------- | 
|     |  |                  |  |  |                | 
|     |  | ( in millions)  | 
|2005 |  | 49               |  |  | 19             | 
|2006 |  | 48               |  |  | 18             | 
|2007 |  | 83               |  |  | 20             | 
|2008 |  | 33               |  |  | 21             | 
|2009 |  | 34               |  |  | 20             | 
|     |  |                  |  |  |                | 

The accompanying notes are an integral part of the consolidated
  financial statements.

F-109

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(d) Postretirement transition obligation

Under French GAAP, Thomson changed the accounting policy to fully
  recognize the entire unrecognized transition obligation in 1997 against retained
  earnings. Under U.S. GAAP, the election to delay recognition of the postretirement
  benefits transition obligation may not be changed and the unrecognized transition
  obligation continues to be charged to income over years.

(e) Stock based compensation

Under French GAAP, common shares issued upon the exercise of
  options granted to employees and directors are recorded as an increase to share
  capital at the exercise price on exercise date. Thomsonholds
  treasury stock to settle qualified employee stock purchase plans. In accordance
  with French GAAP, the Thomson group did not record any compensation expense
  on stock based plans.

Under U.S. GAAP, Thomson has elected to apply APB Opinion No.25
  Accounting For Stock Issued To Employees, which requires that compensation
  arising from compensatory plans to be measured based on the intrinsic value
  of the shares granted or sold to employees. For fixed plans, the compensation
  expense is calculated as the difference between the intrinsic value of the shares
  at the grant date and the employee strike price and recognized over the vesting
  period.

On December 18, 2000, the Board of
  Directors adopted a fixed option plan for 3,458,500 options. The exercise price
  of the options granted to employees is€55.9.
  Such exercise price is in excess of the market value of the shares at the grant
  date,€47. Half of these options
  have vested on December 18, 2003 and the remaining on December 18, 2004.They
  may be exercised up to 10 years from the date of grant.

The Board of Directors onMarch 16, 2001
  and July 23, 2001increased the number of stock options
  granted to employees to 4,018,500. The conditions of grant remained the same
  as the one established by the board on December 18, 2000. As of the two additional
  grant dates (March 16, 2001 and July 23, 2001), the exercise price of€55.9 was in excess of the market value of Thomson shares,€41.19 and€35.3, respectively, thus no compensation expense was recognized.

As of December 2004, after taking into account the forfeited
  stock options, as well as optionscancelled pursuant to
  the decision of the Board of Directors of Thomson held on September 22, 2004
  (see below), the number of stock option related to fixed option plans adopted
  as of December 18, 2000, March 16, 2001 and July 23, 2001 is 973,200.

On October 12, 2001,the Board of
  Directors approved a fixed option plan for a total of 3,540,300 options. Each
  option gives the holder the right to acquire one new share
  to be issued at an exercise price of€31.5, which is in excess of the market value of Thomson
  shares as of the grant date.

Half of these options have vested on October 12, 2004 and the
  remaining 50% will vest on October 12, 2005. They may be
  exercised up to 10 years from the date
  of grant.

As of the grant date (October 12, 2001) no compensation was recognized
  as the exercise price, 31.5, exceeded
  the market price,€25.4.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-110

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

As of December 31, 2004, after taking into account the forfeited
  stock options, as well as options cancelled pursuant to the decision of the
  Board of Directors of Thomson held on September 22, 2004 (see below), the number
  of stock option related to this plan is 651,600.

On September 22, 2004,the Board of
  Directors approved a new stock option plan, for 574 beneficiaries, this plan
  is summarized as follow:

- 358 employees and directors of former stock option plans (those of December
    18, 2000, March
    16, and July 23, 2001) and, have accepted to cancel the options they were
    granted under related plans for a total number of 3,972,000 stocks options
    in exchange for the granting of new options under a new plan. Further, those
    employees and Directors have, upon this plan, been granted with 2, 541, 890
    new options. This plan has been assessed as a variable plan.
- 852,700 options were granted to 216 employees and directors. The subscription
    option price was 16. Former employees and retires were not eligible.
    This plan is a fixed plan.
- Half of these options will vest on September 22, 2007 and the remaining
    50% will vest on September 22, 2008. They may be exercised up to 10 years
    from the date of grant.

As of the grant date (September 22, 2004),€1 million compensation has been recognized as the strike
  price,€16.0, was below the market
  price,€16.54.

As of December 31, 2004, after taking into account the forfeited
  stock options, the number of stock option outstanding is 7,348,590.

 BASA Bon dAcquisition
  ou de Souscription dActions

On September 15, 2004, the General Assembly approved a fixed
  stock option plan (Bon dAcquisition ou de Souscription dActions
  BASA) for all individual shareholders who have purchased or subscribed
  shares before June 30, 2002 and still owned 80% of such shares as of July 21,
  2004.

Shareholders meeting that criteria have the right to purchase
  Thomson subscription certificates at a unit price of€1
  per share, allowing them to call one Thomson shares per certificate at an exercise
  price of€16. The employees and
  directors of the Group subscribed an estimated number of 3,100,000 certificates
  out of 12.471.368 subscribed. Each certificate is exercisable after the issuance
  of 2005 annual Consolidated Financial Statements of Thomson
  beginning March 1st, 2006
  and will expire on June 30, 2006. Thomson may choose to deliver new Thomson
  shares or existing treasury shares.

These options vested on the day of the grant.

As of the measurement date (October 12, 2004, end of subscription
  period) no compensation has been recognized under U.S. GAAP as the exercise
  price,€16.0, plus the premium
  paid, exceeded the market price,€16.78.

As of December 31, 2004, the estimated number of stock option
  related to this plan is 3,100,000.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-111

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Options granted in connection with the formation of TCL-Thomson
  Electronics(TTE)

In connection with the Combination Agreement with TCL Corporation
  (TCL Corp) to form TCL-Thomson Electronics(TTE), Thomson
  will provide employee bonuses in the form of shares of Thomsons
  stock to certain former employees of Thomson that have accepted to be employed
  by TTE. The number of shares to be issued by Thomson will depend upon the
  length of time the employees remain employed by TTE. The maximum amount of options
  to be provided by Thomson is 545,279.

Participants are not considered as Thomson employee and as a
  result the compensation expense related to this plan was measured based on the
  fair value of the instrument granted as of the vesting date.

The options vest as follow: - 25% August 31, 2004 - 25% At the first anniversary - August
  31, 2005 - 25% At the Second anniversary - August
  31, 2006 - 25% At the Third anniversary - August
  31, 2007

As of December 31, 2004,€4
  million compensation has been recognized based on a fair value assessment of
  the instrument granted to related employees.

As of December 31, 2004, after taking into account the forfeited
  stock options, the number of stock option related to this plan is 403,441.

Information for stock options granted and forfeited is as follows:

|                               | Number of options |  | Weighted average exercise price (in Euro) |     
|------------------------------ | ----------------- |  | ----------------------------------------- | ----
|                               |                   |  |                                           |     
|December 31, 2001              | 7,108,400         |  |                                           | 43.9
|Forfeited                      | (257,500)         |  |                                           | 44.4
|December 31, 2002              | 6,850,900         |  |                                           | 43.7
|Forfeited                      | (867,500)         |  |                                           | 42.3
|December 31, 2003              | 5,983,400         |  |                                           | 43.9
|Forfeited                      | (404,600)         |  |                                           | 40.2
|Granted (July 31, 2004)        | 545,279           |  |                                           | 0.0 
|Granted (September 15, 2004)   | 3,100,000         |  |                                           | 16.0
|Cancelled (September 22, 2004) | (3,972,000)       |  |                                           | 43.3
|Granted (September 22, 2004)   | 7,366,590         |  |                                           | 16.0
|Exercized (October 12, 2004)   | (141,838)         |  |                                           | 0.0 
|December 31, 2004              | 12,476,831        |  |                                           | 19.4
|                               |                   |  |                                           |     

Compensation expense charged to income this year

|Plan                   |  | Compensation expense
      2004 | 
|---------------------- |  | ------------------------------- | 
|                       |  |                                 | 
|Employee offering      |  | 1                               | 
|2004 Stock Option plan |  | 1                               | 
|TTE Options            |  | 4                               | 
|Other Plans            |  | -                               | 
|Total                  |  | 6                               | 
|                       |  |                                 | 

The accompanying notes are an integral part of the consolidated
  financial statements.

F-112

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The following table summarizes information for options outstanding
  and exercisable as of December 31, 2004:

|               |  | Options outstanding |  |                | Options exercisable |        |        
|-------------- |  | ------------------- |  | -------------- | ------------------- | ------ | -------
|               |  |                     |  |                |                     |        |        
|Exercise price |  | Number              |  | Average        |                     | Number |        
|               |  |                     |  | remaining life |                     |        |        
|               |  |                     |  |                |                     |        |        
|55.9           |  | 973,200             |  | 6              |                     |        | 973,200
|31.5           |  | 651,600             |  | 7              |                     |        | 325,800
|16.0           |  | 7,348,590           |  | 10             |                     |        | -      
|16.0           |  | 3,100,000           |  | 1.5            |                     |        | -      
|0              |  | 403,441             |  | 2              |                     |        | -      
|               |  |                     |  |                |                     |        |        

Had compensation cost for stock options awarded under these plan
  been determined based on the fair value at the date of grant consistent with
  the methodology of SFAS 123 accounting For Stock-Based Compensation,
  Thomson net income and basic and diluted earnings per share, would have reflected
  the following pro forma amounts (in millions of Euro, except per share amounts):

|                                                             | Year ended December 31, | 
|------------------------------------------------------------ | ----------------------- | 
|                                                             | 2002                    | 
|                                                             |                         | 
|U.S. GAAP net income (loss) available to common              |                         | 
|stockholders (note 31 ad ii)                                 | 351                     | 
|Basic earning (loss) per share                               | 1.26                    | 
|Diluted earning per share                                    | 1.21                    | 
|Add back: stock-based employee compensation expense included |                         | 
|in reported net income net of related tax effects            | 1                       | 
|Deduct: Total stock-based employee compensation expense      |                         | 
|determined under fair value based method for all awards      | (40)                    | 
|                                                             |                         | 
|Pro forma U.S. GAAP net income (loss) available to common    |                         | 
|stockholders (note 31 ad ii)                                 | 312                     | 
|                                                             |                         | 
|Pro forma basic earnings (loss) per share                    | 1.12                    | 
|Pro forma diluted earnings (loss) per share                  | 1.06                    | 
|                                                             |                         | 

The significant assumptions used by Thomson to estimate the fair
  value of the options as of the measurement date are as follow:

|Valuation assumptions    | March 16, |  | July 23, |       | October 12, |  | July 31, |  | September 15, |      | September 22, | 
|------------------------ | --------- |  | -------- | ----- | ----------- |  | -------- |  | ------------- | ---- | ------------- | 
|                         | 2001      |  | 2001     |       | 2001        |  | 2004 (*) |  | 2004          |      | 2004          | 
|                         |           |  |          |       |             |  |          |  |               |      |               | 
|Expected life (in years) | 10.0      |  |          | 10    |             |  | 10       |  |               | 2    |               | 
|Risk free Interest rate  | 5.3%      |  |          | 5.3%  |             |  | 5.3%     |  |               | 2.5% |               | 
|Expected Volatility      | 50.0%     |  |          | 50.0% |             |  | 50.0%    |  |               | N/A  |               | 
|Expected Dividend        | 0.0%      |  |          | 0.0%  |             |  | 1.8%     |  |               | 1.8% |               | 
|Average fair value (**)  |           |  |          |       |             |  |          |  |               |      |               | 
|per option as of         |           |  |          |       |             |  |          |  |               |      |               | 
|measurement date         | 9.9       |  |          | 1.8   |             |  | 53.4     |  |               | 18.2 |               | 
|                         |           |  |          |       |             |  |          |  |               |      |               | 

|(*)  | Fair values of options granted to non-employee are given
      at year end.
|---- | ---------------------------------------------------------------------------
|(**) | Using the Black-Scholes method.                                            

The accompanying notes are an integral part of the consolidated
  financial statements.

F-113

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

f) Derivative Instruments and forward exchange contracts

Under U.S. GAAP, all derivative instruments are recorded on the
  balance sheet at fair market value in other receivables and other creditors
  and accrued liabilities. Recognition of the gain or loss that results
  from recording and adjusting a derivative to fair market value
  depends on the purpose for issuing or holding the derivative. Gains and losses
  from derivatives that are not used as hedges are recognized immediately in earnings.
  If a derivative is used to hedge the fair value of an asset, liability, or firm
  commitment, the gains or losses from adjusting the derivative to its market
  value will be immediately recognized in other financial expenses, net and, to
  the extent the hedge is effective, offset the concurrent recognition of changes
  in the fair value of the hedged item. Gains or losses from derivatives hedging
  expected future cash flows will be recorded on the balance sheet in accumulatedother comprehensive income/(loss) until the hedged transaction
  is recognized in earnings; however, to the extent the change in the fair value
  of the derivative exceeds the change in the anticipated cash flows of the hedged
  transaction, the excess gains or losses will be recognized immediately in earnings.

f i) Forward exchange contracts

Under French GAAP, Thomson defers premiums and discounts as well
  as gains and losses on forward exchange contracts that hedge the following years
  anticipated commercial commitments, and amortizes them to income over the life
  of the underlying transactions being hedged.

Under U.S. GAAP, SFAS 52 Foreign Currency Translation
  and SFAS 133 Accounting for Derivatives Instruments and Hedging Activities,
  unrealized gains and losses on forward exchange contracts which do not hedge
  firm commitments may not be deferred and as a result, are immediately recognized
  in operating income.

f ii) Other derivatives

Thomson acquires derivative instruments to reduce the effect
  of the market volatility of certain marketable equity investments, which are
  treated as hedging transactions under French GAAP but do not always qualify
  as hedges under SFAS 133. Under U.S. GAAP, such instruments are marked to market
  with unrealized gains and losses in financial income of the Consolidated Income
  Statements.

In 2001, Thomson acquires derivatives instruments that have been
  unwounded in 2002 in connection with the sale of the underlying equity securities
  (note 31(a)), resulting in a gain amounted to  34
  million under U.S. GAAP.

In 2003 and 2004, Thomson put in place equity collars and equity
  forward (the Instruments)
  to reduce the market volatility of certain marketable equity investments. The
  Instruments qualified as hedge under both French GAAP and
  U.S. GAAP. More specifically under SFAS 133 of U.S. GAAP,
  theInstruments were considered a Fair
  Value Hedge of the equity investment. Retrospective efficiency
  testing of those was done at December 31, 2003 and 2004, resulting in the conclusion
  that both met the efficiency requirements of SFAS 133.

Thomson also put in place in 2003 interest rate swaps in order
  to reduce the price risk associated with a portion of the
  Groups fixed rate debt. The swaps qualified as hedge instruments under
  both French

The accompanying notes are an integral part of the consolidated
  financial statements.

F-114

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated



GAAP and U.S. GAAP. More specifically under U.S. GAAP the swaps
  were considered Fair ValueHedges of
  the fixed rate debt. Because the characteristics of the swaps are identical
  to the debt, the short cut method was used instead of efficiency tests.

Furthermore Thomson put in place in 2003 a rate lock in order
  to reduce the price risk associated with a future 10 year fixed interest rate
  debt issuance. Through the rate lock the interest rate was effectively fixed
  before the debt was issued. The rate lock qualified as a hedge instrument under
  both French GAAP and U.S. GAAP. Under French GAAP the $1.07 million (€0.96
  million) loss on the rate lock will be recognized over the 10 year life of the
  debt instrument in financial result. Under U.S. GAAP the lock was considered
  a Cash Flow Hedge of future interest payments on the debt. The result on the
  hedge was initially booked in Other Comprehensive Income (OCI) and
  subsequently followingissuance of the debt is being reclassified
  over the 10 year life of the debt to financial result. Over the next 12 months0.08 million in losses will be
  reclassified from OCI to financial result.

(g) Asset re-evaluation

As permitted under French GAAP, Thomson re-evaluated certain
  fixed assets to market value in conformity with certain country regulations.
  Such re-evaluations are not permitted under U.S. GAAP and the assets would continue
  to be recorded at historical value.

(h) Capitalized development costs

In 2002, Thomson acquired Grass Valley and determined under both
  French GAAP and U.S. GAAP the existence of in-process R&D in an amount of€3 million. Under French GAAP,
  related in-process R&D project has been written off and charged to Other
  Income (expense). Under U.S. GAAP, the cost of this intangible, purchased
  from others for a particular R&D project and that has no alternative future
  uses, has been reclassified from Other Income (expense) to R&D
  costs.

In 2003, as permitted under French GAAP, Thomson recognized as
  part of the purchase price allocation of the acquisition of the remaining 20%
  of Technicolor Digital Cinema, an acquired intangible asset related to a R&D
  project that meets French GAAP criteria for recognition. Under U.S. GAAP, such
  project has been determined to in process, and therefore a€2 million expense has been charged to research and development
  expense.

In 2004, Thomson acquired the video division of ParkerVision
  and recognized under French GAAP as part of the purchase price allocation of
  the acquisition, an acquired intangible asset related to a R&D project that
  meets French GAAP criteria for recognition. Under U.S. GAAP, such project has
  beendetermined to in process, and as
  a result Thomson recognized€2
  million research and developmentexpense.

(i) Capitalized interest

For U.S. GAAP purposes, interest cost incurred
  during the construction period for certain
  assetsshould be capitalized, which is not required under
  French GAAP. As of December 31, 2004, the net book value ofcapitalized
  interest amounts to nil.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-115

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(j) Provision for year 2000 compliance and Euro transition

As permitted under French GAAP, Thomson provided for costs to
  be incurred in connection with Year 2000 compliance and Euro currency transition.

Under U.S. GAAP, such provisions may not be recorded and these
  costs would be expensed as incurred.

In 2002, these provisions have been completely reversed.

(k) Subsidiaries controlled but not consolidated

k i) Under French GAAP, certain immaterial subsidiaries are not
  required to be consolidated.

In 2004, 2003 and 2002, the respective number of entities consolidated
  under U.S. GAAP and not under French GAAP was 2, 4 and 20.

k ii) Some investments, considered to be immaterial under French
  GAAP, are accounted for under French GAAP at the lower of cost and fair value
  although the Groups interest in these investments varies from 20% to 50%.
  Under U.S. GAAP, these investments are accounted for using the equity method.

In 2004, 2003 and 2002, the respective number of entities accounted
  for using the equity method and not consolidated under French GAAP was nil,
  nil and 3, respectively.

(l) Philips Professional Broadcast 33.33% minority interests

Thomson acquired 66.67% of Philips Professional Broadcast in
  2001, Thomson and Philips entered into a put and call agreement on the remaining
  33.33% interests in this company. Under French GAAP, Thomson recorded the acquisition
  of the first 66.67% and reported minority interests for the remaining 33.33%.
  During 2002, Thomson acquired the remaining 33.33% and Philips Professional
  Broadcast is fully owned by the Group as of December 31, 2002.

Under U.S. GAAP, EITF 00-04 Majority Owners Accounting
  for Transactions in the Shares of a Consolidated Subsidiary and a Derivative
  indexed to the Minority Interest in that Subsidiary has been applied and
  the put and call agreement has been treated as a financing. Consequently, in
  2001, Thomson has fully consolidated Philips Professional Broadcast and the
  strike price of the call optionhas been discounted to determine
  the financing obtained from Philips at acquisition date.

For U.S. GAAP purposes, the Group net income for the year 2002
  was adjusted with a€1 million
  interest Charge related to the debt toward Philips (incurred from January 1,
  2002 to the acquisition date (see note 2)), and a€2 million additional expense was recorded
  to adjust the minority interest loss reported under French
  GAAP for the period before acquisition date.

Accordingly, as of December
  31, 2004, 2003 and 2002 for U.S. GAAP purposes, gross goodwill
  decreased by€2 million. The debt
  with Philips was considered fully reimbursed at the exercise of the call option
  in 2002.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-116

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(m) Employee offering/bonus shares

Employee shares fourth offering 2002 and fifth offering 2003

Until TSA (formerly THOMSON S.A.), which is fully owned by the
  French State held more than 20% of the share capital of the Group, TSA was subject
  to the French Privatization laws, that states, among other requirements, conditions
  in which part of the sale of such shares have to be offered to Thomsons
  employees.

As a consequence and following the TSA sales of Thomson shares
  made in March 2002 resulting in the fourth employee offering and in December
  2003 resulting in the fifth employee offering, the employees of Thomson have
  been entitled to acquire a certain number of Thomson shares. Suchoffers
  have been made to Thomsons present and former employees at a 20% discount.
  Under French GAAP, no compensation expenses have been recognized.
  Under U.S. GAAP, related discount benefits have been recorded as compensation
  expense for an amount of nil,€2
  million and€14 million for years
  ended as of December 31, 2004, 2003 and 2002, respectively.

Bonus shares

Under French GAAP, no charge has been recorded in connection
  with the rights to bonus shares issued in connection with the February 1999,
  November 1999, October 2000 and March 2002 offering, that are the first, second,
  third and fourth employee offerings. The fifth employee offering has not given
  rise to bonus shares for Thomson employees.

Under U.S. GAAP, since the bonus shares will be awarded by TSA
  (formerly THOMSON S.A.) to both present and former employees without any additional
  consideration and without any obligation for active employees to stay with Thomson
  during the holding periods in order to be awarded with suchbonus
  shares, the fair value of the bonus shares at the employee offering date have
  been charged to income with a corresponding increase to additional paid in capital.

The fair value of outstanding bonus shares awarded as of December
  31, 2004, 2003 and 2002 amounted to€69
  million,€67 million and€67 million, respectively. Subsequent changes in the fair
  value of such shares have been recorded as a gain (loss) in 2004, 2003 and 2002
  with a correspondingdecrease to additional paid in capital
  of€(1) million,€(1) million and€13
  million, respectively.

1,612,079, 521,069 and 149,029 bonus shares related to the first
  offering (February 1999), second offering (October 1999) and third offering
  (September/October 2000) were delivered to Thomsonemployee
  as of March 2002, January 2003 and November 2003, respectively. In the event
  of forfeiture, the fair value of bonus shares at that time will be credited
  to income.

(n) Sale-lease back accounting

Thomson Inc. (ex. Thomson multimedia Inc) sold its U.S. Corporate
  headquarters (Administration andTechnical
  Services buildings) for€60 million
  (USD 58 million) in March 2000. The buildings were leased back from the purchaser
  over a period of twelve years. The resulting lease is accounted for as an operating
  lease. Under French GAAP, the resulting gain of€7
  million (USD 7 million) was

The accompanying notes are an integral part of the consolidated
  financial statements.

F-117

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

recognized as of December 31, 2000, under
  U.S. GAAP, this gain amounted to€9million (USD 8 million (after adjustment
  for capitalized interest).

Under U.S. GAAP, the resulting gain is deferred and amortized
  over the life of the lease, except for the portion of the gain, which exceeds
  the present value of the minimum lease payments measured at disposal date. Thus,
  for U.S. GAAP reporting, an annual gain of USD 1 million (€1 million using the 2004 average exchange rate) is recognized.

As a result, unrecognized gain as of December 31, 2004, 2003
  and 2002 amounts€4 million,
  €5 million and€6 million. For the year ended December 31, 2004, 2003 and
  2002, amortization of the deferred portion of the resulting gain represents€1 million,€1 million and€1
  million,respectively.

Thomson sold its French headquarters located in Boulogne-Billancourt
  for€91 million in February 2000.
  The building was leased back from the purchaser for a period of six years under
  an operating lease. Under French GAAP, the Company recognized a gain of€32 million corresponding to the difference between selling
  price and net book value.

Under U.S. GAAP, the excess of such gain over the present value
  of the minimum lease payments is recognized at disposal date (€9 million), while the remaining amount has been deferred
  and amortized over the lease period for€4
  million,€4 million and€4 million for the years ended December 31, 2004, 2003 and
  2002, respectively. As of December 31, 2004, 2003 and 2002, the unrecognized
  gain under U.S. GAAP amounts to€5
  million,€9 million and€13 million, respectively.

(p) Recording of Singingfish acquisition

Under French GAAP, the acquisition of Singingfish, which occurred
  in September 2000, has been treated as a normal business combination, the excess
  of the purchase price paid over the fair market value of assets acquired, mainly
  software, being recorded as goodwill, which is amortized over a 5 year period.
  In 2001, an impairment loss of€4
  million related to goodwill was recorded.

Under U.S. GAAP according to SFAS 7 Accounting and Reporting
  by Development Stage Enterprise and EITF 98-3 Determining Whether
  a Non Monetary Transaction Involves Receipt of Productive Assets or of a Business
  this acquisition has been treated as a purchase of assets which does notallow
  a portion of the purchase price to be allocated to goodwill, resulting in the
  reclassification of the goodwill recorded under French GAAP to intangible assets
  (taking into account the deferred tax accounting according
  to the EITF 98-11 Accounting for Acquired Temporary Difference in Certain
  Purchase Transactions that are not Accounted for as a Business
  Combination) and in an adjustment on the associated amortization expense.

During 2003, Thomson disposed off Singingfishs assets and
  liabilities (note 2).

Under U.S. GAAP, Singingfish has been classified as a discontinued
  operation (note ad vii).

The impact of such adjustment, including the reversal of French
  GAAP goodwill amortization expense in
  2003 and 2002 of€2million
  and€4million,
  respectively, and related tax effect was€6millionand

The accompanying notes are an integral part of the consolidated
  financial statements.

F-118

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

€(4) million as of December 31, 2003
  and 2002 , respectively. No adjustment has been made in 2004.

(q) Amortization of intangibles recognized through business combinations

Under U.S. GAAP, the intangible assets are as follows:

|                                           | 2001            |  | 2002      |  | 2004  | 
|------------------------------------------ | --------------- |  | --------- |  | ----- | 
|                                           |                 |  |           |  |       | 
|                                           | Net             |  | Net       |  | Gross | 
|                                           | book            |  | book      |  | book  | 
|                                           | value (*)       |  | value (*) |  | value | 
|                                           |                 |  |           |  |       | 
|                                           | ( in millions) | 
|Technicolor Trademark                      | 215             |  | 178       |  | 169   | 
|Technicolor Customer relationships         | 254             |  | 196       |  | 220   | 
|PDSC Customer relationships                | 82              |  | 65        |  | 65    | 
|Screenvision Europe Supplier relationships | 21              |  | 20        |  | 22    | 
|Grass Valley Trademark                     | 43              |  | 36        |  | 33    | 
|Duplitek Customer relationships            | -               |  | 29        |  | 30    | 
|Vidfilm Customer relationships             | -               |  | 31        |  | 33    | 
|                                           |                 |  |           |  |       | 
|TOTAL                                      | 615             |  | 555       |  | 572   | 
|                                           |                 |  |           |  |       | 

|(*) | Changes in carrying value are mainly due to
      change in foreign currency translation.
|--- | -----------------------------------------------------------------------------------------

Technicolor

As of December 31, 2004 under French GAAP, trademark (€169 million, initially booked as of March 16, 2001 for USD
  230 million) and customer relationships (€220
  million, initially booked for USD 300 million) are not amortized and the tax
  effect of the difference between book and tax basis of such intangibles is not
  required to be reflected as a liability at acquisition date.

Under U.S. GAAP, the gross deferred tax liability (€157 million) related to these intangible assets has been
  recorded in 2001 and a valuation allowance on deferred tax assets has been recognized
  viagoodwill, therefore the net deferred tax assets offset
  the amount of deferred tax liability recorded oncustomer
  relationships for€89 million.
  Since January 1, 2002, pursuant to the application of SFAS 142 Goodwill
  and Other Intangible Assets (SFAS 142), the Technicolor trademark
  has been assessed as having an indefinite useful life and as a consequence,
  it is no longer amortized but is tested annually for impairment. As of December
  31, 2004, its carrying value amounts to€166
  million. Thomson continues to amortize the customer relationships over a 16
  year period and amortization expense related to this intangible asset amounting
  to, net of tax,€(15) million,€(17) million and  (20)
  million, for 2004, 2003 and 2002 respectively.

In addition, in accordance with EITF 95-3 and FAS 109, restructuring
  reserves and the related deferred taxes recognized as assumed liabilities have
  been increased under U.S. GAAP compare to those existing under French GAAP for
  an amount of€5 million.

After taking into account the adjustments above, as well as those
  concerning revenue recognition, (note 31(t)), retention bonuses (note 31 (v))
  and other final purchase accounting adjustments in the amount, net of tax, of€(4) million,€(2)
  million and€(5) million, as of
  December 31, 2004, 2003 and 2002, respectively, gross goodwill,
  as determined under French GAAP, increased accordingly by 70
  million as of December 31, 2004.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-119

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The net effect on net income (excluding the effects recorded
  under note 31 (t) and (v)) amounts to (15),€(23) and€(15)
  million for 2004, 2003 and 2002, respectively.

The net impact of deferred tax liability and tax assets depreciation
  reversal on profit and loss for year 2004, 2003 and 2002 amounts to€6 million,€7
  million and€8 million, respectively
  and has been recorded under note 31 aa).

PDSC

Under French GAAP, customer relationships
  (€65 million, initially booked
  as of June 25, 2002 for USD 89 million) are not amortized and the tax effect
  of the difference between book and tax basis of such intangibles is not required
  to be reflected as a liability at acquisition date.

Under U.S. GAAP, the gross deferred tax liability (€26 million) related to this intangible has been recorded
  and a reversal of the valuation allowance on deferred tax assets has been recognized
  via goodwill so that the net deferred tax assets offset the amount of deferred
  tax liability recorded on customer relationships. In addition, customer relationships
  are amortized over 20 years in the amount, net of tax, of€(4) million,€(4)
  million and€(2) million for 2004,
  2003 and 2002, respectively.

In addition, in accordance with EITF 95-3, part of the restructuring
  reserve and the related deferred tax recorded on the French GAAP balance sheet
  at the acquisition date were reversed under U.S. GAAP (€26 million). Other final purchase accounting adjustment
  was not determined to be U.S. GAAP compliant, decreasing the related goodwill
  by€2 million.

After taking into account the above adjustments, gross goodwill,
  as determined under French GAAP decreased by€28
  million as of December 31, 2004.

The net effect on net income amounts to€(4) million and€(7)
  million for 2004 and 2003 respectively.

The impact of deferred tax liability reversal on net income amounts
  to€1 million and€1
  million for 2004 and 2003 respectively
  and has been recorded under note 31 (aa).

Screenvision Europe

Under French GAAP, supplier relationships
  (€22 million initially booked
  on May 7, 2002) are notamortized and
  the tax effect of the difference between book and tax basis of such intangibles
  is not required to be reflected as a liability at acquisition
  date.

Under U.S. GAAP, the gross deferred tax liability (€7
  million) related to this intangible asset has been recorded
  and a reversal of the valuation allowance on deferred tax assets has been established
  viagoodwill so that the net deferred tax assets offset
  the amount of deferred tax liability recorded on supplier
  relationships. Supplier relationships are amortized over 20 years in the amount,
  net of tax, of (1) million,€(1)
  million and€(1) million in 2004,
  2003 and 2002, respectively.

After taking into account this adjustment above, goodwill as
  determined under French GAAP is the same than under U.S. GAAP pursuant to the
  adoption of SFAS 142.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-120

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Grass Valley Group

Under French GAAP, trademark€33
  million (USD 45 million initially booked on March 1, 2002) are not amortized
  and the tax effect of the difference between book and tax basis of such intangibles
  is notrequired to be reflected as a liability at acquisition
  date.

Under U.S. GAAP, the gross deferred tax liability,€13 million related to this intangible has been recorded.
  This indefinite useful life trademark is not amortized under U.S. GAAP.

In addition, in accordance with EITF 95-3, part of the restructuring
  reserve and the related deferred tax recorded on the French GAAP balance sheet
  at acquisition date were reversed under U.S. GAAP (€20 million). Other final purchase accounting adjustment
  was not determined to be U.S. GAAP compliant, decreasing the related goodwill
  by€3 million.

After taking into account the adjustments above, gross goodwill
  as determined under French GAAP decreased by€8
  million as of December 31, 2004.

Dupliteck

Under French GAAP, customer relationships (€30 million, initially booked as of April 4, 2002 for AUD
  53 million) are not amortized and the tax effect of the difference between book
  and tax basis of such intangibles is not required to be reflected as a liability
  at acquisition date.

Under U.S. GAAP, the gross deferred tax liability (€12 million) related to this intangible has been recorded
  via goodwill. In addition, customer relationships are amortized over 20 years
  in the amount, net of tax, of€2
  million and€(2) million for 2004
  and 2003 respectively.

After taking into account the adjustment above, gross goodwill
  as determined under French GAAP increased by€12 million, with no corresponding
  additional amortization charge for the period pursuant to the adoption of SFAS
  142.

The net effect on net income amounts to€2 million and€(2)
  million for 2004 and 2003 respectively.

The impact of deferred
  tax liability on net income amounts to€4
  million and€1 million for 2004
  and 2003 respectively and has been recorded under note 31
  (aa).

VidFilm

Under French GAAP, customer relationships (€33
  million, initially booked as of February 20, 2002 for USD 40 million) are
  not amortized and the tax effect of the difference between book and tax basis
  ofsuch intangibles is not required to be reflected
  as a liability at acquisition date.

Under U.S. GAAP, the gross deferred tax liability
  (€12 million)
  related to this intangible has beenrecorded via goodwill.
  In addition, customer relationships are amortized over 20 years in the amount,
  net of tax, of€0 million and€(2)
  million for 2004 and 2003 respectively.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-121

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

After taking into account the adjustment above, gross goodwill
  as determined under French GAAP increased by€12
  million, with no corresponding additional amortization charge for the period
  pursuant to the adoption of SFAS 142.

The net effect on net income amounts to€0 million and€(2)
  million for 2004 and 2003 respectively.

The impact of deferred tax liability on net income amounts to€2 million and€1
  million for 2004 and 2003 respectively and has been recorded
  under note 31 (aa).

HNS

In 2004 and in relation with the acquisition of HNS business
  (note 2), Thomson recognized a€175
  million Customer relationship under both French GAAP and U.S. GAAP. This intangible
  asset is amortized over a 8 year period. The net book value as of year end 2004
  amounts to€164 million.

(r) BTS purchase price allocation

In 2001, under French GAAP, in connection with BTS business combination,
  which was accounted for as a purchase, accruals mainly related to involuntary
  employee termination and inventory write-offs of Thomson were included as a
  liability in the purchase price allocation.

Under U.S. GAAP, according to EITF 95-3, the costs related to
  activities or employees of the acquiring company were not considered in the
  purchase price allocation and the restructuring reserve and therelated
  deferred tax recorded against goodwill under the French GAAP were reversed under
  U.S. GAAP. As a consequence, goodwill amortization decreased by€1 million in 2001.

In 2002, the finalization of the restructuring plans under French
  GAAP led to additional accruals that were not eligible under U.S. GAAP (as explained
  in note 31 (b)). Therefore, the BTS gross goodwillrecorded
  under U.S. GAAP is€23 million
  less than the amount recorded under French GAAP. The related restructuring impact
  is mentioned in the restructuring adjustment (see note 31 (b)).

(s) Goodwill amortization and impairment - FAS 142

SFAS 142 was issued in June 2001 and requires companies to stop
  amortizing goodwill and indefinitelived
  intangible assets. Instead, SFAS 142 requires that these intangible assets be
  tested for impairment at least annually. SFAS
  142 was effective for the Company as of January 1, 2002 and for purchase
  business combinations consummated after June 30, 2001. Under French GAAP the
  goodwillis amortized over the useful life, as described
  In note 8 a).

For the year ended December 31, 2004, 2003 and 2002, Thomson
  reversed the amortization expense of goodwill recorded under French GAAP for
  an amount of€130 million,€76
  million and€78 million,
  respectively, of which€0million,€2million and€4million for the year 2004, 2003 and 2002respectively,
  were reversed as mentioned in the Singingfish adjustment (see note 31 (p)).

The accompanying notes are an integral part of the consolidated
  financial statements.

F-122

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

A€7 million expense
  has been recognized upon the TTE transaction (see note 2) under U.S. GAAP that
  corresponds to the carrying value of goodwill related to the business sold.

The goodwill impairment charge recognized under U.S. GAAP amounts
  to €27 million. In order to measure the impairment loss Thomson has used
  valuation techniques and the measured impairment losses have been attributed
  to related goodwill.

(t) Revenue Recognition

t i) Licensing agreement

In November 2000, Thomson entered into a five-year licensing
  agreement that allows a third party to use certain Thomson patents (the Licensed
  Patents) and simultaneously entered into a five-year software license
  agreement with the same third party that allows Thomson to use software that
  will bedeveloped by the third party using the Licensed
  Patents. Under French GAAP, revenue from the patentlicensing
  agreement was recognized when the patent licensing agreement was executed and
  non-refundable cash was received by Thomson. Such accounting was appropriate
  under French GAAP because two separate contracts were entered into by the parties,
  the cash received was non-refundable, the only obligation of Thomson was to
  maintain and defend such patents, and the software license agreement includes
  a most favored nation provision allowing Thomson to benefit from
  lower prices granted by the third party to other customers; thereby providing
  evidence that thesoftware license agreement pricing is
  not in excess of fair value. Under U.S. GAAP, the revenue fromthe
  patent licensing agreement is considered to be one element of a multi-element
  arrangement and therefore the patent licensing revenue is being recognized for
  U.S. GAAP purposes on a straight-line basis over the five-year term of the patent
  licensing agreement. During 2003, the parties agreed upon the cancellation of
  the above-related contract. As a consequence, under French GAAP Thomson recognized
  over the year 2003, the cash received during that period by the client party,
  whereas under U.S. GAAP Thomson recognized all deferred revenues existing at
  the date the contract has been cancelled and that were collected. The impact
  amounts to nil,€14 million and€3 million for the years ended
  December 31, 2004, 2003 and 2002, respectively.

t ii) Technicolor revenue recognition

Under French GAAP, Thomson recognizes certain revenue related
  to the duplication/replication of VHS cassettes and DVDs at the time replication
  has been completed and title has contractually been transferred.
  Title transfers upon completion of the replication process, which is generally
  prior to shipment to the customer, which is made upon customer requests.

Under U.S. GAAP, the Company is required to comply with the provisions
  of SAB 104, which has supersed SAB 101 in 2004 when recognizing revenue.

As of December 31, 2003 and 2002 not all criteria of SAB 101
  have been met to allow the company to recognize revenue.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-123

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

In 2004, Thomson has determined that all criteria were met, enabling
  Thomson to recognize revenues upon the replication of DVDs.

For the year ended December 31, 2004, 2003 and 2002 the impact
  of such accounting treatment on the Group consolidated Statement of Operation
  under U.S. GAAP compared to French GAAP amounts to €1
  million,€(2) million and€(1)
  million, respectively.

t iii) Licensing revenue recognition

Under French GAAP, Thomson has recognized for the year ended
  December 31, 2004 and 2003 revenue related to the licensing of the usage of
  Thomson patents on certain products. Under U.S. GAAP, in compliance with SAB
  104, Thomson has deferred the recognition of such revenue due to the fact that
  as of December 31, 2004 and 2003 the related contracts have not been signed
  on December 31, 2004 and December 31, 2003, respectively.

The deferred recognitions of these revenues under US GAAP have
  a positive impact of€25 million
  and a negative impact of€28 million
  for the years ended December 31, 2004 and 2003 respectively. The impact of€25 million in 2004 is explained by the recognition of€28 million revenues related to contract signed in January
  2004 and the deferral of€3 million
  of revenues related to the contract signed in January 2005.

t iv) Rebates and price reductions received

Under French GAAP, certain rebates received from suppliers are
  recorded as a reduction of cost ofsales in the period they
  are received.

Under U.S. GAAP, when rebates are related to future purchases
  commitments, they should be assessed as upfront payments
  with no culmination of the related earning process, and
  therefore theyare amortized over the
  period of those commitments.

As a result, the impact on the net income
  of such restatement is a decrease of€4
  million for the year ended December 31, 2004.

(u) Easyplug gain on assets contribution

In December 2001, Thomson contributed cash for a 26% interest
  in Easyplug Inc. and Thomson Inc. contributed 100% of its wholly owned subsidiary,
  Easyplug Inc. with a fair value of USD 6 million (€7
  million at December 31, 2001 closing rate) for a 24% interest in Easyplug S.A.
  At a consolidated level, Thomson has a 50% interest and
  Schneider Electric has a 50% interest in Easyplug S.A., which is a corporate
  joint-venture as defined by APB 18 The Equity Method of Accounting for
  Investment in Common Stock (APB 18).

Under French GAAP, the gain associated with the asset contribution
  has been eliminated at 50% in the amount of USD 3 million (€3
  million at 2001 average rate).

Under U.S. GAAP, according to APB 18 as Thomson received shares
  in exchange of contributed assets, the investments should be recorded at the
  lower of carrying amount or fair value. Therefore, the gain recognized under
  French GAAP has not been recognized but deducted from investment.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-124

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

(v) Retention bonus

In connection with certain of its acquisitions, Thomson entered
  into agreements with key employees of acquired companies setting up the conditions
  for payment of certain retention bonuses. These bonuses are an incentive for
  their benefitors to remain (for a fixed period of time) employees of their company
  within the Group they have recently joined and allow Thomson to capitalize on
  their knowledge and experience.

Under French GAAP, such bonuses have been accounted for as an
  adjustment of the purchase price for€7
  million.

Under U.S. GAAP, Thomson is required to comply with the provisions
  of SFAS 141 Business Combination (SFAS 141) and EITF
  95-08 Accounting for Contingent Consideration Paid to the Shareholders
  of an Acquired Enterprise in a Purchase Business Combination. The aforementioned
  bonuses have been accounted for as compensation for future services and amortized
  over the duration of the stay period. As such, goodwill decreased by€7 million,€7
  million and€7 million as of December
  31, 2004, 2003 and 2002 and a nil,€1
  million and€6 million compensation
  expense was recorded in operating income for the year ended December 31, 2004,
  2003 and 2002, respectively.

(w) FIN 45 - Recognition of Guarantee given

Under French GAAP, and following the recommendation
  issued by the Commission des Opérations de Bourse for financial
  year closing as of December 31, 2003, off-balance sheet commitments, financial
  debts as well as leases are disclosed in the note 24.

Under U.S. GAAP and pursuant to FIN 45 Guarantors
  Accounting and Disclosure Requirements for Guarantee, Including Indirect Guarantees
  of Indebtedness of Others application, Thomson shall disclose information
  on all guarantees except on those covering the consolidated entity own futureperformance and provide a more extensive disclosure of the
  guarantees given.

Additionally to supplemental disclosure requirement,
  which has no effect for Thomson, the FIN 45 requires that upon issuance of a
  guarantee, the guarantor must recognize a liability for the fair value of the
  obligation it assumes under that guarantee.

As of December 31, 2004 and 2003, Thomson recognized a provision
  pursuant this requirement amounting to nil and€4
  million and results from the warranties and indemnification agreement granted
  related to an asset disposal (note 24 of the consolidated financial statement).

(x) Transaction Costs

Under French GAAP, transaction costs have been deferred as of
  December 31, 2003. During 2004, they have been added to acquisition costs of
  targeted investments, when acquisition transactionshave
  been completed or have been charged to the capital Gain (loss) when disposal
  transactions have been completed.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-125

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Under U.S. GAAP, those costs have been expensed as incurred.

As a consequence, the net income of the Group under U.S. GAAP,
  compared to French GAAP, has been impacted in an amount of€7 million and to€(9)
  million for the year ended December 31, 2004 and 2003, respectively.

(y) Sale of written call

In 2004 in connection with the TTE transaction with TCL International
  (See note 2), Thomson granted TCL International a call option, whereby TCL International
  is entitled to require Thomson to deliver 2.5 million of Thomson common shares
  at a fixed exercise price of€18.12
  per share. Thomson has assessed such above right granted to TCL
  International as part of the contribution given in exchange of the 33% interest
  in TTE. This call option has a net cash settlement.

Under French GAAP and at combination date (see note 2), the benefit
  granted by Thomson to TCL International has been valued and recognized in the
  related exchange of non monetary assets as part of the equity investment received
  with the counterparty charged to retained earnings.

Under U.S.GAAP, such written call option is a freestanding derivates
  that meet the recognition criteria of the EITF 00-19 Accounting for Derivative
  Financial Instruments Indexed to, and Potentially Settled in, a Companys
  Own Stock that shall be recognized at fair value as a liability in the
  consolidatedbalance sheet, with re-measurement at each
  balance sheet date because it is entered into inconjunction
  with some other transaction and is legally detachable and separately exercisable.

As of December 31, 2004 and compare to French GAAP, Thomson recognized
  an additional €4million
  financial expense as a result of the re-measurement
  process of the related options. As a result, as of year-end 2004, Thomson has
  recognized a€8 million financial
  liability and the impact on the net equity under U.S. GAAP compare to French
  GAAP amounts to€(8) million.

(z) Discounting of long term assets and liabilities

As of December 31, 2004, Thomson recognized certain liabilities
  that are expected to be settled with a cash payment of more than 12 months.

French GAAP do not require long term liabilities to be recognized
  at their present values, but at costs. Under U.S. GAAP, long term liabilities
  are recognized at their present value and the accretion is recognized as a financial
  expense.

As of December 31, 2004, the net income and net equity under
  U.S. GAAP of the Group compared to French GAAP is increased by€1
  million.

(aa) Income tax

Tax effects on U.S. GAAP adjustments have been recorded in an
  amount of€1 million in 2004,
  1 million in 2003 and€(10)
  million in 2002.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-126

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Under U.S. GAAP, in connection with deferred tax liabilities
  recognized on acquired intangible assets, (Note 31 (q) above), valuation allowance
  on deferred tax assets was reversed against goodwill in the amount of nil, nil
  and€42 million as of year end
  2004, 2003 and 2002, respectively.

(ab) Presentation of consolidated Balance Sheet

ab - i) Classification of the Balance Sheet

The classification of certain items and the format of Thomsons
  consolidated balance sheets vary to some extent from U.S. GAAP.

The table below presents the current or the non current portion
  of balance sheet captions:

|                                                              | As of December 31,
|------------------------------------------------------------- | ------------------
|                                                              | 2002              
|                                                              |                   
|                                                              | ( in millions)   
|                                                              |                   
|Total Long Lived Assets
      as reported under French GAAP   | 4,023             
|Of which current portion
      of:                            |                   
|Loan and other non current
      assets (*)                   | 92                
|                                                              |                   
|Total Current Assets
      as reported under French GAAP      | 5,691             
|Of which non current portion
      of:                        |                   
|Trade accounts and notes
      receivable                     | 37                
|Other receivables                                             | 49                
|Cash and cash Equivalent                                      | 80                
|                                                              |                   
|Total Reserve as reported
      under French GAAP             | 1,048             
|Of which current portion
      of:                            |                   
|Other reserves                                                | 118               
|                                                              |                   
|Total Financial Debt
      as reported under French GAAP      | 1,694             
|Of which current portion
      of:                            |                   
|Financial debt (**)                                           | 262               
|                                                              |                   
|Total Current Liabilities
      as reported under French GAAP | 2,987             
|Of which non current portion
      of:                        |                   
|Other creditors and accrued
      liabilities (***)           | 404               
|                                                              |                   

|(*)   | Thomson had bank accounts cash deposits as a compensating
      balance to a loan in the same amount at a preferential interest rate. Under
      U.S. GAAP these amounts would be disclosed as non-current assets in the
      consolidated balance sheets and would therefore reduce cash and cash equivalents
      by the same amount.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(**)  | Includes short term portion of capital lease obligations
      disclosed in note 24                                                                                                                                                                                                                                                       
|(***) | In 2002, Other Creditors includes the debt related to the
      Technicolor acquisition                                                                                                                                                                                                                                                   

In addition, as of December 31, 2004, Anagni operations
  assets and related liabilities fulfilled the criteria of assets held for sale
  as specified under FAS 144. The sale of the entity occurred on of February
  28, 2005. Under US GAAP, as of December 31, 2004, the assets held for sale totalling
  €101 million and the related liabilities
  amounting to€178 million should
  be presented separately in the consolidated Balance Sheet. The assets held for
  sale mainly include€65 million
  of inventories and net accounts receivable of€23
  million and other current assets of€7
  million.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-127

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

ab  ii) Additional information:

Trade receivables and related valuation allowances accounting
  policy  Trade receivables include amounts due from customers for services
  provided and products sold in the normal course of the business operation. Thomson
  maintains allowances for doubtful accounts for estimated losses that result
  from the inability of its customers to make payments. Thomson bases its allowance
  on the likelihood of recoverability of accounts receivable based upon past experience
  and reviews of agingand analysis of specific accounts.
  If economic or specific industry trends worsen beyond its estimates, Thomson
  increases its allowances for doubtful accounts by recording additional expense.
  Thomson charged off trade receivable when the non recoverability is definitive.

Under French GAAP, Thomson has classified€816
  million,€873 million and€388
  million of SICAV investments in the caption cash and cash equivalent,
  as of December 31, 2004, 2003 and 2002, respectively, Under US GAAP, these investments
  are classified as trading investment.

Under French GAAP, Finished goods inventory caption is broken down as follow:

|                                                 | As of December 31, | 
|------------------------------------------------ | ------------------ | 
|                                                 | 2002               | 
|                                                 |                    | 
|                                                 |                    | 
|                                                 |                    | 
|Finished goods inventory                         | 330                | 
|Purchase goods for resale
      inventory        | 231                | 
|Finished goods inventory                         | 561                | 
|Valuation allowance                              | (59)               | 
|Finished goods inventory,
      net of allowance | 502                | 
|                                                 |                    | 

The valuation allowance described under Note 11 corresponds exclusively
  to loss in value.

Under French GAAP, other creditors and accrued liabilities caption includes
  the following:

|                                                           | As of December 31, | 
|---------------------------------------------------------- | ------------------ | 
|                                                           | 2002               | 
|                                                           |                    | 
|                                                           |                    | 
|                                                           |                    | 
|Income tax payable, deferred
      taxes and accrued taxes | 244                | 
|Royalties payable                                          | 223                | 
|Accounts payable                                           | 95                 | 
|Deferred income                                            | 85                 | 
|Deferred income                                            | 17                 | 
|Other accruals                                             | 373                | 
|Other creditors                                            | 13                 | 
|Advertising and promotion
      payable                    | 20                 | 
|                                                           |                    | 
|Total other creditors
      and accrued liabilities        | 1,070              | 
|                                                           |                    | 

Sales between Displays and Components segment and Consumer Products
  segment are made based upon market conditions.

The accompanying notes are an integral part of the consolidated
  financial statements.

F-128

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

As of December 31, 2004, tangible assets recognized in the Group consolidated
  balance sheet that are under capital lease agreements amount to €51
  million (2003: €61 million and 2002: €1 million).Thomson recognized
  a similar financial debt as of the same date. Related depreciation expenses
  are posted in the caption costs of sales of the consolidated Income
  Statement.

(ac) Presentation of the consolidated Income Statements

ac i) Operating income

Certain expenses such as Restructuring costs and Pension
  plans costs on closed factory, which are classified in French GAAP as
  non-operating expenses are classified as operating expenses under U.S. GAAP
  and therefore decrease the operating income under U.S. GAAP in an amount of
  €(767) million, €(241)
  million and€(167) million for
  the year ended as of December 31, 2004, 2003 and 2002, respectively.

Under U.S. GAAP, certain operations are discontinued operations as of December
  31, 2004 that were classified under continuing operation under French GAAP (note
  31 ad viii). As a result, Thomsons operating income under U.S. GAAP has been
  increased in an amount of €280 million. This amount includes €196
  million of restructuring costs.

Other items, recorded under other income (expense) under French GAAP have
  been reclassified to operating income under U.S. GAAP. The items reclassified
  to operating income under U.S. GAAP approximate €(80) million, €(86)
  million and €(15) million for the years ended as of December 31, 2004,
  2003 and 2002, respectively. Main items are listed hereafter.

- In 2004, (a) a loss of 14 million that has been
    recognized in the Content & Network Segment that is related to an indemnity
    paid in relation with the acquisition of the PDSC business made in 2002, (b)
    a loss of €25 million that corresponds
    to costs incidental to the restructuring of Thomsons displays activities
    and includes operational impairments amounted to€3
    million (consisting primarily of the reduced production output that resulted
    from the restructuring announcement until the effective closure), a €6
    million loss related to the settlement of pension obligation in the United
    States of America following the closure of Tubes & Glass
    Plants and a loss of€16 million
    on certain risks related to the exit of the business.
- Write offs of long lived assets (€36
    million, €52 million and €15
    million, in 2004, 2003 and 2002 respectively. Other suppliers commitments
    costs (nil, €1 million and nil, in 2004, 2003 and
    2002 respectively).
- In 2003, under French GAAP, costs related to the decision to temporarily
    stop two of the Components segments large-size tube
    production lines (lines 1 and 2) in Marion, Indiana have been classified as
    non-current expenses and amount to €(18)
    million in 2003 (Note 6). These costs relate to costs incurred between February
    and June, the decision to definitively close the lines being announced on
    June 12, 2003. They include mainly employee unemployment costs (€(7)
    million), and operational impairment (€(10) million).
    Operational impairment is primarily the reduced production output that resulted
    from interplant job changes that are required by the seniority protection
    clauses in the Union contracts. Also, during 2003 €6
    million of income related to the reversal of a provision for litigation has
    been classified as a non-current gain (Judgment of the lawsuit in favour of
    Thomson); The accrual made was classified as an operating

The accompanying notes are an integral part of the consolidated financial statements.

F-129

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

> expense under U.S. GAAP and as a consequence the reversal has increased
>     the operating income by the same amount. In addition during 2003, Thomson
>     accrued for €(8) million of expense related to litigation in the Audio
>     Video profit center. Under French GAAP this has been classified as a non current
>     expense and as an operating expense under U.S. GAAP.

- Under French GAAP, in connection with litigations patents infringement settlements
    (note 3 and 6), the Group elected to classify under Other income (expense)
    the estimated amount in excess of reasonable royalties to be paid
    €0 million, €0 million and €(8) million in 2004, 2003 and 2002,
    respectively.
- In 2002, €10 million of the proceeds received from insurance recovery
    has been classified as a non-current item under French GAAP (Note 6). In addition,
    under French GAAP, in 2002, the Group recorded under other income and
    expenses the operational inefficiencies costs amounting to €(3)
    million in connection with fire damages in one of its Display and Components
    plant.
- In 2001, as part of a substantial reassessment of its product portfolio,
    the Group discontinued certain products or product lines, which have not resulted
    in restructuring plans. The related costs, mainly write-off of finished goods
    and raw material inventory (€(30) million), purchase order and other
    contract cancellation costs (€(18) million) and associated fixed asset
    write-offs (€(16) million) have been recorded as non-current items under
    French GAAP as of December 31, 2001. Under U.S. GAAP, such costs were reflected
    in 2001 in the operating income. In 2002, the Group succeeded in negotiating
    the reduction of certain contract cancellation costs mentioned above by €5
    million. Therefore and consistently with 2001 classification, the Group classified
    such reversal as an exceptional gain under French GAAP.

The table below reconciles operating income under French GAAP to operating
  income under U.S. GAAP. Amounts displayed in the next table that would not have
  been explained here above, are fully explained in other parts of this reconciliation
  note.

The accompanying notes are an integral part of the consolidated financial statements.

F-130

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                                           | Year ended December 31, | 
|-------------------------------------------------------------------------- | ----------------------- | 
|                                                                           | 2002                    | 
|                                                                           |                         | 
|                                                                           | ( in millions)         | 
|Operating income as reported in the Consolidated                           |                         | 
|Statements of operations                                                   | 718                     | 
|Adjustments                                                                |                         | 
|Restructuring                                                              | 1                       | 
|Pension and termination benefits                                           | (13)                    | 
|Post retirement transition obligation                                      | (2)                     | 
|Forward exchange contracts                                                 | (10)                    | 
|Stock based compensation                                                   | -                       | 
|Capitalized development costs                                              | -                       | 
|Capitalized interest                                                       | (1)                     | 
|Provision for year 2000 and Euro                                           | (1)                     | 
|Subsidiaries controlled but not consolidated                               | (2)                     | 
|Recording of Singingfish acquisition                                       | (13)                    | 
|Purchase price allocation and Amortization of recognized intangible assets | (26)                    | 
|Revenue recognition                                                        | 3                       | 
|Retention bonuses                                                          | (6)                     | 
|Compensation (expense) gain related to employee offerings                  | (1)                     | 
|In process R&D                                                             | -                       | 
|Transactions costs                                                         | -                       | 
|OCEANE costs                                                               | -                       | 
|Long-term liabilities                                                      | -                       | 
|Sub total adjustments                                                     | (71)                    | 
|                                                                           |                         | 
|Reclassifications                                                          |                         | 
|Restructuring                                                              | (141)                   | 
|In process R&D                                                             | (5)                     | 
|Contracts cancellation costs                                               | 5                       | 
|Fixed assets write-off                                                     | (15)                    | 
|Other reclassifications                                                    | -                       | 
|Pension plans interest costs                                               | (26)                    | 
|Discontinued operations                                                    | -                       | 
|Sub total reclassifications                                               | (182)                   | 
|Operating income according to U.S. GAAP                                    | 465                     | 
|                                                                           |                         | 

ac ii) Research and development expenses

Under U.S. GAAP, research and development expenses approximate €263 million,
  €285 million and €364 million for the years ended December 31, 2004,
  2003 and 2002, respectively.

ac iii) Cost of sales

Under French GAAP, Thomson has classified certain costs in the consolidated
  income of operations as research and development costs in an amount of €16
  million that are reclassified to costs of sales and general and administrative
  expenses under U.S. GAAP. As a result of the cost of sales increasing, the gross
  margin decreased in an amount of €7 million for year ended December 31,
  2004 (2003: €5 million and 2002: Û 5 million). Finally, general and administrative
  expenses have been increased in an amount of €9 million for year ended
  December 31, 2004.

The accompanying notes are an integral part of the consolidated financial statements.

F-131

---

In addition, research and development in process write-off on acquired entities
  has been reclassified from non-current under French GAAP to operating under
  U.S. GAAP in the amount of nil, nil, and €5 million for the years ended
  December 31, 2004, 2003 and 2002 (see Note 31 y iii).

In addition, under French GAAP, warranty costs of €82 million, €123
  million and €150 million for the years ended December 31, 2004, 2003 and
  2002, respectively, have been classified in selling general, and administrative
  expenses. Under U.S. GAAP, these amounts would be classified as cost of sales
  thus decreasing the gross margin by these respective amounts.

Under French GAAP, Thomson has classified cooperative advertising and promotions
  expenses, which have not been reclassified as a deduction of sales as required
  by the provision of the EITF 01-09 Accounting for Consideration Given
  by a Vendor to a Customer or a Reseller of the Vendors Products, under
  selling, general and administrative expense caption. Under U.S.
  GAAP, such costs should be classified as cost of sales, thus decreasing the
  gross margin by €25 million, €38 million and €53 million for
  the years ended December 31, 2004, 2003 and 2002, respectively.

ac iv) Additional information

Amortization of capitalized software costs was €12 million, €26
  million and €29 million for 2004, 2003 and 2002 respectively.

Advertising costs are expensed as incurred. These costs were €45 million,
  €62 million and  75 million for the years ended December 31,
  2004, 2003 and 2002 respectively.

Rental expense was €88 million, €122 million and €103 million
  for the years ended December 31,2004, 2003 and 2002, respectively.

The other than temporary impairment charge recorded under U.S.
  GAAP for listed securities amounted to €0 million, €0 million, and
  €11 million for the years ended as of December 31, 2004, 2003 and 2002,
  respectively.

Shipping and handling costs amounted to €294 million, €246 million
  and €302 million for the years ended as of December 31, 2004, 2003 and
  2002 and were classified under cost of sales.

Revenue of the Group under French GAAP amounted to €7,994 million for
  the year ended December 31, 2004 and is broken down as follow  revenue
  from delivery of product amounts to €5,110 million, revenue from services
  amounts to €2,480 million and revenue from licenses amounts to €404
  million.

(ad) Additional U.S. GAAP information

ad i) Other comprehensive income

SFAS No. 130, Other Comprehensive Income, defines
  comprehensive income as the change in equity of a business enterprise from transactions
  and other events and circumstances from non-owner sources. French GAAP does
  not require separate disclosure of all such changes in equity during afiscal
  period.

The accompanying notes are an integral part of the consolidated financial statements.

F-132

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Under U.S. GAAP, the following information would be displayed within the consolidated
  financial statements as either a separate statement or as a component of the
  consolidated statement of changes in shareholders equity and minority
  interests:

|                                                                         |  |                 |  |       |  |       | 
|------------------------------------------------------------------------ |  | --------------- |  | ----- |  | ----- | 
|                                                                         |  | 2002            |  | 2003  |  | 2004  | 
|                                                                         |  |                 |  |       |  |       | 
|                                                                         |  | ( in millions) | 
|                                                                         |  |                 |  |       |  |       | 
|Net Income According
      to US GAAP                                    |  | 351             |  | (46)  |  | (567) | 
|                                                                         |  |                 |  |       |  |       | 
|Other Comprehensive Income                                               |  |                 |  |       |  |       | 
|Minimum Liability Adjustement                                            |  | (37)            |  | 12    |  | (12)  | 
|Foreign Currency Translation                                             |  | (400)           |  | (286) |  | (111) | 
|Unrealized Gain (Loss)
      on Securities                               |  |                 |  |       |  |       | 
|Unrealized Holding Gains
      (Losses) arising during the period        |  | (227)           |  | 11    |  | 5     | 
|Less: Reclassification
      adjustments for gain included in net Income |  | 1               |  | 0     |  | 0     | 
|                                                                         |  |                 |  |       |  |       | 
|Net Unrealized Gains (Losses)
      on securities                        |  | (226)           |  | 11    |  | 5     | 
|                                                                         |  |                 |  |       |  |       | 
|Tax effect of the above
      adjustments (*)                            |  | 17              |  | 0     |  | 0     | 
|                                                                         |  |                 |  |       |  |       | 
|Comprehensive Income
      according to US GAAP                          |  | (295)           |  | (309) |  | (685) | 
|                                                                         |  |                 |  |       |  |       | 

|(*) | Under U.S. GAAP the unrealized gain (loss) on
      securities is a temporary difference, the tax effect of which is partially
      offset by the reversal of the deferred tax valuation allowance in the amount
      of 98 million in 1999 and utilization of long-term
      capital losses carry-forward with the tax effect of 65
      million in 1999. In 2001 and 2002 the decrease of the unrealized holding
      gains has resulted in the recognition of a deferred tax gain offsetting
      part of the deferred tax liability recorded in 1999.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If Thomson were to present consolidated financial statements in accordance
  with U.S. GAAP, the accumulated balances for minimum liability adjustment, foreign
  currency translation adjustments and unrealized gains on available-for-sale
  securities, respectively, would be disclosed on the face of the consolidated
  balance sheets, in the statements of changes in shareholders equity and
  minority interests, or in the notes to the financial statements. The following
  table presents the accumulated balances of each classification noted above.

The accompanying notes are an integral part of the consolidated financial statements.

F-133

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated



|                                       |  |                 |  |       |  |            |  |       |       | 
|-------------------------------------- |  | --------------- |  | ----- |  | ---------- |  | ----- | ----- | 
|                                       |  | MLA             |  | CTA   |  | Net        |  | Total |      
|                                       |  |                 |  |       |  | unrealized |  |       |      
|                                       |  |                 |  |       |  | gains      |  |       |      
|                                       |  |                 |  |       |  |            |  |       |       | 
|                                       |  | (€ in millions) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|2002                                   |  |                 |  |       |  |            |  |       |       | 
|Balance at beginning of
      the year |  | (60)            |  | 86    |  | 209        |  |       | 235   | 
|current year change                    |  | (37)            |  | (400) |  | (209)(*)   |  |       | (646) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|Balance at the end of the
      year   |  | (97)            |  | (314) |  | 0          |  |       | (411) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|2003                                   |  |                 |  |       |  |            |  |       |       | 
|Balance at beginning of
      the year |  | (97)            |  | (314) |  | 0          |  |       | (411) | 
|current year change                    |  | 12              |  | (286) |  | 11         |  |       | (263) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|Balance at the end of the
      year   |  | (85)            |  | (600) |  | 11         |  |       | (674) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|2004                                   |  |                 |  |       |  |            |  |       |       | 
|Balance at beginning of
      the year |  | (85)            |  | (600) |  | 11         |  |       | (674) | 
|current year change                    |  | (12)            |  | (111) |  | 5          |  |       | (118) | 
|                                       |  |                 |  |       |  |            |  |       |       | 
|Balance at the end of the
      year   |  | (97)            |  | (711) |  | 16         |  |       | (792) | 
|                                       |  |                 |  |       |  |            |  |       |       | 

|(*) | The accumulated CTA on unrealized gain has been
      included under the column foreign currency translation adjustments
      and represents a decrease of 17 million in the
      current period change of CTA in the year 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ad ii) Earnings per share under U.S. GAAP

Employee offering

Under French GAAP, the Employee Offering (Note 16) is treated as a capital
  increase and the average number of shares is computed after having considered
  the shares issued to employees.

Earnings per share according to U.S. GAAP, giving effect to the adjustments
  would be as follows:

|                                                | Year ended December 31, | 
|----------------------------------------------- | ----------------------- | 
|                                                | 2002                    | 
|                                                |                         | 
|                                                | ( in millions)         | 
|                                                |                         | 
|Net income                                      | 351                     | 
|Preferred dividend BASAs (a)                    | -                       | 
|Income available to common stockholders         | 351                     | 
|Average number of shares basic U.S.
      GAAP  | 279,590,805             | 
|Earnings per share according to
      U.S. GAAP |                         | 
|Basic                                           | 1.26                    | 
|Diluted                                         | 1.21                    | 
|                                                |                         | 

|(a) | Related to BASA plan, offered to non-employees
      / non-directors as described in note 31(e), the difference between the subscribed
      price of €1 and the fair value of the option which gave right to purchase
      one Thomson share at €16 has been considered a preferred dividend.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated financial statements.

F-134

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Reconciliation of average number of shares from French to U.S. GAAP:



|                                                    |  | December 31, | 
|--------------------------------------------------- |  | ------------ | 
|                                                    |  | 2002         | 
|                                                    |  |              | 
|Average number of shares
      used for French GAAP |  |              | 
|calculations as restated
      for October 1999 and |  |              | 
|June 16, 2000 stock splits.                         |  | 277,240,438  | 
|                                                    |  |              | 
|Treasury shares loaned                              |  | 2,350,367    | 
|Redeemable bonds                                    |  | -            | 
|                                                    |  |              | 
|Average number of shares
      used for U.S. GAAP   |  |              | 
|calculation (basic)                                 |  | 279, 590,805 | 
|                                                    |  |              | 

The U.S. GAAP accounting treatment in connection with the treasury shares
  lent to third parties does not differ from French GAAP. The shares lent are
  directly credited to equity. Thomson transferred the control over the shares
  to the third party. Accordingly, for earnings per share purposes, these shares
  are treated as outstanding in 2002. Starting 2003, no further loan on treasury
  shares was granted by the Group.

ORA bonds issued on March 16, 2001 were redeemed in 15.5 million Thomson shares on March 16, 2002.

Reconciliation from basic earnings per share to diluted earnings per share:

|                                                    | Income          |  | Shares      |  | Per share | 
|--------------------------------------------------- | --------------- |  | ----------- |  | --------- | 
|                                                    | numerator       |  | Denominator |  | Euro      | 
|                                                    |                 |  |             |  |           | 
|                                                    | ( in millions) | 
|2004                                                |                 |  |             |  |           | 
|Earnings per share according to U.S. GAAP (basic)   | (590)           |  | 273,646,869 |  | (2.16)    | 
|Earnings per share according to U.S. GAAP (diluted) | (590)           |  | 273,646,869 |  | (2.16)    | 
|                                                    |                 |  |             |  |           | 

As of year-end 2004, in addition to the OCEANEs 2000 & 2002 (Note 20) and
  promissory note to Carlton ( Note 22), Thomson issued additional dilutive instruments
  convertibles bonds (Note 20), TCL call option ( Note 16 & 31(y)) , TTE retention
  shares (Note 31 (e), Basa'sThomson (Note 16 & 31 (e)), written put option (Note
  16) and Thomson 2004 stock option plans (Note 16 & 31 (e)).These instruments
  were not included in the computation of diluted earning per share because they
  would have been antidilutive.

|                                                    | Income          |  | Shares      |  | Per share | 
|--------------------------------------------------- | --------------- |  | ----------- |  | --------- | 
|                                                    | numerator       |  | Denominator |  | Euro      | 
|                                                    |                 |  |             |  |           | 
|                                                    | ( in millions) | 
|2003                                                |                 |  |             |  |           | 
|Earnings per share according to U.S. GAAP (basic)   | (46)            |  | 276,796,602 |  | (0.17)    | 
|Earnings per share according to U.S. GAAP (diluted) | (46)            |  | 276,796,602 |  | (0.17)    | 
|                                                    |                 |  |             |  |           | 

As of year-end 2003, none potential shares (OCEANEs 2000 & 2002 (Note 20) and promissory notes issued to Carlton) have a dilutive effect on the earnings per share.

The accompanying notes are an integral part of the consolidated financial statements.

F-135

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                      | Income          |  | Shares      |             | Per share | 
|----------------------------------------------------- | --------------- |  | ----------- | ----------- | --------- | 
|                                                      | numerator       |  | Denominator |             | Euro      | 
|                                                      |                 |  |             |             |           | 
|                                                      | ( in millions) | 
|2002                                                  |                 |  |             |             |           | 
|Earnings per share according to U.S. GAAP (basic)     | 351             |  |             | 279,590,805 |           | 
|Dilutive effect of convertible bonds (OCEANE 2002)    | 3               |  |             | 11,973,618  |           | 
|Dilutive effect of promissory notes issued to Carlton | 2               |  |             | 4,000,000   |           | 
|Earnings per share according to U.S. GAAP (diluted)   | 356             |  |             | 295,564,423 |           | 
|                                                      |                 |  |             |             |           | 

As of year-end 2002, the OCEANEs 2000 (Note 20) are antidilutive
  on the earnings per share.

Subsequent event:

During the first half of 2005, the Group has acquired companies and has given
  Thomson shares as consideration. In addition, the Group gave stock options to
  some key employees.

Accordingly, Thomson has delivered a total of 2,351,647 shares and has delivered
  an additional total of 2,901,328 Thomsons shares by instalement during 2006,
  2007 and 2008. An earn-out may also require the Group to deliver 87,075 additional
  shares. In case Thomson share drops from the closing date until the delivery/availability
  for sale of shares by the seller, Thomson will deliver additional shares as
  compensation so that the seller is guaranteed to get the originally determined
  price.

In addition, Thomson granted 3,861,756 stock options that may be exercised
  in different period from 2006 through 2008 at an exercise price which range
  from €20.33 (for 2,101,576 options) to €20.72 (for 1,760,000 options).

ad iii) Combined information concerning pro rata consolidated entities

In accordance with regulations of the U.S. Securities and Exchange Commission with respect to the use of the pro rata consolidation method, summarized financial information of the Companys assets, liabilities, revenues, expenses and cash flows related to investments accounted for using the pro rata consolidation method has been prepared as of December 31, 2004, 2003 and 2002.

The following table presents the entities consolidated under pro rata which summarized financial information is disclosed.

The accompanying notes are an integral part of the consolidated financial statements.

F-136

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                             | 2002 | 2003 | 2004
|------------------------------------------------------------ | ---- | ---- | ----
|                                                            
|                                                             |      |      |     
|Thomson CITIC Digital Technology                             |      |      |    
|Nagra Thomson Licensing                                      |      |      |    
|La luna Titra                                                |      |      |    
|KeyMRO S.A.S. (*)                                            |      |     |    
|Thomson Broadcast and Media Solutions Nordic A/S             |      |     |    
|ScreenVision Europe entities sub-group (note 30)             |     |     |    
|Screnvision acquisition 10, Inc.                             |      |      |    
|Screnvision acquisition 20, LLC.                             |      |      |    
|Technicolor Screen services, Inc.                            |     |     |    
|Thomson Zhaowei Multimedia Co Ltd (**)                       |     |     |    
|Cinema Billboard Network, LLC                                |     |     |    
|ScreenVision Cinema Network, LLC                             |     |     |    
|Screenvision Direct, Inc. (ex - Val Morgan Cinema Adv. Inc.) |     |     |    
|Technicolor Cinema Billboard, Inc.                           |     |     |    
|Technicolor Screen Advertising, Inc.                         |     |     |    
|Technicolor Digital Cinema LLC                               |     |      |     
|Technicolor Cinema Advertising LLC                           |     |     |    
|3DCD LLC                                                     |     |     |    
|Easyplug SAS                                                 |     |      |     
|Easyplug Inc.                                                |     |      |     
|                                                             |      |      |     

|(*)  | KeyMRO has been sold as of December 31, 2004 (see note 2).
|---- | ----------------------------------------------------------
|(**) | Zhaowei has been disinvested on July 31, 2004.            

|                                    | December 31,    | 
|----------------------------------- | --------------- | 
|                                    | 2002            | 
|                                    |                 | 
|                                    | ( in millions) | 
|                                    |                 | 
|Balance sheet                       |                 | 
|Non current assets                  | 104             | 
|Current assets                      | 77              | 
|Non current liabilities             | 21              | 
|Current liabilities                 | 42              | 
|                                    |                 | 
|Income statements                   |                 | 
|Net sales                           | 56              | 
|Cost of sales                       | (42)            | 
|Gain (loss) from operation          | (17)            | 
|Net gain (loss)                     | (30)            | 
|                                    |                 | 
|Cash flow statements                |                 | 
|Cash flow from operating activities | (25)            | 
|Cash flow from investing activities | (12)            | 
|Cash flow from financing activities | (6)             | 
|                                    |                 | 

ad iv) Goodwill information

Under U.S. GAAP, goodwill and indefinite-lived intangible assets are no longer
  amortized and are assessed for impairment on at least an annual basis. Intangible
  assets with finite lives are amortized over their estimated useful life.



The accompanying notes are an integral part of the consolidated financial statements.

F-137

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

The impairment test for goodwill involves a two-step process. Step one consists
  of a comparison of a reporting units fair value to its carrying value. A
  reporting unit is the level at which goodwill impairment is measured and it
  is defined as an operating segment or one level below, if certain conditions
  are met. The fair value for goodwill is determined based on discounted cash
  flows, market multiple or appraised values, as appropriate. If the carrying
  value is greater than its fair value, goodwill is impaired.

Under step two, the amount of goodwill impairment is measured by the amount
  that the reporting units goodwill carrying value exceeds the implied fair
  value of goodwill. The implied fair value of goodwill can only be determined
  by deducting the fair value of all tangible and intangible net assets (including
  unrecognized intangible assets) of the reporting unit from the fair value of
  the reporting unit (as determined in the first step). In this step, the fair
  value of the reporting unit is allocated to all of the reporting units assets
  and liabilities (a hypothetical purchase price allocation). Thomson performed
  its annual impairment test as of June 30, 2002, 2003 and 2004.

For the year ended December 31, 2004, under U.S. GAAP, Thomson recorded impairment
  charges amounting to €27 million.

Thomson did not recognize any goodwill impairment charge for the years ended
  December 31, 2003 and 2002.

The goodwill impairment charge is reported under the operating income under
  U.S. GAAP.

Impairment of Indefinite-lived Intangible Assets

The impairment test for indefinite-lived intangible assets other than goodwill
  consists of comparing the carrying amount of these intangible assets to their
  fair value. Any excess of the carrying amount over an assets fair value is recorded
  as an impairment charge. Thomson completed the impairment test for these assets
  as of June 30, 2004 and determined that the fair value of these assets was in
  excess of the relative carrying amounts. Accordingly, no impairment charges
  were recorded for the year ended December 31, 2004 related to indefinite lived
  intangibles assets. No impairment charges were recognized for the years ended
  December 31, 2003 and 2002, as well.

Intangible assets acquired subject to amortization mainly consist of:

- Acquisitions in 2004 amounting to €193 million and primarily consisting
    of customer relationships of the HNS business (€175 million) and NOKIA
    (€3 million) as well as certain other technology rights for an amount
    of €15 million. The weighted average amortization period is 8 years
- Acquisitions in 2003 amounting to €116 million and primarily consisting
    of customer relationships of Dupliteck (€32 million) and Vidfillm (€35
    million) as well as certain other Technology rights for an amount of €34
    million. The weighted average amortization period is 15 years
- Acquisitions in 2002 amounting to €206 million and primarily consisting
    of customer relationships of Panasonic Disc Services Corporation (€85
    million), supplier relationships of ScreenVision Europe (€22 million),
    certain rights on intellectual property acquired (€89 million) as well
    as acquired developed technology (€10 million). The weighted average
    amortization period is 13 years.

The accompanying notes are an integral part of the consolidated financial statements.

F-138

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                            |  |       |  |              |  |       |       |              |       |       |  |              |  |       |  | 
|------------------------------------------- |  | ----- |  | ------------ |  | ----- | ----- | ------------ | ----- | ----- |  | ------------ |  | ----- |  | 
|                                            |  | 2002  |  | 2003         |  | 2004  |      
|                                            |  | Gross |  | Accumulated  |  | Gross |       | Accumulated  |       | Gross |  | Accumulated  | 
|                                            |  | book  |  | amortization |  | book  |       | amortization |       | book  |  | amortization | 
|                                            |  | value |  |              |  |       | value |              |       |       |  | value        |  |       |  | 
|                                            |  |       |  |              |  |       |       |              |       |       |  |              |  |       |  | 
|Customer and supplier relationship          |  | 393   |  | (32)         |  |       | 397   |              | (58)  |       |  | 548          |  | (83)  |  | 
|Intellectual property rights                |  | 117   |  | (27)         |  |       | 149   |              | (37)  |       |  | 162          |  | (45)  |  | 
|Other intangibles (mainly
      software)   |  | 195   |  | (126)        |  |       | 141   |              | (111) |       |  | 139          |  | (121) |  | 
|Total definite life
      intangible assets |  | 705   |  | (185)        |  |       | 687   |              | (206) |       |  | 849          |  | (249) |  | 
|                                            |  |       |  |              |  |       |       |              |       |       |  |              |  |       |  | 

The aggregate amortization expense for intangible assets for
  the year ended December 31, 2004, 2003 and 2002 was€63
  million,€66 million and€74
  million, respectively. Based on the current amount of intangible assets subject
  to amortization, the estimated amortization expense for 2005 would be€73
  million and€73 million for 2006
  and each of the three following years.

No indefinite-lived intangible assets were acquired during the year ended
  December 31, 2004. Indefinite-lived intangible assets acquired during the year
  ended December 31, 2003 amounted to €24 million and primarily related to
  the Recoton acquisition. Indefinite-lived intangible assets acquired during
  the year ended December 31, 2002 amounted to €43 million and primarily
  related to the acquisition of Grass Valley Group.

The carrying amount of indefinite-lived intangible assets reached €289
  million, €296 million and €321 million as of December 31, 2004, 2003
  and 2002, respectively and was primarily related to Technicolor trademark, which
  is denominated in U.S. Dollars. As a consequence, changes in the carrying amount
  result from the impact of the conversion in euros of USD denominated intangible
  assets during 2004, 2003 and 2002.

The research and development assets acquired and written off in the year ended
  December 31, 2004, 2003 and 2002 amounted to €2 million, €2 million
  and €5 million, respectively (note 31 h).

Under U.S. GAAP, the aggregate amount of goodwill as of December 31, 2004,
  2003 and 2002 amounted to €1, 268 million, €1,198 million and €1,360
  million, respectively, and is broken down as follows by reportable segment.

The roll forward goodwill by segment under U.S. GAAP is as follows:

|                      | December 31,    |  | December 31, |       | Change in |  | Impairment    |  | CTA |     | December 31, | 
|--------------------- | --------------- |  | ------------ | ----- | --------- |  | ------------- |  | --- | --- | ------------ | 
|                      | 2002**          |  | 2003**       |       | goodwill* |  | or disposal** |  |     |     | 2004**       | 
|                      |                 |  |              |       |           |  |               |  |     |     |              | 
|                      | ( in millions) | 
|Content & Network     | 1,348           |  |              | 1,171 |           |  | 123           |  |     | -   |              | 
|Consumer Products     | 10              |  |              | 25    |           |  | 5             |  |     | (7) |              | 
|Displays & Components | 2               |  |              | 2     |           |  | 6             |  |     | -   |              | 
|                      |                 |  |              |       |           |  |               |  |     |     |              | 
|Total                 | 1,360           |  |              | 1,198 |           |  | 134           |  |     | (7) |              | 
|                      |                 |  |              |       |           |  |               |  |     |     |              | 

|(*)  | Changes in goodwill are either due to recent acquisition
      or to final purchase price allocation               
|---- | -------------------------------------------------------------------------------------------------------------------
|(**) | Goodwill on equity accounting investments and proportionally
      consolidated investments is not presented above.

ad v) Recently issued accounting pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004),
  Share-Based Payment (SFAS 123R), which replaces SFAS
  No. 123, Accounting for Stock-Based Compensation, (SFAS 123)

The accompanying notes are an integral part of the consolidated financial statements.

F-139

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

and supersedes APB Opinion No. 25, Accounting for Stock
  Issued to Employees. SFAS 123R requires all share-based payments to employees,
  including grants of employee stock options, to berecognized
  in the financial statements based on their fair values beginning with the first
  interim or annual period after June 15, 2005, with early adoption encouraged.
  The pro forma disclosures previously permitted under SFAS 123 no longer will
  be an alternative to financial statementrecognition. The
  Company is required to adopt SFAS 123R in the fourth quarter of fiscal 2005,
  beginning August 1, 2005. Under SFAS 123R, the Company must determine the appropriate
  fair value model to be used for valuing share-based payments, the amortization
  method for compensation cost and the transition method to be used at date of
  adoption. The transition methods include prospectiveand
  retroactive adoption options. Under
  the retroactive option, prior periods may be restated either
  asof the beginning of the year of adoption or for all periods
  presented. The prospective method requires that compensation expense be recorded
  for all unvested stock options and restricted stock at thebeginning
  of the first quarter of adoption of SFAS
  123R, while the retroactive methods would record compensation expense for all
  unvested stock options and restricted stock beginning with the first period
  restated. The Company is evaluating the requirements of SFAS 123R and expects
  that the adoption of SFAS 123R will have a material impact on The Companys
  consolidated results ofoperations and earnings per share.
  The Company has not yet determined the method of adoption or the effect of adopting
  SFAS 123R, and it has not determined whether the adoption will result in amounts
  that are similar to the current pro
  forma disclosures under SFAS 123.

In July 2004, the FASB issued EITF Issue No. 02-14, Whether
  an Investor Should Apply the Equity Method of Accounting to Investments Other
  Than Common Stock (EITF 02-14). EITF 02-14 requires application
  of the equity method of accounting when an investor is able to exert significant
  influence over operating and financial policies of an investee through ownership
  of common stock or in-substance common stock. EITF 02-14 is effective for reporting
  periods beginning after September 15, 2004 and is required to be adopted by
  the Company beginning on January 1, 2005.

The Company is currently assessing the effect that the adoption of EITF 02-14 will have on its consolidated results of operations and financial condition, but does not expect EITF 02-14 to have a material impact.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs--An Amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing to clarify that abnormal amounts of idle facility expense, excessive spoilage, freight, and handling costs are to be recognized as current-period charges regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by the Company beginning on January 1, 2005.

The Company is currently assessing the effect that the adoption of SFAS 151 will have on its consolidated results of operations and financial condition, but does not expect SFAS 151 to have a material impact.

In December 2004, the FASB issued SFAS No. 153, Exchanges
  of Non-monetary Assets - An Amendment of APB Opinion No.
  29, Accounting for Non-monetary Transactions (SFAS 153). SFAS
  153 amended APB Opinion 29 to eliminate the exception for non-monetary exchanges
  of similar productive assets and replaces it with a general exception for exchanges
  of non-monetary assets that

The accompanying notes are an integral part of the consolidated financial statements.

F-140

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

do not have commercial substance. SFAS 153 specifies that a non-monetary
  exchange has commercial substance if the future cash flows of the entity are
  expected to change significantly as a result of the exchange. SFAS 153 is effective
  for the non-monetary asset exchanges occurring in fiscal periods beginning after
  June 15, 2005 and is required to be adopted by the Company
  beginning on January 1, 2005. The provisions of SFAS 153 are required to be
  applied prospectively.

The Company is currently
  assessing the effect that the adoption of SFAS 153 will have on its consolidated
  results of operations and financial condition, but does not expect SFAS 153
  to have a material impact.

ad vi) Cah flow presentation

The following table presents the reconciliation
  from net income to cash provided by operating activities in accordance with
  SFAS 95 Statement of Cash-Flows for the years ended 2004, 2003 and
  2002.

|                                                                  | December 31,    | 
|----------------------------------------------------------------- | --------------- | 
|                                                                  | 2002            | 
|                                                                  |                 | 
|                                                                  | ( in millions) | 
|                                                                  |                 | 
|Net income (loss)                                                 | 373             | 
|Minority interests                                                | (13)            | 
|                                                                  |                 | 
|Adjustments to reconcile net income (loss) before minority        |                 | 
|interests to net cash provided by (used in) Operating activities: |                 | 
|Equity result of unconsolidated subsidiaries                      |                 | 
|(net of dividends received)                                       | -               | 
|Depreciation of property, plant and equipment                     | 358             | 
|Amortization of intangible assets                                 | 116             | 
|Amortization of customer contracts                                | 66              | 
|Allowances for losses on fixed assets, investments and provision  |                 | 
|for retirement indemnities                                        | 117             | 
|Deferred taxes                                                    | (22)            | 
|Net gain on disposal of fixed assets                              | (79)            | 
|Changes in restructuring and other reserves items                 | (54)            | 
|                                                                  |                 | 
|Net change in net working capital:                                |                 | 
|Decrease (increase) in inventories                                | 155             | 
|Decrease (increase) in trade and other receivables                | 401             | 
|Increase (decrease) in trade accounts and notes payable and       |                 | 
|accrued expenses                                                  | (139)           | 
|Change in other current assets and current liabilities            | (175)           | 
|                                                                  |                 | 
|Change in working capital                                         | 242             | 
|                                                                  |                 | 
|Net cash provided by operating activities                         | 1,104           | 
|                                                                  |                 | 
|Interest paid                                                     | (22)            | 
|Income taxes paid                                                 | (205)           | 
|                                                                  |                 | 

ad vii) Impairment of long-lived assets

On October 21, 2004, the Group announced its decision to exit the Tube business,
  (see note 18). As a result of this decision, the Group has reassessed the value
  of fixed assets of the Tube business. In order to properly assess the related
  fair values, the Group has separated the operations into two main categories:
  (i) Assets that are to be held and used and (ii) Assets for which the Group
  has the intention to dispose them off and that meet definition of asset held
  for sale.

The accompanying notes are an integral part of the consolidated financial statements.

F-141

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Estimates made by the Groups management that relate to the two above categories
  are further discussed here below: 
  Assets to be held and used: as of year ended December 31, 2004, the Group has
  determined that certain assets of its Tube business should remain held and used
  because the Group has no intention to dispose of them or because all criteria
  set forth by FAS 144 Accounting for the Impairment or Disposal of Long-Lived
  Assets, were not met as of December 31, 2004. As a result, and based on a group
  of assets by group of assets fair value analysis that has been performed using
  various valuation techniques, the Group has written down long-lived assets of
  this category by €431 million for the year ended December 31, 2004. 
  As of December 31, 2004, the carrying value of such long lived asset amounts
  to €218 millions.

Assets held for sale: As of December 31, 2004, the group has determined that
  its assets relating to its Tube business currently held for sale should be carried
  at selling price less cost to sell. As a result the Group has recognized an
  impairment charge of €99 million related to this category of assets; after
  recording the €99 million impairment charge, its carrying value was reduced
  to nil.

ad viii) Discontinued operation

In 2004, Thomson disposed of certain affiliates or business components,
  which met FAS 144 Accounting for the Impairment or Disposal of Long-Lived
  Assets criteria for reporting as discontinued operations, as summarized
  below.

Anagni and Circleville

Thomson announced on October 21, 2004 the decision to change
  its strategy in the Display business, which is included in the Components Segment,
  either by sale, by incorporation of a joint venture or by abandonment. Following
  this announcement, as of December 31, 2004, the Anagni and Circleville plants
  have been classified as discontinued operations.

Anagni

As of December 31, 2004, Anagni plant assets and related liabilities met the
  criteria of assets held for sale as set forth by FAS 144. The sale of the entity
  occurred on of February 28, 2005. Under US GAAP, as of December 31, 2004, the
  assets held for sale totalling €101 million and the related liabilities
  of €178 million should be presented separately in the consolidated balance
  sheet. The assets are net of an impairment loss of €99 million. The assets
  held for sale mainly included a €65 million of inventories, net, €23
  million in accounts receivable of and €7 million in other current assets
  and the liabilities held for sale mainly included €25 million of postretirement
  benefits reserve, €27 million of account payable and €111 million
  of inter-group liabilities.

Revenues under U.S. GAAP of the related group of assets amounted to €11
  million, €26 million and €32 million for the years ended December
  31, 2004, 2003 and 2002, respectively (after elimination of inter-company transactions).
  Net income under U.S. GAAP of the activity amounts to €(163) million, €(47)
  million and €6 million for the years ended December 31, 2004, 2003 and
  2002, respectively. Pursuant to the provisions of FAS 144, the effect of the
  discontinuation of this group of asset is presented separately and included
  in income from discontinuing operations.

The accompanying notes are an integral part of the consolidated financial statements.

F-142

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

Circleville

As of December 31, 2004, the Circleville plant was abandoned and represented
  as discontinued operation. Revenues under U.S. GAAP of the activity amounted
  to €0 million, €0 million and €2 million for the years ended
  December 31, 2004, 2003 and 2002, respectively (after elimination of inter-company
  transactions). Net income under U.S. GAAP of the activity amounted to €(104)
  million, €(26) million and €32 million for the years ended December
  31, 2004, 2003 and 2002, respectively. Pursuant to provisions of FAS 144, the
  effect of the discontinuation of this group of asset is presented separately
  and included in income from discontinuing operations.

TAK

In 2002, Thomson decided to discontinue its activity of interactive home entertainment
  service to customers in the last quarter 2002 through the signature of agreements
  with an internet service provider to which such activity has been transferred.
  Such activity was run through its subsidiary TAK, which is part of the New Media
  Services segment.

Costs associated with these agreements, employee termination and exit costs
  as well as other operational cost amount to €0 million, €0 million
  and €(13) million for the years ended December 31, 2004, 2003 and 2002,
  respectively. Assets as of December 31, 2002 included a €4 million tax
  receivable from the French state. According to the provisions of SFAS 144, the
  effect of the discontinuation of this group of asset is presented separately
  and included in income from discontinuing operations.

SINGINGFISH

In 2002, Thomson disposed of its Singingfishs assets and liabilities.

Net income under U.S. GAAP of the activity, including the result of the disposal
  of its assets and liabilities reported by the entity amounted to €0 million,
  €(3) million and €(14) million for the years ended December 31, 2004,
  2003 and 2002, respectively. According to the provisions of SFAS 144, the effect
  of the discontinuation of this group of asset is presented separately and included
  in income from discontinuing operations.

|                                       | December 31,    | 
|-------------------------------------- | --------------- | 
|                                       | 2002            | 
|                                       |                 | 
|                                       | ( in millions) | 
|Income from continuing operation       |                 | 
|before income taxes                    | 407             | 
|Income taxes                           | (68)            | 
|                                       |                 | 
|Income from continuing operations      | 339             | 
|                                       |                 | 
|Discontinued operations                |                 | 
|Gain (loss) on discontinued operations | 10              | 
|Income tax benefit                     | 2               | 
|                                       |                 | 
|Gain (loss) on discontinued operations | 12              | 
|                                       |                 | 
|Net income                             | 351             | 
|                                       |                 | 

The accompanying notes are an integral part of the consolidated financial statements.

F-143

---

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

ae) Schedule II SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


|                                                                            | Opening         |  | Charged to |          | Reversal of |  | Usage |  | Other      |      | Closing | 
|--------------------------------------------------------------------------- | --------------- |  | ---------- | -------- | ----------- |  | ----- |  | ---------- | ---- | ------- | 
|                                                                            | balance         |  | costs and  |          | provisions  |  |       |  | movements* |      | balance | 
|                                                                            |                 |  |            | expenses |             |  |       |  |            |      |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|                                                                            | ( in millions) | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|Valuation and qualifying accounts deducted from the related
      accounts: |                 |  |            |          |             |  |       | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2004                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Trade accounts and notes                                                    |                 |  |            |          |             |  |       |  |            |      |         | 
|receivable                                                                  | 48              |  |            | -        |             |  | (10)  |  |            | -    |         | 
|Other investments                                                           | 86              |  |            | 4        |             |  | (4)   |  |            | (3)  |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2003                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Trade accounts and notes                                                    |                 |  |            |          |             |  |       |  |            |      |         | 
|receivable                                                                  | 67              |  |            | -        |             |  | (11)  |  |            | -    |         | 
|Other investments                                                           | 190             |  |            | 2        |             |  | (19)  |  |            | -    |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2002                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Trade accounts and notes                                                    |                 |  |            |          |             |  |       |  |            |      |         | 
|receivable                                                                  | 79              |  |            | 24       |             |  | (24)  |  |            | -    |         | 
|Other investments                                                           | 179             |  |            | 82       |             |  | -     |  |            | (49) |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|Liabilities - Other reserves:                                               |                 |  |            |          |             |  |       |  |            |      |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2004                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Losses on subsidiaries                                                      | 59              |  |            | -        |             |  | (1)   |  |            | (2)  |         | 
|Others                                                                      | 68              |  |            | 65       |             |  | (28)  |  |            | (32) |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2003                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Losses on subsidiaries                                                      | 51              |  |            | 4        |             |  | -     |  |            | -    |         | 
|Others                                                                      | 73              |  |            | 28       |             |  | (17)  |  |            | (40) |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 
|2002                                                                        |                 |  |            |          |             |  |       |  |            |      |         | 
|Losses on subsidiaries                                                      | 52              |  |            | 8        |             |  | (1)   |  |            | (3)  |         | 
|Others                                                                      | 81              |  |            | 44       |             |  | (21)  |  |            | (42) |         | 
|                                                                            |                 |  |            |          |             |  |       |  |            |      |         | 

|(*) | Includes changes in scope of consolidation and
      currency translation adjustments.
|--- | --------------------------------------------------------------------------------------

The accompanying notes are an integral part of the consolidated financial statements.

F-144

---

| | Thomson
      Group                    
| | ---------------------------------------
| |                                        
| | Consolidated
      Financial Statements

NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

32. U.S. GAAP RECONCILIATION

(a) Net income

|                                           |                                                                   | Year Ended December 31, |     
|------------------------------------------ | ----------------------------------------------------------------- | ----------------------- | ----
|                                           |                                                                   | 2002                    |     
|                                           |                                                                   |                         |     
|                                           |                                                                   | ( in millions)         |     
|Net income as reported in the Consolidated |                                                                   |                         |     
|                                           | Statements of operations                                          | 373                     |     
|a)                                         | Investment securities                                             | (1)                     |     
|b)                                         | Restructuring (and cancellation of impairment reversal)           | 1                       |     
|c)                                         | Pensions and termination benefits                                 | (13)                    |     
|d)                                         | Postretirement transition obligation                              | (2)                     |     
|e)                                         | Stock based compensation                                          | -                       |     
|f i)                                       | Forward exchange contracts                                        | 7                       |     
|f ii)                                      | Derivatives and hedging activities                                | (47)                    |     
|h)                                         | Capitalized development costs                                     | -                       |     
|i)                                         | Capitalized interest                                              | (1)                     |     
|j)                                         | Provision for year 2000 and Euro                                  | (1)                     |     
|k)                                         | Subsidiaries controlled but not consolidated                      | 2                       |     
|l)                                         | Philips Professional Broadcast 33% minority interests             | (3)                     |     
|m)                                         | Compensation (expense) gain related to employee offerings
      / |                         |     
|                                           | Bonus shares                                                      | (1)                     |     
|n)                                         | Sale-leaseback accounting                                         | 5                       |     
|p)                                         | Recording of Singingfish acquisition                              | (4)                     |     
|q)                                         | Purchase price allocation and Amortization of recognized          |                         |     
|                                           | intangible assets                                                 | (26)                    |     
|r)                                         | BTS purchase price allocation                                     | -                       |     
|s)                                         | Goodwill amortization and impairment SFAS 142                     | 74                      |     
|t)                                         | Revenue recognition                                               | 3                       |     
|v)                                         | Retention bonuses                                                 | (6)                     |     
|w)                                         | FIN 45  recognition of guarantee given                           | -                       |     
|x)                                         | Transactions costs                                                | -                       |     
|y)                                         | Sale of written Call                                              | -                       |     
|z)                                         | Discount of long term assets & liabilities                        | -                       |     
|aa)                                        | Reversal of deferred tax valuation allowance and tax effects      |                         |     
|                                           | of the above adjustments                                          | (10)                    |     
|                                           |                                                                   |                         |     
|Minority Interests                         | (1)                                                               |                         | -   
|                                           |                                                                   |                         |     
|Net income according to U.S. GAAP          | 351                                                               |                         | (46)
|                                           |                                                                   |                         |     

The accompanying notes are an integral part of the consolidated financial statements.

F-145

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NOTES
  TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  (CONTINUED) All amounts indicated in the tables are expressed in millions of euro, unless
  otherwise stated

|                                                           |                                                              | Year Ended December 31, |      
|---------------------------------------------------------- | ------------------------------------------------------------ | ----------------------- | -----
|                                                           |                                                              | 2002                    |      
|                                                           |                                                              |                         |      
|                                                           |                                                              | ( in millions)         |      
|Shareholders equity as reported in the
      Consolidated |                                                              |                         |      
|                                                           | balance sheet                                                | 3,947                   |      
|a)                                                         | Investment securities                                        | (1)                     |      
|b)                                                         | Restructuring                                                | 5                       |      
|c)                                                         | Pensions and termination benefits                            | (99)                    |      
|d)                                                         | Postretirement transition obligation                         | 59                      |      
|f i)                                                       | Forward exchange contracts                                   | 5                       |      
|f ii)                                                      | Derivatives and hedging activities                           | -                       |      
|g)                                                         | Asset reevaluations                                          | (4)                     |      
|h)                                                         | Capitalized development costs                                | -                       |      
|i)                                                         | Capitalized interest                                         | 1                       |      
|k)                                                         | Subsidiaries controlled but not consolidated                 | 2                       |      
|l)                                                         | Philips Professional Broadcast 33.33% minority interests     | (2)                     |      
|m)                                                         | Employee offering / bonus shares                             | -                       |      
|n)                                                         | Sale-leaseback accounting                                    | (19)                    |      
|p)                                                         | Recording of Singingfish acquisition                         | (4)                     |      
|q)                                                         | Purchase price allocation and Amortization of recognized     |                         |      
|                                                           | intangible assets                                            | (44)                    |      
|r)                                                         | BTS purchase price allocation                                | 1                       |      
|s)                                                         | Goodwill amortization and impairment SFAS 142                | 70                      |      
|t)                                                         | Revenue recognition                                          | (15)                    |      
|u)                                                         | Easyplug gain on assets contribution                         | (3)                     |      
|v)                                                         | Retention Bonus                                              | (6)                     |      
|w)                                                         | FIN 45  recognition of guarantee given                      | -                       |      
|x)                                                         | Transactions costs                                           | -                       |      
|y)                                                         | Sale of written Call                                         | -                       |      
|z)                                                         | Discount of long term assets & liabilities                   | -                       |      
|aa)                                                        | Reversal of deferred tax valuation allowance and tax effects |                         |      
|                                                           | of the above adjustments                                     | (33)                    |      
|                                                           |                                                              |                         |      
|Minority Interests                                         | 1                                                            |                         | -    
|                                                           |                                                              |                         |      
|Shareholders equity according to U.S. GAAP                | 3,859                                                        |                         | 3,433
|                                                           |                                                              |                         |      

The accompanying notes are an integral part of the consolidated financial statements.

F-146

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