MOTOROLA INC
10-K405, 1995-03-24
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 (FEE REQUIRED)

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
                                       OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NUMBER 1-7221
                                 MOTOROLA, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                <C>
    DELAWARE               36-1115800
    (STATE OF           (I.R.S. EMPLOYER
 INCORPORATION)       IDENTIFICATION NO.)
</TABLE>

              1303 EAST ALGONQUIN ROAD, SCHAUMBURG, ILLINOIS 60196

                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                  REGISTRANT'S TELEPHONE NUMBER (708) 576-5000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                                                NAME OF EACH EXCHANGE ON
            TITLE OF EACH CLASS                     WHICH REGISTERED
--------------------------------------------  -----------------------------
<C>                                           <S>
    Common Stock, $3 Par Value per Share      New York Stock Exchange
                                              Chicago Stock Exchange
     Liquid Yield Option Notes due 2009       New York Stock Exchange
     Liquid Yield Option Notes due 2013       New York Stock Exchange
  Rights to Purchase Junior Participating     New York Stock Exchange
         Preferred Stock, Series A            Chicago Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      NONE
                            ------------------------

    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 if disclosure  of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge, in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

    The  aggregate market  value of voting  stock held by  non-affiliates of the
registrant as of  January 31,  1995 was  approximately $34.9  billion (based  on
closing  sale  price of  $59.25 per  share as  reported for  the New  York Stock
Exchange-Composite Transactions).

    The number of  shares of  the registrant's Common  Stock, $3  par value  per
share, outstanding as of January 31, 1995 was 588,266,574.

                      DOCUMENTS INCORPORATED BY REFERENCE

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<CAPTION>
                                         DOCUMENT                                            LOCATION IN FORM 10-K
-------------------------------------------------------------------------------------------  ---------------------
<S>                                                                                          <C>
Portions of Registrant's Proxy Statement for 1995 Annual Meeting of Stockholders             Part III
Portions of Registrant's 1994 Annual Report to Stockholders                                  Parts I, II and IV
</TABLE>

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                                     PART I


Item 1:  Business

(a)  General development of business.

Motorola, Inc. is a corporation organized under the laws of the State of
Delaware as the successor to an Illinois corporation organized in 1928.
Motorola's principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196 (telephone number:  708-576-5000).

Motorola, Inc., one of the world's leading providers of electronic equipment,
systems, components and services for worldwide markets, is engaged in the
design, manufacture and sale, principally under the Motorola brand, of a
diversified line of such products.  These products include two-way land mobile
communication systems, paging and wireless data systems and other forms of
electronic communication systems; subscriber and infrastructure equipment for
the telephone market; cellular mobile and portable telephones and systems;
semiconductors, including integrated circuits, discrete devices and
microprocessor units; information systems products such as modems, multiplexers
and network processors; electronic equipment for military and aerospace use;
electronic engine controls, and other automotive and industrial electronic
equipment; and multifunction computer systems for distributed data processing
and office automation applications.  Motorola also provides services for paging,
cellular telephone, shared mobile radio and wireless data.

The term "Motorola" as used hereinafter means Motorola, Inc. or Motorola, Inc.
and its subsidiaries, as the context requires.

(b)  Financial information about industry segments.

The response to this section of Item 1 is incorporated by reference to  Note 7
of the Notes to Consolidated Financial Statements of Motorola's 1994 Annual
Report to Stockholders.

(c)  Narrative description of business.

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                                      - 2 -


 SEMICONDUCTOR PRODUCTS


Semiconductors control and amplify electrical signals and are used in a broad
range of electronic products, including television receivers and other consumer
electronic products, solid-state ignition systems and other automotive
electronic products, major home appliances, industrial controls, robotics,
aircraft, missiles, space vehicles, communications equipment, computers,
calculators and automatic controls.

The semiconductor products manufactured by Motorola's Semiconductor Products
Sector include integrated circuit devices (metal-oxide semiconductor and
bipolar) such as dynamic and static random access memories, microcontrollers,
microprocessors, microcomputers, gate arrays, standard cells, digital signal
processors, mixed signal and other logic and analog components. In addition, the
Sector manufactures a wide variety of discrete devices including zener and
tuning diodes, RF devices, power and small signal transistors, field effect
transistors, microwave devices, optoelectronics, rectifiers and thyristors.

The Sector sells its products worldwide to original equipment manufacturers
through its own sales force.  Products also are sold through a network of
industrial distributors in the United States.  Sales outside the United States
are made through the Sector's own sales staff and through independent
distributors.  Products manufactured by the Sector are also supplied to other
operating units of Motorola.  The Sector is affected by the cyclical nature of
the semiconductor industry.  Available capacity, cyclical customer demands, new
product introduction and aggressive pricing can have a significant impact on its
business.  The Sector's capacity is being increased to meet current strong
market demand, but the Sector is still experiencing capacity constraints.  In
addition to the Sector's factory expansion program, it is actively pursuing
additional capacity through the sourcing of products from outside vendors.
Because of the strong market demand, the available quantity of some products
have been allocated among customers, including other Motorola operating units,
from time to time.

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                                      - 3 -

The semiconductor industry is subject to rapid changes in technology, requires a
high level of capital spending and an extensive research, development and design
program to maintain state-of-the-art technology.  Accordingly, the Sector
maintains an extensive research and development program in advanced
semiconductor technology.

The Sector's backlog amounted to $2.68 billion at December 31, 1994 and $2.12
billion at December 31, 1993.  The 1994 backlog amount is believed to be
generally firm, and approximately 100% of that amount is expected to be shipped
during 1995.  However, in the past, the Sector has experienced abrupt and
repeated rescheduling of previously firm and even expedited orders.  The
estimate of the firmness of such orders is subject to future events which may
cause the percentage of the 1994 backlog actually shipped to change.

The Semiconductor Products Sector experiences intense competition from numerous
competitors, including Japanese companies and several other companies around the
world, ranging from large companies offering a full range of products to small
companies specializing in certain segments of the market.  The competitive
environment is also changing as a result of increased alliances between
competitors.  The Sector competes in many markets, including the
telecommunications, personal computer/work stations, industrial, automotive,
consumer, computer, government and distributor markets.  The Sector announced
that it will withdraw from its military business, which is expected to take
approximately eighteen months.  Due to the multitude of competitors, price,
service, technology and product quality are important factors in competition.
The ability to develop new products to meet customer requirements and to meet
customer delivery schedules are also competitive factors.  Management believes
that Motorola's commitment to research and development of new products combined
with utilization of state-of-the-art technology should allow the Sector to
remain competitive.

The Sector is not currently experiencing, nor does it anticipate, any shortages
in obtaining raw materials.  However, it is experiencing some extended lead
times on certain raw materials due to strong industry demand, but this is not
currently expected to have any material impact on the Sector's business.  A
significant portion of certain materials and

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                                      - 4 -

parts used by the Sector is supplied from a single country.  The Sector is
actively seeking new sources of supply to decrease this dependency.  With
respect to other materials, the Sector is constantly seeking new sources of
supply to minimize the risk of obtaining materials from only a few
sources.  Electricity, oil and natural gas are used extensively in the Sector's
operations.  All of these energy sources are available in adequate quantities
for current and foreseeable future needs.  Electricity and oil are the primary
energy sources for the Sector's foreign operations, and presently, there are no
shortages of these sources although the reliability of electrical power has been
a problem from time to time.

Reference is made to the material under the heading "General" for information
relating to patents and trademarks and seasonality of business with respect to
this industry segment.

The Semiconductor Products Sector's headquarters are in Phoenix, Arizona, with
manufacturing facilities in Phoenix, Mesa, Tempe and Chandler, Arizona;  Irvine,
California; Research Triangle Park, North Carolina, Austin, Texas; Tianjin,
China; Toulouse, France; Munich, Germany; Kwai Chung and Tai Po, Hong Kong; Aizu
and Sendai, Japan; Seoul, Korea; Kuala Lumpur and Seremban, Malaysia;
Guadalajara, Mexico; Singapore; East Kilbride, Scotland; Carmona and Manila, the
Philippines; and Chung-Li, Taiwan.


COMMUNICATIONS PRODUCTS


Communications products are designed, manufactured and sold by Motorola's Land
Mobile Products Sector ("LMPS") and its Paging Products and Wireless Data Groups
("PWDG").  In 1994, both operations comprised the Company's Communications
Products segment.  Also, in January 1994, Motorola's Information Systems Group
(consisting of Codex Corporation and Universal Data Systems, Inc.) was combined
with PWDG to form the Messaging, Information and Media Sector.  During 1994,
this new Sector did not constitute a separate reportable industry segment, and
the results of operations of the Information Systems Group were reported under

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                                      - 5 -

"Other Products".  For 1995, the Messaging, Information and Media Sector will be
reported as a separate industry segment.

As a principal supplier of mobile and portable FM two-way radio and radio paging
and wireless data systems, LMPS and PWDG provide equipment and systems to meet
the communications needs of individuals and many different types of business,
institutional and governmental organizations.  Products of LMPS and certain
products of PWDG provide voice and data communication between vehicles, persons
and base stations.  PWDG designs, manufactures and distributes paging, data and
gateway communications products on a worldwide basis.  PWDG also provides
network services for paging and data subscribers through wholly-owned and
operated businesses and domestic and international joint ventures.  LMPS
provides network services for two-way radio subscribers in international markets
through joint ventures.

The principal customers for two-way radio and radio paging products include
public safety agencies, such as police, fire, highway maintenance departments
and forestry services; petroleum companies; gas, electric and water utilities;
telephone companies; diverse industrial companies; mining companies;
transportation companies such as railroads, airlines, taxicab operations and
trucking firms; institutions, such as schools and hospitals; and companies in
the construction, vending machine and service businesses.  Also, there is a
growing base of paging and wireless data customers using the products for
personal and family communication needs.  These products are also sold and
leased to various federal agencies for many uses.  No one customer or a few
customers represent a material part of the business of the Communications
Products segment.  However, PWDG and LMPS each has a few customers that
collectively may be material to their respective businesses.

Users of two-way radios are regulated by a variety of governmental and other
regulatory agencies throughout the world.  In the United States, users of
two-way radios are licensed by the Federal Communications Commission ("FCC")
which has broad authority to make rules and regulations and prescribe
restrictions and conditions to carry out the provisions of the Communications
Act of 1934.  The FCC's authority includes, among other things, the power to
classify radio stations,

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                                      - 6 -

prescribe the nature of the service to be rendered by each class of station,
assign frequencies to the various classes of stations and regulate the kinds of
equipment which may be used.  Regulatory agencies in other countries have
similar types of authority.  Consequently, the business of this segment and
other segments may be affected by the rules and regulations adopted by the FCC
or regulatory agencies in other countries from time to time.

Motorola has developed products using trunking and data communications
technologies to enhance spectral efficiencies.  The growth of the two-way radio
communications industry may be affected, however, by the regulations of the FCC
or other regulatory agencies relating to the allocation of frequencies for land
mobile communications users, especially in urban areas where such frequencies
are heavily used.

LMPS also manufactures and sells signaling and control systems and communication
control centers used in two-way radio operations.

This segment carries on an extensive product development program.  Its products
make substantial use of solid-state semiconductor components, including large-
scale integrated circuits.

The products manufactured and marketed by LMPS are sold directly through its own
distribution force, or through independent authorized distributors and dealers,
commercial radio service operators and independent commission sales
representatives.  Leasing and conditional sale arrangements are also made
available to customers.  The direct distribution force also provides systems
engineering and technical services to meet the customer's particular needs.  The
customer may choose to install and maintain the equipment with its own
employees, or may obtain installation, service and parts from a network of
Motorola authorized service stations (most of whom are also authorized dealers)
or from other non-Motorola service stations.  The majority of the leases and
conditional sale contracts entered into by LMPS are sold to several unaffiliated
finance companies and banks on terms which, in most instances, provide recourse
to Motorola with certain limitations.  Some leases and conditional sale
contracts are sold to a Motorola finance subsidiary.   Subscriber units are sold
directly and through indirect

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                                      - 7 -

distribution channels.  Personal wireless communicators in the U.S. market are
distributed through resellers and computer retailers.  Pagers are sold directly
and to service providers.

This segment's backlog amounted to $2.02 billion at December 31, 1994 and $1.71
billion at December 31, 1993.  The 1994 backlog amount is believed to be
generally firm, and approximately 96% of that amount is expected to be shipped
during 1995.  The estimate of the firmness of such orders is subject to future
events which may cause the percentage of the 1994 backlog actually shipped to
change.

This segment experiences widespread, intense competition from numerous
competitors ranging from some of the world's largest, diversified companies to
foreign state-owned telecommunications companies to many small, specialized
firms.  The principal manufacturing operations of many competitors are located
outside of the United States.  Competitive factors for LMPS include:  price,
product performance, product quality, quality and availability of service, and
quality and availability of systems engineering, and for PWDG include:  price,
quality, volume, service and technology, with no one factor being dominant.
Management believes that Motorola's commitment to research and development
programs for improving existing products and developing new products and its
utilization of state-of-the-art technology should allow this segment to remain
competitive.

Availability of materials and components required by this segment is relatively
dependable and certain, but normal fluctuations in market demand and supply
could cause temporary, selective shortages.  Direct sourcing of materials and
components from foreign suppliers is becoming more extensive.  LMPS operates
certain offshore subassembly plants, the loss of one or more of which could
constrain its production capabilities.  Natural gas, electricity and, to a
lesser extent, oil, are the primary sources of energy.  Current supplies of
these forms of energy are considered to be adequate for this segment's United
States and foreign operations.  PWDG carries significant amounts of paging
production inventory to help reduce delivery cycle time.  LMPS provides custom
products based on assembling basic units into a large variety of models or
combinations.  This requires stocking of inventories and large varieties of

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                                      - 8 -

piece parts as well as a variety of basic level assemblies to meet short
delivery requirements.

Reference is made to the material under the heading "General" for information
relating to patents and trademarks with respect to this segment.

Information with respect to transfer of LMPS's 800 MHz specialized mobile radio
service businesses, systems and licenses in the United States is incorporated by
reference to the information under "Communications Products" under the caption
"Financial Review" and in Note 6 of the Notes to Consolidated Financial
Statements of Motorola's 1994 Annual Report to Stockholders.

This segment's headquarters are located in Schaumburg, Illinois, with
manufacturing facilities in Schaumburg, Illinois; Boynton Beach and Plantation,
Florida; Mount Pleasant, Iowa; Ft. Worth, Texas; Tianjin, China; Bangalore,
India; Dublin, Ireland; Arad, Israel; Penang, Malaysia; Vega Baja, Puerto Rico;
Taunusstein, Germany; and Singapore.


GENERAL SYSTEMS PRODUCTS


General systems products are designed, manufactured and sold by Motorola's
General Systems Sector which includes the Cellular Subscriber Group, the
Cellular Infrastructure Group, the Network Ventures Division, Personal
Communications Systems Division ("PCS") and the Motorola Computer Group.

The Cellular Subscriber and Infrastructure Groups manufacture, sell, install and
service cellular infrastructure and radiotelephone equipment.  In addition, the
Cellular Subscriber Group resells cellular line service in the U.S., New
Zealand, Germany, France and the U.K. markets.  The Network Ventures Division is
a joint venture partner in cellular and telepoint operating systems in
Argentina, Uruguay, Hong Kong, Israel, Chile, Mexico, Thailand, Pakistan,
Nicaragua, Dominican Republic, Russia, Honduras, Jordan, Lithuania and Japan.
The Cellular Infrastructure Group products

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                                      - 9 -

include electronic exchanges (i.e., telephone switches), base site controllers
and radio base stations.  Radiotelephone products include mobile, portable,
personal and transportable radiotelephones with various options, personal
communications equipment and cordless telephones.  PCS products include
subscriber and infrastructure equipment for the telephone market.  Products are
marketed worldwide through original equipment manufacturers, carriers,
distributors, dealers, retailers and, in certain countries, through a direct
sales force.  Financing of cellular and personal communications infrastructure
equipment is sometimes offered to qualifying customers.

Radio frequencies are required to provide cellular service.  The allocation of
frequencies is regulated in the United States and other countries throughout the
world, and limited spectrum space is allocated for cellular  services.  The
growth of the cellular and personal communications industry may be affected if
adequate frequencies are not allocated for its use, or alternatively, if new
technology is not developed to increase capacity on presently allocated
frequencies.

The Motorola Computer Group develops, manufactures, sells and services multi-
function computer systems and board level products, together with operating
systems and system enablers based on the Motorola 68000, 88000 and Power PC
series microprocessors.  These products are sold worldwide to a variety of
customers, some of whom produce computer products which compete with the Group.
The Computer Group's products are marketed to end-users, original equipment
manufacturers, value added resellers and distributors throughout the world.  The
Motorola Computer Group also markets computer products and peripherals that it
does not manufacture.

General Systems products are subject to constant changes in technology.
Consequently, the Sector has an extensive research and development program.

The Sector's backlog amounted to $1.7 billion at December 31, 1994 and $1.2
billion at December 31, 1993.  The 1994 backlog is believed to be generally
firm, and approximately 100% of that amount is expected to be shipped during
1995.  The estimate of the firmness of such orders is

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                                     - 10 -

subject to future events which may cause the percentage of the 1994 backlog
actually shipped to change.

The General Systems Sector experiences intense competition from numerous
competitors ranging from some of the world's largest companies to small,
specialized firms.  The Sector competes in markets worldwide.  Competitive
factors in the market for the products are price, service, delivery,
technological capability, product quality and product and system performance.
An additional factor for the Motorola Computer Group products is the
availability of software products to address specific user applications.
Participation in a very competitive industry requires a continuing high level of
investment in technology.  Management believes that Motorola's commitment to
research and development programs for improving existing products and developing
new products and its utilization of state-of-the-art technology should allow the
General Systems Sector to remain competitive.

Materials used in the Sector's operations are generally second-sourced to ensure
a continuity of supply.  Occasionally, there are shortages of required purchased
components.  Energy necessary for the Sector's operations consists of
electricity, natural gas and gasoline, all of which are currently adequate in
supply.  The Sector's factories are highly automated and therefore, dependent
upon a steady supply of electrical power.

Patent protection is very important to the cellular business.  Also, reference
is made to the material under the heading "General" for information relating to
patents and trademarks and seasonality of business with respect to this industry
segment.

The General Systems Sector's headquarters are located in Arlington Heights,
Illinois.  The Sector operates manufacturing facilities in Tempe, Arizona;
Arlington Heights, Grayslake, Harvard and Libertyville, Illinois; Swindon,
England; Penang, Malaysia; Easter Inch, Scotland; Flensburg, Germany; Arad,
Israel; and Tianjin, China.  The Sector also has a joint venture manufacturing
operation in Austria.

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                                     - 11 -

GOVERNMENT AND SPACE TECHNOLOGY PRODUCTS


The Government and Space Technology Group (formerly the Government and Systems
Technology Group) is engaged in the design, development and production of
electronic systems and products, and it competes for a variety of United States
Government projects and commercial business.  The Group is attempting to expand
the application of its core capabilities to support global growth opportunities
within other Motorola businesses.  The Group produces products related to
electronic and communications equipment that has various applications based upon
customer requirements of the Group's three business segments: government,
commercial and Satellite Communications.  The government business segment, known
as the Government Electronics Division, primarily does research, development and
production work under contracts with governmental agencies, but also conducts
independent research and development programs.  The government business segment
produces products such as diversified military and space electronic equipment,
including aerospace telecommunications systems, military communications
equipment, radar systems, data links, display systems, positioning and
navigation systems, instrumentation products, countermeasures systems, missile
guidance equipment, electronic ordnance devices and drone electronic systems.
The government business segment has been predominantly dependent upon the United
States Government as its main customer, acting as either a prime contractor or a
subcontractor to other prime contractors.  The total loss of all of this
business could have a material adverse effect on the Group.  Contracts are
secured from United States Government agencies and their suppliers by
negotiation and competitive bidding.  The government procurement environment is
becoming more competitive and is highly regulated.  Competition has increased
substantially in all aspects of the government business due to a slowdown in
procurement resulting from a lower defense budget.  Competitors include large
and small technically competent firms.  Some competitors from whom the segment
procured subcontract work in the past are becoming more vertically integrated
and are performing the work previously subcontracted.  This segment currently
expects to continue to meet competition on the basis of price and quality of
product performance.

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                                     - 12 -


The Group diversified by applying its core technologies to other non-federal
government and commercial opportunities.  During 1993, the Group organized its
commercial business thrusts into the Diversified Technologies Division ("DTD")
which marketed products in the secure telecommunications and commercial test
equipment markets.  It also developed products for positioning and navigation
systems, and personal alarm and reporting systems markets.  However, these
businesses have not grown as rapidly as expected and will be pursued less
actively in 1995.  The resources within DTD are expected to be re-deployed to
meet the growing need for design and development services within other Motorola
Sectors beginning in 1995.  DTD had in place during 1994 distribution agreements
with the Land Mobile Products Sector ("LMPS") for the commercial test equipment
and secure telecommunications markets.  However, during 1994, DTD was able to
expand its own distribution network for commercial test equipment to reduce
reliance on LMPS.

The Group's Satellite Communications Division (SATCOM) is developing the
IRIDIUM[REGISTERED TRADEMARK] satellite-based communication system.  The IRIDIUM
system is a space-based wireless communications system that is being designed to
provide global digital service to hand-held telephones and related equipment.
The IRIDIUM system involves four components: (1) a constellation of low earth
orbit satellites, (2) a centralized system control center, (3) gateways
distributed throughout the world and (4)  individual subscriber units including,
for example, voice, data, facsimile and paging.  SATCOM is the prime contractor
under contracts with Iridium, Inc. to provide and launch the satellites, control
the ground stations and maintain the system. During the last three years, this
contract for development effort has become a significant portion of the Group's
business and is expected to remain a major contributor to the Group's sales for
the next few years.  The loss of these contracts could have a material adverse
effect on the Group.  SATCOM has entered into significant subcontracts for
portions of the system for which it will generally remain obligated even if
Iridium, Inc. is unable to satisfy the terms of its contracts with SATCOM,
including funding.  IRIDIUM is a registered trademark and service mark of
Iridium, Inc.

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                                     - 13 -

Total sales for the Group include sales made to a number of free world
governments and corporations.  Products of the Group are marketed outside the
United States by a few distributors, by independent representatives and by the
Group's own sales force.  In 1994, a small percentage of the Group's business
was conducted internationally, primarily through the government business sector.

The Group's backlog amounted to $1.1 billion at December 31, 1994 and $634
million at December 31, 1993.  The 1994 backlog is believed to be generally firm
and approximately 73% of that amount is expected to be shipped during 1995.  All
contracts with the United States Government are subject to cancellation at the
convenience of the Government, and the contracts with Iridium, Inc. may be
terminated by Iridium, Inc. pursuant to the terms set forth in the contracts.
The estimate of the firmness of the 1994 backlog is subject to future events
which may cause the percentage actually shipped to change.

Materials used by the Group in its operations are generally available.  Natural
gas and electricity are the principal types of energy used, and availability of
both to the Group is currently more than adequate.

Patents are becoming more important as competition increases in a declining U.S.
Government market and as the Group expands quasi-government and commercial
opportunities.  Also, reference is made to the material under the heading
"General" for information relating to patents and trademarks with respect to
this industry segment.

The Group has its headquarters in Scottsdale, Arizona, with manufacturing
facilities in Scottsdale and Chandler, Arizona.


INFORMATION SYSTEMS PRODUCTS


Information systems products are designed, manufactured and sold by the
Information Systems Group ("ISG"), which consisted of Codex Corporation and
Universal Data Systems, Inc., which were wholly owned subsidiaries

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                                     - 14 -

of Motorola.  These two corporations have been dissolved and their businesses
have been combined with other operations of Motorola.

ISG manufactures and sells high-speed leased-line and dial modems, digital
transmission devices, data/voice, time division and statistical multiplexers,
network management and control systems, X.25 networking equipment and local area
network interconnection products.  These products are offered alone, and
increasingly in systems, which have been configured to transmit information
among personal computers, terminals, other peripheral devices and host
computers. ISG also manufactures and sells a broad line of analog and digital
data communications equipment, including modems and DDS (Digital Dataphone
Services) service units for dedicated and switched networks, multiplexers, ISDN
(Integrated Services Digital Network) terminal adaptors, network management
systems and LAN (Local Area Network) products.  ISG markets a few data
communication products it does not manufacture.

ISG products are sold through both domestic and international sales
organizations which sell through direct and indirect channels, such as
distributors and value added resellers.

Information systems products are subject to constant changes in technology.
Consequently, the Group has an extensive research and development program.

ISG experiences intense competition from numerous competitors ranging from some
of the world's largest companies, including AT&T and IBM, to small, specialized
firms.  Competitive factors in the market for these products are product quality
and performance, customer service and price.  Management believes that
Motorola's commitment to research and development programs for improving
existing products and developing new technologies and its utilization of
state-of-the-art technology should allow the Group to remain competitive.

Materials used in the Group's business consist primarily of electronic
components and assemblies which are generally available from multiple sources.
Occasionally, shortages or extended delivery periods occur in various component
parts, the effects of which have been industry-wide

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                                     - 15 -

and short in duration.  The Group requires commercially available electrical
energy for manufacturing and administrative operations.  Facilities are
temperature controlled with oil or gas heat and electrical power.  These types
of energy are currently readily available.

Reference is made to the material under the heading "General" for information
relating to patents and trademarks with respect to this industry segment.

ISG is headquartered in Mansfield, Massachusetts where it has separate product
engineering and marketing facilities.  Manufacturing operations are located in
Mansfield, Massachusetts and Huntsville, Alabama.


AUTOMOTIVE, ENERGY AND CONTROLS PRODUCTS


The Automotive, Energy and Controls Group manufactures and sells products in
three major categories:  automotive and industrial electronics; energy storage
products and systems; and ceramic and quartz electronic components.  The Group
also includes operations which manufacture electronic ballasts for fluorescent
lighting and radio frequency identification devices.  The Group is involved in
several joint ventures.  Manufacturing facilities are located at both domestic
and foreign locations.

The Group sells its automotive and industrial electronics products to original
equipment manufacturers, including foreign and domestic automobile
manufacturers, heavy vehicle manufacturers, farm equipment manufacturers and
industrial customers.  A large part of its business is dependent upon two
customers, the loss of either of which could have a material adverse effect on
the business of the Group.  Demand for products is linked to automobile sales in
the United States and other countries where the Group sells its products.  The
Group experiences competition from numerous global competitors including
automobile manufacturers.

<PAGE>

                                     - 16 -

The energy storage products business and the ceramic and quartz products
business sell primarily to other industry segments within Motorola, principally
the Communications and General Systems Products segments.

All materials used by the Group have good availability at this time.  The Group
uses electricity and gas in its operations, which are currently adequate in
supply.

Competitive factors in the sale of all of the Group's products include price,
product quality and performance, supply integrity, quality reputation,
experience, responsiveness and design and manufacturing technology.

Reference is made to the material under the heading "General" for information
relating to patents and trademarks with respect to this industry segment.

The Group's headquarters is located in Northbrook, Illinois.  It has
manufacturing operations located in Scottsdale, Arizona; San Jose, California;
Atlanta, Georgia; Northbrook, Buffalo Grove, Schaumburg and Vernon Hills,
Illinois; Albuquerque, New Mexico; Elma, New York; Carlisle, Pennsylvania;
Seguin, Texas; Angers, France; Stotfold, England; Tuas, Singapore; Tianjin,
China; Chung-Li, Taiwan; Penang, Malaysia; Vega Baja, Puerto Rico; Dublin,
Ireland; and San Jose, Costa Rica.


GENERAL

CUSTOMERS.  Motorola is not dependent for a material part of its business upon a
single or a very few customers.  Approximately 3% of Motorola's total sales and
revenues in 1994 were received from various branches and agencies, including the
armed services, of the United States Government.

All contracts with the United States Government are subject to cancellation at
the convenience of the Government.

Government contractors, including Motorola, are routinely subjected to numerous
audits and investigations, which may be either civil or criminal

<PAGE>

                                     - 17 -

in nature.  The consequences of these audits and investigations may include
administrative action to suspend business dealings with the contractor and to
exclude it from receiving new business.  In addition,  Motorola, like other
contractors, is internally reviewing aspects of its government contracting
operations, and, where appropriate, taking corrective actions and making
voluntary disclosures to the Government.  From time to time, these audits and
investigations may adversely affect Motorola.

BACKLOG.  Motorola's aggregate backlog position, including the backlog position
of subsidiaries through which some of its business units operate, as of the end
of the last two fiscal years, was approximately as follows:

          December 31, 1994. . .   $7.594 billion
          December 31, 1993. . .   $6.006 billion

The orders supporting the 1994 backlog amounts shown in the foregoing table are
believed to be generally firm, and approximately 95% of orders on hand at
December 31, 1994 are expected to be shipped during 1995.  However, future
events may cause the percentage actually shipped to change.

Motorola has a general policy of including in its reported orders only those
contracts or commitments which are written and firm, and which it believes will
result in a sale within one year.  For long-term contracts, only the portion to
be funded within a year generally is recorded as an order.  For products and
contracts involving certain new technologies, and some new combinations of
technologies, Motorola's general practice is to defer recognition of either
revenues or profits or both revenues and profits until technological feasibility
is established or customer acceptance is obtained.

RESEARCH AND DEVELOPMENT.  Throughout its history, Motorola has relied, and
continues to rely primarily on its research and development programs for the
development of new products and its production engineering capabilities for the
improvement of existing products.  Technical data and product application ideas
are exchanged among Motorola's industry segments on a regular basis.  Research
and development expenditures

<PAGE>

                                     - 18 -

relating to new product development or product improvement, other than
customer-sponsored contracts, were approximately $1,860 million in 1994, $1,521
million in 1993 and $1,306 million in 1992.

In addition, research funded under customer-sponsored contracts amounted to
approximately $601 million in 1994, $324 million in 1993 and $37 million in
1992.

Approximately 16,500 professional employees were engaged in such research
activities (including customer-sponsored) during 1994.

PATENTS AND TRADEMARKS.  Motorola owns 6,604 patents in the United States and
5,177 in foreign countries.  These foreign patents are counterparts of
Motorola's United States patents.  Many of the patents owned by Motorola are
licensed to others, and Motorola is licensed to use certain patents owned by
others.  In some instances, certain of the patents licensed by Motorola to
others have generated significant amounts of revenue to Motorola.

During 1994, Motorola was granted 940 United States patents.  Many of Motorola's
patents are used in its operations or licensed for use by others.

Motorola considers its trademark "MOTOROLA" and the "M" symbol to be valuable
assets.  These are protected through trademark registrations.  Other trademarks
of Motorola are protected and registered in the relevant markets, but are used
only on limited product lines.

CORPORATE MISSION.  Motorola's corporate mission is to grow rapidly, in each of
its chosen arenas of the electronics industry, by providing its worldwide
customers what they want, when they want it, with six sigma quality (virtually
zero defects, i.e., no more than 3.4 parts per million defective) and best-in-
class cycle time, as it strives to achieve its fundamental objective of total
customer satisfaction and to achieve its stated goals of increased global market
share; best-in-class people, marketing, manufacturing, technology, service and
product software, hardware and systems; and superior financial results.  To try
to fulfill this mission, Motorola has concentrated on five key operational
initiatives:  first, designing products that will accept reasonable

<PAGE>

                                     - 19 -

variation in component parts, developing manufacturing processes that will
produce minimum variation in final output product and designing systems that
will achieve six sigma performance; second, examining the total product system
to reduce the cycle time from when an order is placed or a product is conceived
until it is delivered; third, emphasizing the need for product development,
environmental and manufacturing disciplines to work together; fourth, attempting
to improve profits through implementing a long-term, customer-driven approach
that shows it where to commit its resources to give customers what they want;
and fifth, empowerment for all, in a participative, cooperative and creative
workplace to achieve more synergy, greater efficiency and improved quality
within and among organizations.  In addition, it has tried to develop the
following key attributes or elements of a successful quality program:
leadership; communications; training; establishing high goals and high
expectations; providing for recognition; and developing a participative,
cooperative, creative and receptive culture.  Motorola strives to build on the
skills of its people and its growing portfolio of technologies to create the
platforms upon which whole new global industries are born.  In doing so,
Motorola draws on the creativity and wealth of experience of its people in all
cultures.

ENVIRONMENTAL QUALITY.  Motorola operations are from time to time the subjects
of investigations, conferences, discussions and negotiations with various
federal, state and local environmental agencies with respect to the discharge or
cleanup of hazardous waste and compliance by those operations with environmental
laws and regulations.  The balance of the response to this section of Item 1 is
incorporated by reference to Note 6 of the Notes to Consolidated Financial
Statements under the caption "Environmental and Legal" and the information
contained in Motorola Management's Discussion and Analysis of Financial
Condition and Results of Operations under the caption "Environmental Matters" in
Motorola's 1994 Annual Report to Stockholders.

MISCELLANEOUS.  At December 31, 1994, there were approximately 132,000 employees
of Motorola and its subsidiaries.  The business of Motorola and its industry
segments is not seasonal to any significant extent overall, although the
Semiconductor Products Sector has tended to have stronger, seasonally-adjusted
sales in the first half of the year, and sales of

<PAGE>

                                     - 20 -

products in consumer markets tend to increase in the fourth quarter.  Also, as
the market for paging products in China has matured, a seasonal pattern has
developed in which orders decline in the fourth and first quarters.  The
increase in large system orders in the Cellular Infrastructure Group and the
Land Mobile Products Sectors could increase the volatility of orders, revenues
and profits recognized in any particular period.  Radio frequencies are required
to use many of Motorola's products and services.  These frequencies and their
use are regulated by a variety of agencies throughout the world.  The growth in
cellular and other wireless communications products could be affected if
adequate frequencies are not allocated for their use, or through regulation or
regulatory changes.  In the United States, the Federal Communications Commission
has broad authority to make the rules and regulations and prescribe restrictions
and conditions on the use of radio frequencies.  Many countries, including the
United States, are currently in the process of making available a significant
number of additional licensed radio frequencies.

(d)  Financial information about foreign and domestic operations and export
     sales.

Domestic export sales to third parties were $2.97 billion in 1994, $1.83 billion
in 1993 and $1.14 billion in 1992.  Domestic export sales to affiliates were
$4.40 billion in 1994, $3.16 billion in 1993 and $2.32 billion in 1992.

The remainder of the response to this section of Item 1 is incorporated by
reference to Note 7 of the Notes to Consolidated Financial Statements and the
"Results of Operations" section of Motorola's 1994 Annual Report to
Stockholders.


Item 2:  Properties

Motorola's principal executive offices are located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196.  Its other major facilities in the United States are
located in Arlington Heights, Buffalo Grove, Grayslake, Libertyville,
Northbrook, Schaumburg and Vernon Hills, Illinois; Elma, New

<PAGE>

                                     - 21 -

York; Phoenix, Chandler, Scottsdale, Mesa and Tempe, Arizona; Boynton Beach and
Plantation, Florida; Atlanta, Georgia; Austin, Ft. Worth and Seguin, Texas;
Mount Pleasant, Iowa; Mansfield, Massachusetts; Huntsville, Alabama; Research
Triangle Park, North Carolina; Albuquerque, New Mexico; Carlisle, Pennsylvania;
and Irvine and San Jose, California.  Motorola also operates manufacturing
facilities or sales offices in 39 other countries.  (See "Narrative Description
of Business" for information regarding the location of the principal
manufacturing facilities for each industry segment.)  The United States
facilities (both manufacturing and administrative) owned by Motorola contain
approximately 16.9 million square feet.  Motorola also leases facilities in the
United States containing approximately 4.5 million square feet.  Motorola's
facilities outside the United States contain approximately 8.3 million square
feet of which approximately 3.1 million square feet are leased.

Motorola generally considers the productive capacity of the plants operated by
each of its industry segments adequate and suitable for the requirements of each
of such segments, except for the Semiconductor Products Sector which is engaged
in a factory expansion program to meet the strong market demand for its
products.  Motorola is also adding production capacity for its General Systems
Sector and its Paging Products Group.

The extent of utilization of such manufacturing facilities varies from plant to
plant and from time to time during the year.


Item 3:  Legal Proceedings

Motorola is a named defendant in six cases arising out of alleged groundwater,
soil and air pollution in Phoenix and Scottsdale, Arizona.  MCINTIRE ET AL. V.
MOTOROLA and CAMELHEAD EQUITIES ET AL. V. MOTOROLA ET AL. are pending in the
U.S. District Court for the District of Arizona, and BAKER ET AL. V. MOTOROLA ET
AL., LOFGREN ET AL. V. MOTOROLA ET AL., BENTANCOURT ET AL. V. MOTOROLA ET AL.
and FORD ET AL. V. MOTOROLA ET AL. are pending in the Arizona Superior Court,
Maricopa County.  The MCINTIRE lawsuit, filed on December 20, 1991, involves
over 900 plaintiffs who allege that the operations of Motorola at several
facilities in Phoenix and Scottsdale,

<PAGE>

                                     - 22 -

Arizona have caused property damage and health problems by contaminating the
soil, groundwater and air in the area surrounding those facilities.  CAMELHEAD
EQUITIES, filed on June 1, 1993, is a suit for business losses by four failed
real estate development limited partnerships alleging that groundwater
contamination caused property damage and the failure of their real estate
development.  The BAKER lawsuit, filed on February 11, 1992, is also a class
action, involving six representative individual named plaintiffs, alleging that
Motorola and other defendants contaminated the soil, air and groundwater in the
Phoenix/Scottsdale area, diminishing property values and exposing members of the
class to possible adverse health effects.  On August 24, 1994, the BAKER court
certified two classes, a property damage class consisting of all persons who
were residents, property owners or lessees of property which overlies, or is
adjacent to, the alleged groundwater pollution, and a medical monitoring class
consisting of all persons who resided in Phoenix and/or Scottsdale for more than
one year continuously during the years between 1955 and 1989, and who received
potable drinking water containing trichloroethylene at a level equal to or
exceeding 2.0 parts per billion, on average.  The LOFGREN, BENTANCOURT and FORD
lawsuits, filed on April 6, 1993, July 16, 1993 and June 10, 1994, respectively,
have been consolidated.  The consolidated cases involve approximately 190
plaintiffs, alleging that Motorola and other defendants contaminated the soil,
air and groundwater in the Phoenix/Scottsdale area, causing health problems.

All six lawsuits seek compensatory and punitive damages.  The MCINTIRE complaint
includes personal injury and property damage claims and seeks injunctive relief.
The BAKER complaint seeks damages for medical monitoring and alleges claims for
property, business and economic loss and seeks declaratory and injunctive
relief.

In December 1994, an agreement in principal was reached to settle the FELDMAN ET
AL. V. MOTOROLA, INC. ET AL., securities law class action, subject to court
approval.  FELDMAN was filed on May 1, 1991 in the U.S. District Court for the
Northern District of Illinois as a class action against Motorola and several of
its officers for alleged violations of Section 10(b), 20(a) and 20A of the
Securities Exchange Act of 1934 and SEC Rule 10b-5.

<PAGE>

                                     - 23 -

Motorola's declaratory judgment action filed on October 8, 1993 against
InterDigital Communications Corporation ("IDC") is being tried by jury trial in
the United States District Court for the District of Delaware.  IDC claims that
Motorola's TDMA technology (used in cellular products, MIRS and other areas)
infringes one or more of IDC's patents.  Motorola believes that the IDC patents
are invalid; and if valid, that Motorola does not infringe them.  If Motorola
loses, the jury could award damages for past infringement.  The amount of such
an award cannot be predicted but could be significant.  The jury could also
impose royalties on future sales.  Also, Motorola could be enjoined from selling
infringing products.  A number of Motorola's competitors have now signed
licenses with IDC.

Motorola and several of its directors and officers are named defendants in three
alleged class actions for alleged violations of Section 10(b) and 20(a) of the
Securities Exchange Act and SEC Rule 10b-5, KAUFMAN, ET AL. V. MOTOROLA, INC. ET
AL.; HOFFMAN IRA ROLLOVER ACCOUNT ET AL. V. MOTOROLA, INC., ET AL.; and MILLER
V. MOTOROLA, INC., ET AL.  Each proposed action is pending in the U.S. District
Court for the Northern District of Illinois, and each maintains that Motorola
and the individual defendants committed a fraud on the securities market by
artificially inflating the price of Motorola stock.  Plaintiffs propose a class
period of January 9, 1995 through February 17, 1995, and seek an unspecified
amount of damages.

Motorola is a defendant in several cases arising out of the Company's
manufacture and sale of portable cellular telephones.  VERB, ET AL. V. MOTOROLA,
INC., ET AT., Circuit Court of Cook County, Illinois, 93 CH 00969, is a
purported class action by purchasers of portable cellular phones against the
Company and seven other corporate defendants, alleging economic loss; the trial
court's dismissal of the case on legal grounds is on appeal to the Illinois
Court of Appeals.  SCHIFFNER V. MOTOROLA, INC., Circuit Court of Cook County,
Illinois, 95 CH 1879, is another economic loss purported class action by
portable cellular phone purchasers.  CRIST V. MOTOROLA, INC. ET AL., Circuit
Court of Cook County, Illinois, 93 CH 00969, HOFFMAN V. MOTOROLA, INC., ET AL.,
Circuit Court of Cook County, Illinois, 94 L 13713, WARD V. MOTOROLA, INC., ET
AL., State Court of Fulton County, Georgia, 94 VS 91470 A, and WRIGHT V.
MOTOROLA, INC., ET AL., Circuit Court of Cook County, Illinois, 95 L 04929, are
individual personal injury cases


<PAGE>

                                     - 24 -

alleging portable cellular telephone use caused and/or aggravated the
plaintiffs' brain cancers.  KANE V. MOTOROLA, INC., ET AL., Circuit Court of
Cook County, Illinois, 93 L 15256, is an individual personal injury case brought
by a Motorola employee alleging that testing of a prototype cellular telephone
antenna caused his brain cancer.

The information contained in Motorola Management's Discussion and Analysis of
Financial Condition and Results of Operations under the caption "Environmental
Matters" and in Note 6 of the Notes to Consolidated Financial Statements under
the caption "Environmental and Legal" in Motorola's 1994 Annual Report to
Stockholders is incorporated herein by reference.

Motorola is a defendant in various other suits, claims and investigations which
arise in the normal course of business.  In the opinion of management, the
ultimate disposition of these matters, including those matters described above
in this Item 3, will not have a material adverse effect on the consolidated
financial position, liquidity or results of operations of Motorola.


Item 4:  Submission of Matters to a Vote of Security Holders

Not applicable.

Executive Officers of the Registrant

Following are the persons who were the executive officers of Motorola as of
December 31, 1994, their ages as of December 31, 1994 and their current titles
and positions held during the last five years:

Gary L. Tooker; age 55; Vice Chairman of the Board and Chief Executive Officer
since December 1993; President and Acting Chief Executive Officer from October
1993 to December 1993; President and Chief Operating Officer from January 1990
to October 1993; and Chief Operating Officer and Senior Executive Vice President
from January 1988 to January 1990.

<PAGE>

                                     - 25 -

Christopher B. Galvin; age 44; President and Chief Operating Officer since
December 1993; Senior Executive Vice President and Assistant Chief Operating
Officer from January 1990 to December 1993; and Executive Vice President and
Chief Corporate Staff Officer from May 1989 to January 1990.

Robert W. Galvin; age 72; Chairman of the Executive Committee of the Board of
Directors since January 1990; and Chairman of the Board of Directors from
November 1959 to January 1990.

John F. Mitchell; age 66; Vice Chairman of the Board and Officer of the Board
since January 1988.

Keith J. Bane; age 55; Executive Vice President and Chief Corporate Staff
Officer since February 1995; Senior Vice President and Chief Corporate Staff
Officer from August 1994 to February 1995; Senior Vice President and Motorola
Director of Strategy, Technology and External Relations from October 1993 to
August 1994; and Senior Vice President and Motorola Director of Strategy from
November 1988 to October 1993.

Arnold S. Brenner; age 57; Executive Vice President and General Manager, Japan
Group since November 1988.

James Donnelly; age 55; Executive Vice President and Motorola Director of Human
Resources (name changed from Personnel to Human Resources in 1993) since
December 1987.

Thomas D. George; age 54; Executive Vice President, and President and General
Manager, Semiconductor Products Sector since April 1993; Executive Vice
President and Assistant General Manager, Semiconductor Products Sector from
November 1992 to April 1993; and Senior Vice President and Assistant General
Manager, Semiconductor Products Sector from July 1986 to November 1992.

Merle L. Gilmore; age 46; Executive Vice President, President and General
Manager, Land Mobile Products Sector ("LMPS"), since July 1994; Senior Vice
President and President and General Manager, LMPS, from June 1994 to July 1994;
Senior Vice President and Assistant General Manager, LMPS,

<PAGE>

                                     - 26 -

from July 1992 to June 1994; Senior Vice President and General Manger, Worldwide
Radio Products Group, LMPS, from May 1991 to July 1992; Corporate Vice President
and General Manager, Worldwide Radio Products Group, Communications Sector, from
January 1991 to May 1991; and Corporate Vice President and General Manager,
Portable Products Division, Communications Sector, from April 1989 to January
1991.

Robert L. Growney; age 52; Executive Vice President, and President and General
Manager, Messaging, Information and Media Sector since January 1994; Executive
Vice President and General Manager, Paging and Wireless Data Group from
September 1992 to January 1994; Senior Vice President and General Manager,
Paging and Telepoint Systems Group from January 1991 to September 1992; and
Senior Vice President and General Manager, Radio Technologies Group,
Communications Sector from May 1989 to January 1991.

Carl F. Koenemann; age 56; Executive Vice President and Chief Financial Officer
since December 1991; Senior Vice President and Assistant Chief Financial Officer
from May 1990 to December 1991; Corporate Vice President and Assistant Chief
Financial Officer from January 1990 to May 1990; and Corporate Vice President
and Director of Finance, General Systems Group, from May 1987 to January 1990.

James A. Norling; age 52; Executive Vice President, and President, Motorola
Europe, Middle East and Africa since April 1993; and Executive Vice President,
and President and General Manager, Semiconductor Products Sector from December
1989 to April 1993.

Edward F. Staiano; age 58; Executive Vice President, and President and General
Manager, General Systems Sector since December 1989.

Frederick T. Tucker; age 54; Executive Vice President and General Manager,
Automotive, Energy and Controls Group (name changed from Automotive and
Industrial Electronics Group in 1993) since September 1992; and Senior Vice
President and General Manager, Automotive and Industrial Electronics Group from
April 1988 to September 1992.

<PAGE>

                                     - 27 -

Richard H. Weise; age 59; Senior Vice President, General Counsel and Secretary
since November 1985.

David G. Wolfe; age 59; Executive Vice President and General Manager, Government
and Space Technology Group (name changed from Government and Systems Technology
Group in 1994) since November 1990; and Senior Vice President and General
Manager, Government Electronics Group from January 1988 to November 1990.

Richard W. Younts; age 55; Executive Vice President and Corporate Executive
Director International-Asia and Americas since December 1993; Senior Vice
President and Corporate Executive Director, International-Asia and Americas from
July 1991 to December 1993; Senior Vice President and President, Nippon Motorola
Ltd., Japanese Group from May 1991 to July 1991; and Corporate Vice President
and President, Nippon Motorola Ltd. from August 1987 to May 1991.

The above executive officers will serve as officers of Motorola until the
regular meeting of the Board of Directors in May 1995 or until their respective
successors shall have been elected.  Christopher B. Galvin is a son of Robert W.
Galvin.  There is no family relationship between any of the other executive
officers listed above.


                                     PART II

Item 5:   Market for Registrant's Common Equity and Related Stockholder Matters

Motorola's Common Stock is listed on the New York, Chicago, London and Tokyo
Stock Exchanges.  The remainder of the response to this Item is incorporated by
reference to the information under the caption "Quarterly and Other Financial
Data" of Motorola's 1994 Annual Report to Stockholders.

<PAGE>

                                     - 28 -

Item 6:   Selected Financial Data

The response to this Item is incorporated by reference to the information under
the caption "Five Year Financial Summary" of Motorola's 1994 Annual Report to
Stockholders.


Item 7:   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

The response to this Item is incorporated by reference to the information under
the captions "Financial Review", the "Financial Results" section of the Letter
to Stockholders and "Review of Operations" of Motorola's 1994 Annual Report to
Stockholders.


Item 8:  Financial Statements and Supplementary Data

The response to this Item is incorporated by reference to the information  under
the captions "Management's Responsibility For Financial Statements",
"Independent Auditors' Report", "Statements of Consolidated Earnings",
"Statements of Consolidated Stockholders' Equity", "Consolidated Balance
Sheets", "Statements of Consolidated Cash Flows", "Supplemental Cash Flow
Information", "Notes to Consolidated Financial Statements", "Quarterly and Other
Financial Data" and "Five Year Financial Summary" of Motorola's 1994 Annual
Report to Stockholders.


Item 9:   Changes in and Disagreements With Accountants on Accounting and
          Financial Disclosure

None.

                                    PART III

Item 10:  Directors and Executive Officers of the Registrant

<PAGE>

                                     - 29 -

The response to this Item required by Item 401 of Regulation S-K, with respect
to directors, is incorporated by reference to the information under the caption
"Nominees" on pages 2 through 12 of Motorola's Proxy Statement for the 1995
annual meeting of stockholders and with respect to executive officers, is
contained in Part I hereof under the caption "Executive Officers of the
Registrant".


Item 11:  Executive Compensation

The response to this Item is incorporated by reference to the information under
the caption "Director Compensation" on pages 14 and 15 of Motorola's Proxy
Statement for the 1995 annual meeting of stockholders and "Summary Compensation
Table," "Stock Option Grants in 1994," "Aggregated Option Exercises in Last
Fiscal Year and FY-End Option Values," "Long-Term Incentive Plans - Awards in
Last Fiscal Year," "Pension and Supplementary Retirement Plans," and
"Termination of Employment and Change in Control Arrangements" on pages 19
through 23 of Motorola's Proxy Statement for the 1995 annual meeting of
stockholders.


Item 12:  Security Ownership of Certain Beneficial Owners and Management

The response to this Item is incorporated by reference to the information under
the captions "Security Ownership of Management of the Company" and "Principal
Shareholders" on pages 17, 18 and 19 of Motorola's Proxy Statement for the 1995
annual meeting of stockholders.


Item 13:  Certain Relationships and Related Transactions

The response to this Item is incorporated by reference to the information under
the caption "Director Compensation" on pages 14 and 15 of Motorola's Proxy
Statement for the 1995 annual meeting of stockholders.

<PAGE>

                                     - 30 -

                                     PART IV

Item 14:  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  1.   Financial Statements

          See Part II, Item 8 hereof.

     2.   Financial Statement Schedule and Auditors' Report

          Title                                         Schedule
          -----                                         --------

          Valuation and Qualifying Accounts. . . . . . . . II

     All schedules omitted are inapplicable or the information required is shown
     in the consolidated financial statements or notes thereto.  The auditors'
     report of KPMG Peat Marwick LLP with respect to the Financial Statement
     Schedule is located at page 32.

     3.   Exhibits

     Exhibits required to be attached by Item 601 of Regulation S-K are listed
     in the Exhibit Index attached hereto, which is incorporated herein by this
     reference.  Following is a list of management contracts and compensatory
     plans and arrangements required to be filed as exhibits to this form by
     Item 14(c) hereof:

     Motorola Executive Incentive Plan ("MEIP")
     Motorola Long Range Incentive Plan of 1994
     Share Option Plan of 1982
     Share Option Plan of 1991
     Motorola Elected Officers Supplementary Retirement Plan
     Officers Supplemental Medical Plan
     Accidental Death and Dismemberment Insurance for MEIP
        Participants
     Arrangement for Directors' Fees
     Retirement Plan for Non-employee Directors

<PAGE>

                                     - 31 -

     Deferred Fee Plan for Outside Directors
     Officers' Group Life Insurance Policy
     Consultant Agreements with William J. Weisz, John T. Hickey,
        Gardiner L. Tucker, Donald R. Jones and Erich Bloch
     Form of Termination Agreement
     Policy Protecting Salary and Medical Benefits
     Insurance Policy for Non-employee Directors

(b)  Reports on Form 8-K.  Motorola filed no reports on Form 8-K during the last
     quarter of 1994.

(c)  Exhibits      See Item 14(a)3 above.

<PAGE>

                                     - 32 -

KPMG PEAT MARWICK LLP

Certified Public Accountants

Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-9973


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
of Motorola, Inc.:


Under date of January 9, 1995, we reported on the consolidated balance sheets of
Motorola, Inc. and consolidated subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1994, as contained in the 1994 annual report to stockholders.  These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1994.  In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedule as listed in Part IV, Item
14(a)2.  The financial statement schedule is the responsibility of the Company's
management.  Our responsibility is to express an opinion on the financial
statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

                                   /s/  KPMG Peat Marwick LLP

January 9, 1995

<PAGE>

                                     - 33 -

                         Motorola, Inc. and Subsidiaries         Schedule II

                        Valuation and Qualifying Accounts
                       Three Years Ended December 31, 1994
                                  (In millions)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Column A                      Column B           Column C                      Column D     Column E
-----------------------------------------------------------------------------------------------------
                                                    Additions
                              Balance at  ----------------------------                       Balance
                              beginning    Charged to       Charged to                        at end
                              of period   costs & expenses  other accounts     Deductions    of period
------------------------------------------------------------------------------------------------------

1994
----
<S>                              <C>        <C>                <C>               <C>            <C>
Allowance for doubtful accounts  $ 91        $ 48               ---             $  21 (1)       $118

Product and service warranties    166         195               ---                78 (2)        283

1993
----
Allowance for doubtful accounts  $ 69        $ 54               ---             $  32 (1)       $ 91

Product and service warranties    117         110               ---                61 (2)        166

1992
----
Allowance for doubtful accounts  $ 79        $ 20               ---             $  30 (1)       $ 69

Product and service warranties     92          64               ---                39 (2)        117


<FN>
(1)  Uncollectible accounts written off
(2)  Warranty claims paid
</TABLE>

<PAGE>

                                     - 34 -

KPMG PEAT MARWICK LLP

Certified Public Accountants

Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-9973


                         CONSENT OF INDEPENDENT AUDITORS


The Board of Directors
of Motorola, Inc.:


We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 33-40876 and 33-58714) and Form S-3 (Nos. 33-30662, 33-59252, 33-50207
and 33-56055) of Motorola, Inc. and consolidated subsidiaries of our reports
dated January 9, 1995, relating to the consolidated balance sheets of Motorola,
Inc. and consolidated subsidiaries as of December 31, 1994 and 1993 and the
related statements of consolidated earnings, stockholders' equity, and cash
flows and related financial statement schedule for each of the years in the
three-year period ended December 31, 1994, which reports appear in or are
incorporated by reference in the Annual Report on Form 10-K of Motorola, Inc.
for the year ended December 31, 1994.


                                   /s/  KPMG Peat Marwick LLP

March 22, 1995

<PAGE>

                                     - 35 -


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Motorola, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

March 3, 1995
                              MOTOROLA, INC.


                              By:     /s/  Gary L. Tooker
                                 -----------------------------------------
                                   Gary L. Tooker
                                   Vice Chairman of the Board
                                   and Chief Executive Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Motorola, Inc. and
in the capacities and on the dates indicated.


     SIGNATURE                          TITLE                              DATE
     ---------                          -----                              ----

    /s/  Gary L. Tooker                 Director and Principal            3/3/95
------------------------------          Executive Officer
Gary L. Tooker


    /s/  Carl F. Koenemann              Principal Financial              3/20/95
------------------------------          Officer
Carl F. Koenemann


   /s/  Kenneth J. Johnson              Principal Accounting              3/1/95
------------------------------          Officer
Kenneth J. Johnson

<PAGE>

                                     - 36 -



     SIGNATURE                          TITLE                              DATE
     ---------                          -----                              ----

   /s/  Erich Bloch                     Director                          3/2/95
------------------------------
Erich Bloch


  /s/  David R. Clare                   Director                          3/5/95
------------------------------
David R. Clare


  /s/  Wallace C. Doud                  Director                          3/2/95
------------------------------
Wallace C. Doud


  /s/  H. Laurance Fuller               Director                          3/6/95
------------------------------
H. Laurance Fuller


  /s/  Christopher B. Galvin            Director                          3/3/95
------------------------------
Christopher B. Galvin


  /s/  Robert W. Galvin                 Director                          3/3/95
------------------------------
Robert W. Galvin


  /s/  John T. Hickey                   Director                          3/3/95
------------------------------
John T. Hickey


  /s/  Anne P. Jones                    Director                         3/10/95
------------------------------
Anne P. Jones


  /s/  Donald R. Jones                  Director                          3/5/95
------------------------------
Donald R. Jones

<PAGE>

                                     - 37 -


     SIGNATURE                          TITLE                              DATE
     ---------                          -----                              ----

  /s/  Walter E. Massey                 Director                          3/4/95
------------------------------
Walter E. Massey


  /s/  John F. Mitchell                 Director                          3/6/95
------------------------------
John F. Mitchell


  /s/  Thomas J. Murrin                 Director                          3/6/95
------------------------------
Thomas J. Murrin


  /s/  John E. Pepper, Jr.              Director                         3/21/95
------------------------------
John E. Pepper, Jr.


  /s/  Samuel C. Scott III              Director                          3/2/95
------------------------------
Samuel C. Scott III


  /s/  Gardiner L. Tucker               Director                          3/9/95
------------------------------
Gardiner L. Tucker


  /s/  William J. Weisz                 Director                          3/3/95
------------------------------
William J. Weisz


  /s/  B. Kenneth West                  Director                          3/1/95
------------------------------
B. Kenneth West

<PAGE>

                                     - 38 -

                                  EXHIBIT INDEX

EXHIBIT NO.                        EXHIBIT
-----------                        -------

3(i)   Restated Certificate of Incorporation of Motorola, Inc., including
       Certificate of Designation, Preferences and Rights for Junior
       Participating Preferred Stock, Series A (incorporated by reference to
       Exhibit 3(i)(b) to Motorola's Quarterly Report on Form 10-Q for the
       fiscal quarter ended April 2, 1994).

3(ii)  By-Laws of Motorola, Inc., revised as of May 3, 1994 (incorporated by
       reference to Exhibit 3(ii) to Motorola's Quarterly Report on Form 10-Q
       for the fiscal quarter ended April 2, 1994).

4.1    Rights Agreement dated November 9, 1988 (incorporated by reference to
       Exhibit (1) to Motorola's Registration Statement on Form 8-A dated
       November 15, 1988).

4.2    Amendment to Rights Agreement dated August 7, 1990 (incorporated by
       reference to Exhibit 2 to Motorola's Form 8 dated August 9, 1990 amending
       Motorola's Registration Statement on Form 8-A dated November 15, 1988).

4.3    Amendment No. 2 on Form 8 dated December 2, 1992 amending Motorola's
       Registration Statement on Form 8-A dated November 15, 1988 (incorporated
       by reference to Motorola's Form 8 dated December 2, 1992).

4.3(a) Amendment No. 3 on Form 8-A/A dated February 28, 1994 amending Motorola's
       Registration Statement on Form 8-A dated November 15, 1988 (incorporated
       by reference to Motorola's Amendment No. 3 Form 8-A/A dated February 28,
       l994).

4.4    LYONs Indenture dated September 1, 1989 (incorporated by reference to
       Exhibit 4(a) to Motorola's Registration Statement on Form S-3,
       Registration No. 33-30662).

<PAGE>

                                     - 39 -


EXHIBIT NO.                        EXHIBIT
-----------                        -------

4.5    Indenture dated as of March 15, 1985 between Motorola, Inc. and Harris
       Trust and Savings Bank, as Trustee, and specimen of 8.40% Debentures due
       August 5, 2031 under the Indenture (incorporated by reference to Exhibits
       4(C) and 4(B), respectively, to Motorola's Current Report on Form 8-K
       dated August 12, 1991).

4.6    Indenture dated as of October 1, 1991 between Motorola, Inc. and Harris
       Trust and Savings Bank, as Trustee (incorporated by reference
       to Exhibit 4.5 to Motorola's Annual Report on Form 10-K for the fiscal
       year ended December 31, 1991).

4.7    Specimen of 7.60% Notes due January 1, 2007 (incorporated by reference to
       Exhibit 4.6 to Motorola's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1991).

4.8    Specimen of 6 1/2% Notes due March 1, 2008 (incorporated by reference to
       Exhibit 4(B) to Motorola's Current Report on Form 8-K dated March 1,
       1993).

4.9    LYONs Indenture dated September 1, 1993 (incorporated by reference to
       Exhibit 4(v) to Motorola's Quarterly Report on Form 10-Q for the quarter
       ended October 2, 1993.

10.1   Motorola Executive Incentive Plan, as amended through November 23, 1993,
       including the Long Range Incentive Program (incorporated by reference to
       Exhibit 10.1 to Motorola's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1993).

10.2   Motorola Long Range Incentive Plan of 1994 (incorporated by reference to
       Exhibit 10.2 to Motorola's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1993).

10.3   Share Option Plan of 1982, as amended through March 24, 1992
       (incorporated by reference to Exhibit 10.3 to Motorola's Annual

<PAGE>

                                     - 40 -


EXHIBIT NO.                        EXHIBIT
-----------                        -------

       Report on Form 10-K for the fiscal year ended December 31, 1990, Exhibit
       10.2(a) to Motorola's Annual Report on Form 10-K for the fiscal year
       ended December 31, 1991 and Exhibit 10.3 to Motorola's Annual Report on
       Form 10-K for the fiscal year ended December 31, 1992).

10.4   Share Option Plan of 1991, as amended through December 16, 1993
       (incorporated by reference to Exhibit 10.4 to Motorola's Annual Report on
       Form 10-K for the fiscal year ended December 31, 1993).

10.5   Motorola Elected Officers Supplementary Retirement Plan, as amended
       through February 6, 1995.

10.6   Officers supplemental medical plan (incorporated by reference to Exhibit
       10.6 to Motorola's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1990).

10.7   Accidental death and dismemberment insurance for MEIP participants
       (incorporated by reference to Exhibit 10.7 to
       Motorola's Annual Report on Form 10-K for the fiscal year ended December
       31, 1990).

10.8   Arrangement for directors' fees and retirement plan for non-employee
       directors (description incorporated by reference from page 14 of
       Motorola's Proxy Statement for the 1995 annual meeting of stockholders).

10.9   Deferred Fee Plan for Outside Directors.

10.10  Officers' Group Life Insurance Policy (incorporated by reference to
       Exhibit 10.10 to Motorola's Annual Report on Form 10-K for the fiscal
       year ended December 31, 1990).

<PAGE>

                                     - 41 -


EXHIBIT NO.                        EXHIBIT
-----------                        -------

10.11  Consultant Agreement dated February 15, 1994 between Motorola, Inc. and
       William J. Weisz (incorporated by reference to Exhibit 10.11 to
       Motorola's Annual Report on Form 10-K for the fiscal year ended December
       31, 1993).

10.12  Consultant Agreement dated January 27, 1994 between Motorola, Inc. and
       John T. Hickey (incorporated by reference to Exhibit 10.12 to Motorola's
       Annual Report on Form 10-K for the fiscal year ended December 31, 1993).

10.13  Consultant Agreement dated January 27, 1994 between Motorola, Inc. and
       Dr. Gardiner L. Tucker (incorporated by reference to Exhibit 10.13 to
       Motorola's Annual Report on Form 10-K for the fiscal year ended December
       31, 1993).

10.14  Consultant Agreement dated January 27, 1994 between Motorola, Inc. and
       Donald R. Jones (incorporated by reference to Exhibit 10.14 to Motorola's
       Annual Report on Form 10-K for the fiscal year ended December 31, 1993).

10.15  Consultant Agreement dated January 27, 1994 between Motorola, Inc. and
       Erich Bloch (incorporated by reference to Exhibit 10.15 to Motorola's
       Annual Report on Form 10-K for the fiscal year ended December 31, 1993).

10.16  Form of Termination Agreement in respect of a change in control
       (incorporated by reference to Exhibit 10.15 to Motorola's Annual Report
       on Form 10-K for the fiscal year ended December 31, 1989).

10.17  Policy protecting salary and medical benefits of employees in the event
       of an unsolicited change in control (incorporated by reference to Exhibit
       10.16 to Motorola's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1990).

<PAGE>

                                     - 42 -


EXHIBIT NO.                        EXHIBIT
-----------                        -------

10.18  Insurance policy covering non-employee Directors (incorporated by
       reference to the description on pages 14 and 15 of Motorola's Proxy
       Statement for the 1995 annual meeting of stockholders and to Exhibit
       10.16 to Motorola's Annual Report on Form 10-K for the fiscal year ended
       December 31, 1989).

10.19  Iridium Space System Contract between Motorola, Inc. and Iridium, Inc.,
       as amended to date, and Iridium Communications Systems Operations and
       Maintenance Contract between Motorola, Inc. and Iridium, Inc., as amended
       to date (incorporated by reference to Exhibits 99.2 and 99.3,
       respectively, to Motorola's Current Report on Form 8-K dated August 2,
       1993 and Exhibits 99(a) and 99(b), respectively, to Motorola's Quarterly
       Report on Form 10-Q for the quarter ended October 1, 1994).

11     Motorola, Inc. and Consolidated Subsidiaries Primary and Fully Diluted
       Earnings Per Common and Common Equivalent Share.

13     Portions of Motorola's 1994 Annual Report to Stockholders.

21     Subsidiaries of Motorola.

23     Consent of KPMG Peat Marwick.  See page 34 of the Annual Report on Form
       10-K of which this Exhibit Index is a part.

27     Financial Data Schedule (filed only electronically with SEC).

99.1   Agreement and Plan of Contribution and Merger Among Nextel
       Communications, Inc., Motorola, Inc., ESMR, Inc. and ESMR Sub, Inc. dated
       August 4, 1994 (incorporated by reference to Exhibit 5.1 to Motorola's
       Current Report on Form 8-K dated August 5, 1994).

99.2   Amendment to Agreement and Plan of Contribution and Merger among Nextel
       Communications, Inc., Motorola, Inc., ESMR, Inc. and ESMR Sub, Inc. dated
       February 12, 1995.


<PAGE>
                                                                    Exhibit 10.5

             MOTOROLA ELECTED OFFICERS SUPPLEMENTARY RETIREMENT PLAN
                           AS AMENDED February 6, 1995



     Motorola, Inc. (the "Company") heretofore established the Elected Officers
Supplementary Retirement Plan (the "Plan").  Effective November 9, 1988, the
Board of Directors of the Company approved extensive amendments to the Plan.
This document sets forth the Plan as amended on November 9, 1988 and includes
all additional amendments through June 21, 1993.  The Plan and the Trust created
to fund the Company's obligations under the Plan are not intended to be
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code.

     Section 1. DEFINITIONS.  Where the following words and phrases appear in
this Plan, they shall have the respective meanings set forth below, unless the
context clearly indicates to the contrary:

     1.1  ACTUARIAL (OR ACTUARIALLY) EQUIVALENT:  Equality in value of the
aggregate amounts expected to be received under different forms of payment, and
except as provided below, based on the actuarial assumptions, tables and
interest rates which are adopted by the Committee from time to time for this
purpose and are set forth in Appendix A hereto.

     1.2  AFFILIATED EMPLOYER:  Any corporation which is a member of a
controlled group of corporations (as defined in Section 414 (b) of the Internal
Revenue Code) which includes the Company.

     1.3  ANNUITY STARTING DATE:  As defined in Section 8.1 hereof.

     1.4  AVERAGE MEIP AWARD:  As defined in Section 6 hereof.

     1.5  BOARD OF DIRECTORS:  The Board of Directors of the Company, and shall
also mean any committee of the Board of Directors which has been delegated
authority to exercise the powers and authority of the Board of Directors with
respect to the Plan.

     1.6  CHANGE IN CONTROL:  A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act") whether or not the Company is then subject to such reporting requirement;
provided that, without limitation, such a change in control shall be deemed to
have occurred if (A) any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13-d3 under

<PAGE>

the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities (other than the Company, any employee benefit plan of the
Company, any "person" who is a natural person and who was shown as the
"beneficial owner", directly or indirectly, of securities of the Company
representing more than 5% of the combined voting power of the Company's
securities in the Company's Proxy Statement dated earlier than, but closest to,
the Effective Date; and, for purposes of the Plan, no change in control shall be
deemed to have occurred as a result of the "beneficial ownership," or changes
therein, of the Company's securities by any of the foregoing), (B) there shall
be consummated (i) any consolidation or merger of the Company in which the
Company is not the surviving or continuing corporation or pursuant to which
shares of the Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company, in which the holders of the
Company's Common Stock immediately prior to the merger have (directly or
indirectly) at least an 80% ownership interest in the outstanding Common Stock
of the surviving corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, (C)
the stockholders of the Company approve any plan or proposal for the liquidation
or dissolution of the Company, or (D) as the result of, or in connection with,
any cash tender offer, exchange offer, merger or other business combination,
sale of assets, proxy or consent solicitation (other than by the Board),
contested election or substantial stock accumulation (a "Control Transaction"),
the members of the Board immediately prior to the first public announcement
relating to such Control Transaction shall thereafter cease to constitute a
majority of the Board.

     1.7  COMMITTEE:  The persons appointed pursuant to Section 12 to assist the
Company in the administration of the Plan in accordance with said Section.

     1.8  COMPANY:  Motorola, Inc., a corporation organized and existing under
the laws of the State of Delaware or its successor or successors.

     1.9  DISABILITY; DISABLED:  The Committee shall determine, in its
reasonable discretion, whether any Participant has a Disability or is Disabled.

     1.10 EARLY RETIREMENT DATE:  The first day of the calendar month coincident
with or immediately following the Participant's 60th birthday.

     1.11 EARLY RETIREMENT AGE:  The Participant's 60th birthday.

                                        2

<PAGE>

     1.12 EFFECTIVE DATE:  November 9, 1988, the date on which the provisions of
this Plan as amended on November 9, 1988 become effective.

     1.13 ERISA:  The Employee Retirement Income Security Act of 1974, as
amended from time to time.

     1.14 ERISA EXCESS FORMULA:  As defined in Section 6 hereof.

     1.15 HOUR OF SERVICE:

     (a)  each hour for which an employee is paid, or entitled to payment, for
     the performance of duties for the Company.  These hours will be credited to
     the employee for the computation period in which the duties are performed;

     (b)  each hour for which an employee is paid, or entitled to payment, by
     the Company on account of a period of time during which no duties are
     performed (irrespective of whether the employment relationship has
     terminated) due to vacation, holiday, illness, incapacity (including
     Disability), layoff, jury duty, military duty or leave of absence.  No more
     than 501 Hours of Service will be credited under this paragraph for a
     single computation period (whether or not the period of time during which
     no duties are performed occurs in a single computation period).  Hours
     under this paragraph will be calculated and credited pursuant to section
     2530.200b-2 of the Department of Labor Regulations which are incorporated
     herein by this reference; and

     (c)  each hour for which back pay, irrespective of mitigation of damages,
     is either awarded or agreed to by the Company.  The same Hours of Service
     will not be credited both under paragraph (a) or paragraph (b), as the case
     may be, and under this paragraph (c).  These hours will be credited to the
     employee for the computation period or periods to which the award or
     agreement pertains rather than the computation period in which the award,
     agreement, or payment is made.  Solely for purposes of determining whether
     a One Year Break in Service for vesting purposes has occurred in a
     computation period, an employee who is absent from work for maternity or
     paternity reasons shall receive credit for the Hours of Service which would
     otherwise have been credited to such employee but for such absence, or in
     any case in which such hours cannot be determined, 8 hours of service per
     day of such absence.  For purposes of this paragraph, an absence from work
     for maternity or paternity reasons means an absence (1) by reason of the
     pregnancy of the employee, (2) by reason of a birth of a child of the
     employee, (3) by reason of the

                                        3

<PAGE>

     placement of a child with the employee in connection with the adoption of
     such child by such employee, or (4) for purposes of caring for such child
     for a period beginning immediately following such birth or placement.  The
     Hours of Service credited under this paragraph shall be credited (1) in the
     computation period in which the absence begins if the crediting is
     necessary to prevent a One Year Break in Service in that period, or (2) in
     all other cases, in the following computation period.  The total Hours of
     Service Required to be credited for maternity or paternity reasons shall
     not exceed 501 hours.  As used in this definition, the term Company
     includes all Affiliated Employers.

     1.16 NORMAL FORMULA:  As defined in Section 6 hereof.

     1.17 NORMAL RETIREMENT AGE:  The Participant's 65th birthday.

     1.18 NORMAL RETIREMENT DATE:  A Participant's Normal Retirement Date is the
first day of the calendar month coincident with or immediately following the
Participant's 65th birthday.

     1.19 OFFICER:  An officer of the Company elected by the Board of Directors.

     1.20 ONE YEAR BREAK IN SERVICE:  An employee shall incur a One Year Break
in Service if in any computation period, as described in the definition of a
Year of Service, he does not complete more than five hundred (500) Hours of
Service.  In the case of an employee who is absent from work for maternity or
paternity reasons, as described in Section 1.15, Hours of Service shall be
credited to such employee in accordance with Section 1.15.

     1.21 PBGC:  Pension Benefit Guaranty Corporation, a body corporate within
the Department of Labor established under the provisions of Title IV of ERISA.

     1.22 PARTICIPANT:  An Officer participating in the Plan in accordance with
the provisions of Section 3.

     1.23 PENSION PLAN:  The Motorola, Inc. Pension Plan.

     1.24 PLAN:  Motorola Elected Officers Supplementary Retirement Plan, the
plan set forth herein, as amended from time to time.

     1.25 PLAN YEAR:  The 12-month period commencing on January 1 and ending on
December 31.

                                        4

<PAGE>

     1.26 QUALIFIED JOINT AND SURVIVOR ANNUITY:  As defined in Section 8.1
hereof.

     1.27 QUALIFIED PRE-RETIREMENT ANNUITY:  As defined in Section 8.2 hereof.

     1.28 RETIREMENT BENEFIT:  As defined in Section 6 hereof.

     1.29 SALARY:  The amount paid to an Officer by the Company as annual basic
compensation, excluding awards under the Motorola Executive Incentive Plan and
Long Range Incentive Program, moving expense reimbursements, the imputed fair
market value of a Company provided automobile or excess group-term life
insurance coverage and similar imputed income items.

     1.30 SCRP:  The Motorola Supplementary Contributory Retirement Plan.

     1.31 SERVICE CREDIT:  As defined in Section 6 hereof.

     1.32 SUBSIDIARY:  Any corporation more than fifty percent (50%) of the
outstanding voting stock of which (other than directors' qualifying shares) is
at the time directly or indirectly owned by the Company or by one or more
Subsidiaries or by the Company and one or more Subsidiaries.

     1.33 SURVIVOR ANNUITY STARTING DATE:  As defined in Section 8.2 hereof.

     1.34 TRUST:  Any trust established for receiving, holding, investing and
disposing of the Trust Fund and for implementing and carrying out the provisions
of the Plan.

     1.35 TRUSTEE:  The person or entity named as trustee herein or in any
separate Trust forming part of this Plan, and any successors.

     1.36 TRUST AGREEMENT:  As defined in Section 14.1 hereof.

     1.37 TRUST FUND:  The Plan assets held by the Trustee under the Trust.

     1.38 YEAR OF SERVICE:  A twelve (12) consecutive month period (computation
period) during which period the employee has completed at least one thousand
(1,000) Hours of Service.  the computation period of an employee shall begin
with the date he commences employment with the Company and additional
computation periods shall begin on each succeeding anniversary of the date the
employee commences employment with the Company.  In the event an employee's
employment with the Company is terminated and such employee has a One Year Break
in Service following the termination

                                        5

<PAGE>

of his employment, and if such employee is later reemployed by the Company, the
computation period shall begin with the date such employee is reemployed by the
Company, and additional computation periods shall begin on each succeeding
anniversary of the date the employee was reemployed by the Company.  All Years
of Service (both pre-break and post-break) will be counted for vesting purposes
and for calculating the Retirement Benefit under the Normal Formula.  Years of
Service with any Affiliated Employer shall be counted as Years of Service with
the Company.

     Section 2.  CONSTRUCTION.  The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender, and the singular may
include the plural, unless the context clearly indicates to the contrary.  The
words "hereof," "herein," "hereunder," and other similar compounds of the word
"here" shall mean and refer to the entire Plan, not to any particular provision
or Section.  Section headings are included for convenience of reference and are
not intended to add to, or subtract from, the terms of the Plan.

     Section 3.  PARTICIPATION.  Each Officer who is age 55 or older on the
Effective Date shall become a Participant in the Plan, as amended, on the
Effective Date.  After the Effective Date, an Officer shall become a Participant
in the Plan upon the earlier of (i) his designation as a Participant by the
Committee at any age under age 55, (ii) attaining age 55, (iii) his election as
an Officer if age 55 or older at that time, (iv) a Change in Control or (v) his
Disability.

     Section 4.  VESTING.  A Participant's right to a Retirement Benefit shall
be vested and nonforfeitable as follows:

     (a)  For a Participant who has not attained age 60, when he has completed
     at least five Years of Service;

     (b)  For a Participant who is age 60 or older but who has not attained age
     65, when he has completed at least two Years of Service;

     (c)  Upon attainment of age 65 (Normal Retirement Age) regardless of his
     Years of Service;

     (d)  Upon a Change in Control of the Company regardless of the
     Participant's age or number of Years of Service;

     (e)  At the time he becomes Disabled regardless of the Participant's age or
     number of Years of Service.

     Section 5.  ELIGIBILITY FOR RETIREMENT BENEFITS.  To be eligible for a
Retirement Benefit under the Plan, a Participant must also be a participant in
the Pension Plan if eligible for

                                        6

<PAGE>

participation, or the pension plan of a Subsidiary if the Subsidiary has a
pension plan and the Participant is eligible to participate in it, and he must
meet the other eligibility requirements stated herein.  A Participant who is
vested and who retires on or after age 60 shall be eligible to receive an
unreduced Retirement Benefit upon retirement.  A Participant who retires at any
age because of Disability shall be eligible to receive an unreduced Retirement
Benefit upon retirement.  A Participant whose employment with the Company
terminates at any age because of a Change in Control shall be eligible to
receive an unreduced Retirement Benefit upon retirement at or after age 55.    A
Participant who is vested and ceases to be an Officer or ceases to be employed
by the Company for any reason (other than Disability or a Change in Control)
before he has attained age 57 shall be eligible to receive a deferred unreduced
Retirement Benefit upon retirement at or after age 60 or, subject to the
condition stated hereinbelow, a deferred Actuarially reduced Retirement Benefit
determined as provided in this Section 5 upon retirement at or after age 57. A
Participant who is vested and who retires at or after age 57 but prior to age 60
shall, subject to the condition stated hereinbelow, be eligible to receive an
Actuarially reduced Retirement Benefit upon retirement determined as follows:

     (a) With respect to the lump sum payment option, the lump sum amount to be
paid to the Participant will be equal to the cost to purchase (from an insurance
company selected by the Company) a deferred annuity for the Participant at
retirement which would provide the full Retirement Benefit with payments
commencing at age 60.

     (b) With respect to the lifetime income payments option, such payments will
be determined by the amount of lifetime income which could be provided by
purchasing an annuity with the lump sum amount determined in (a) above.  The
other optional forms of payment under the Plan will also be available to the
Participant on an actuarially reduced basis.

Notwithstanding the foregoing, as a condition to the availability of a
Retirement Benefit at or after age 57 but prior to age 60, the Participant shall
enter into an agreement not to compete with the Company.

     Section 6.  DETERMINATION OF AMOUNT OF RETIREMENT BENEFIT.  A benefit for
each Participant shall be calculated under the Normal Formula.  A benefit for
each Participant who participates in the Pension Plan shall also be calculated
under the ERISA Excess Formula.  The formula which produces the greater benefit
will be the applicable formula for Participants who participate in the Pension
Plan.  The benefit so calculated for each Participant, whether determined under
the Normal Formula or the ERISA Excess


                                        7

<PAGE>

Formula, shall be reduced by the amount (computed on a life annuity basis)
payable to such Participant under the Pension Plan (but not including SCRP
payments), the pension plan of any Subsidiary, the Company's Long Term
Disability Plan, and the disability plan of any Subsidiary, whichever plan or
plans is or are at the time applicable to such Participant.  The result so
obtained shall be the Participant's "Retirement Benefit", provided, however,
that the Retirement Benefit payable annually to any Participant shall not exceed
seventy percent (70%) of his Salary as of the date immediately prior to
retirement.

     NORMAL FORMULA.  The monthly benefit under the Normal Formula expressed as
lifetime income shall be calculated as follows:  One-Twelfth (1/12) times the
sum of (i) Salary as of the date immediately prior to retirement (or as of such
earlier date as may be mutually agreed upon by the Company and the Officer
affected) or in the case of a deferred vested Retirement Benefit, as of the date
of the Participant's termination of employment plus (ii) the five year Average
MEIP Award paid to the Officer under the Motorola Executive Incentive Plan times
forty percent (40%) plus an additional percentage ("Service Credit") equal to
one-fourth (1/4) of one percent (1%) for each Year of Service of the Officer in
excess of ten (10) Years of Service, subject to the following maximums:
<TABLE>
<CAPTION>

  Age At                             Age At
Retirement          Maximum        Retirement          Maximum
----------          -------        ----------          -------
<S>                 <C>            <C>                 <C>
     55             42.50%              61             44.00%
     56             42.75%              62             44.25%
     57             43.00%              63             44.50%
     58             43.25%              64             44.75%
     59             43.50%              65 & over      45.00%
     60             43.75%
</TABLE>

If the Service Credit determined as above is less than the Early Service Credit
calculated under the Plan as it existed prior to the Effective Date for any
Participant, the Early Service Credit shall be used for such Participant in lieu
of the Service Credit determined as above.

     "Average MEIP Award" shall mean and shall be calculated as follows:

     (i)   For each of the eight full calendar years prior to retirement, each
     year's MEIP award is calculated as a percentage of that year's actual
     earnings from Salary.

     (ii)  The five calendar years which produce the highest percentages are
     then determined.

                                        8

<PAGE>

     (iii)The average of the percentages for those five years is then
     determined.

     (iv) The average of the percentages so determined is then applied to the
     Officer's Salary at retirement (or at such earlier date as may be mutually
     agreed upon by the Company and the Officer affected) to determine the
     Average MEIP Award amount for purposes of this Plan.

     Following is an example of the calculation:

<TABLE>
<CAPTION>

             Actual                               MEIP Award as %
          Earnings from            MEIP           of Actual Earnings
Year         Salary                Award             from Salary
----      -------------            -----          ------------------
<S>       <C>                      <C>            <C>
 1        $  190,000               $57,000             30.0%*
 2           180,000                36,000             20.0%*
 3           170,000                30,600             18.0%*
 4           160,000                20,800             13.0%
 5           150,000                48,000             32.0%*
 6           140,000                 -0-                  0
 7           130,000                28,600             22.0%*
 8           110,000                17,600             16.0%
<FN>
* Average MEIP rate for five years which               24.4%
  produces the highest percentage
</TABLE>

Final Salary = $200,000

Average MEIP Award (24.4% of $200,000 final Salary) = $48,800

     Payments made under the Long Range Incentive Program shall not be taken
into account in determining the Average MEIP Award.

     ERISA EXCESS FORMULA.  The monthly benefit under the ERISA Excess Formula
expressed as lifetime income shall be calculated in the same manner as the
Normal Retirement Benefit is calculated under Section 6.1(b) of the Pension
Plan.  The benefit calculated under this formula shall not be subject to the
limitations of Sections 401(a)(17) and 415 of the Internal Revenue Code.

     Notwithstanding the method prescribed above for calculating Average MEIP
Award, if, under extraordinary circumstances which are in the interest of the
Company, as determined by the Company (acting through the Board of Directors or
any committee thereof to whom authority has been delegated) in its sole
discretion, an Officer extends his or her employment beyond his or her planned
retirement date at the request of the Company, the Company may, with the consent
of the Officer affected, calculate the Officer's Average MEIP Award by using the
MEIP awards for the calendar years

                                        9

<PAGE>

that would have been used if the Officer had retired on the date originally
planned.

     Section 7.  PAYMENT OF RETIREMENT BENEFITS.  A Participant's Retirement
Benefit shall be paid in monthly installments commencing as follows:  (i) in the
case of a vested Participant who retires prior to or on or after his Early
Retirement Age, on the first day of the month coinciding with or immediately
following the date of his retirement, (ii) in the case of a Participant who
retires before his Early Retirement Age because of Disability, on the first day
of the month coinciding with or immediately following the date of Disability,
and (iii) in the case of a Participant who has a deferred vested Retirement
Benefit, on the first day of the month selected by the Participant after he has
attained his Early Retirement Age, or if a Change in Control has occurred, after
he has attained age 55 rather than his Early Retirement Age.  Such payments
shall continue on the first day of each succeeding month until the benefit
terminates as provided in the Plan for the type of benefit being paid to the
Participant.  Unless the Participant elects otherwise, in writing, payment of
benefits under the Plan will begin not later than the 60th day after the latest
of the close of the Plan Year in which:

     (1)  the Participant attains Normal Retirement Age;

     (2)  occurs the 10th anniversary of the year in which the Participant
          commenced participation in the Plan; or

     (3)  the Participant terminates his service with the Company.

     7.1  FACILITY OF PAYMENT:  If, in the Committee's judgment, any person to
whom benefits are payable hereunder is under a legal disability or unable to
care for his affairs because of illness, accident, or other incapacity, any
payment due (unless prior claim therefor shall have been made by a duly
qualified guardian, committee, or other legal representative) may be paid to his
spouse, parent, brother or sister, or any other person as the Committee may
determine. Any such payment shall be a payment for the account of such person
and shall, to the extent thereof, be a complete discharge of any liability under
the Plan to such person.

     Section 8.  QUALIFIED JOINT AND SURVIVOR ANNUITY AND QUALIFIED PRE-
RETIREMENT SURVIVOR ANNUITY.

     8.1  QUALIFIED JOINT AND SURVIVOR ANNUITY.

     (a)       Unless otherwise elected as provided below, a Participant who is
     married on the Annuity Starting Date and who does not die before the
     Annuity Starting Date shall receive the value of his benefit in the form of
     a Qualified Joint and Survivor Annuity.  An unmarried Participant shall

                                       10

<PAGE>

     receive the value of his benefit in the form of a life annuity.  Such
     unmarried Participant, however, may elect in writing to waive the life
     annuity.  The election must comply with the provisions of this Section as
     if it were an election to waive the joint and survivor annuity by a married
     Participant, but without the spousal consent requirement.  The joint and
     survivor annuity and the life annuity form of distribution shall be the
     Actuarial Equivalent of the benefits due the Participant.

     (b)  Any election to waive the Qualified Joint and Survivor Annuity must be
     made by the Participant in writing during the election period, must be
     consented to in writing by the Participant's spouse and must indicate that
     the Participant alone is to receive the benefit or designate a specific
     beneficiary or beneficiaries, including any class of beneficiaries or a
     contingent beneficiary and a form of benefit payment which may not be
     changed (except back to a Qualified Joint and Survivor Annuity) without
     spousal consent, unless the consent of the spouse expressly permits
     designations by the Participant without any requirement of further consent
     by the spouse.  Such spouse's consent shall be irrevocable and must
     acknowledge the effect of such election and be witnessed by a Plan
     representative or a notary public.  A consent that permits designations by
     the Participant without any requirement of further consent by such spouse
     must acknowledge that the spouse has the right to limit consent to a
     specific beneficiary and a specific form of benefit, where applicable and
     that the spouse voluntarily elects to relinquish either or both of such
     rights.  Such consent shall not be required if it is established to the
     satisfaction of the Committee that the required consent cannot be obtained
     because there is no spouse, the spouse cannot be located, or other
     circumstances that may be prescribed by Treasury regulations.  The election
     made by the Participant and consented to by his spouse may be revoked by
     the Participant in writing without the consent of the spouse at any time
     during the election period.  The number of revocations shall not be
     limited.  Any new election must comply with the requirements of this
     paragraph.  A former spouse's waiver shall not be binding on a new spouse.

     (c)  The election period to waive the joint and survivor annuity and to
     revoke an election shall be the ninety (90) day period ending on the
     Annuity Starting Date.

     (d)  "Annuity Starting Date" means the first day of the first period for
     which an amount is paid as an annuity, or, in the case of a Retirement
     Benefit not payable in the form of an annuity, the first day on which all
     events have occurred which entitles the Participant to such Retirement
     Benefit.

                                       11

<PAGE>

     (e)  "Qualified Joint and Survivor Annuity" means a reduced annuity for the
     life of the Participant with a survivor annuity for the life of the spouse
     which is either 50 percent (50%), 75 percent (75%) or 100 percent (100%)
     (as selected by the Participant, and if no selection is made, it will be
     50%) of the amount of the annuity which is payable during the joint lives
     of the Participant and the spouse and which is the Actuarial Equivalent of
     the normal form of benefit.

     (f)  With regard to the election, the Committee shall provide the
     Participant no less than thirty (30) days and no more than ninety (90) days
     prior to the Annuity Starting Date (and consistent with Treasury
     regulations), a written explanation of:

          (i)  the terms and conditions of the Qualified Joint and Survivor
          Annuity,

          (ii) the Participant's right to make and the effect of an election to
          waive the Qualified Joint and Survivor Annuity,

          (iii)the right of the Participant's spouse to consent to any election
          to waive the Qualified Joint and Survivor Annuity,

          (iv) the right of the Participant to revoke such election, and the
          effect of such revocation, and

          (v)  the relative values of the various optional forms of benefit
          under the Plan.

     (g)  The distribution of a benefit in the form of a Qualified Joint and
     Survivor Annuity shall not require the consent of the Participant's spouse
     if such distribution commences prior to the later of his Normal Retirement
     Age or age 62.

     8.2  QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY.  In the case of a vested
Participant who dies before the Annuity Starting Date, whether or not separated
from service with the Company at the time of death, and who has a surviving
spouse, a Qualified Pre-Retirement Survivor Annuity shall be paid to the
surviving spouse of such Participant.  This form of benefit may not be waived
nor may another beneficiary be selected.  Under this form of benefit, the
Participant's surviving spouse will receive a lifetime annuity payable in
monthly installments equal to fifty percent (50%) of the Retirement Benefit
calculated for the deceased Participant as of the date immediately prior to his
death.  For purposes of this Section 8.2, a surviving spouse will begin to
receive payments on the fist day of the month immediately

                                       12

<PAGE>

following the date of the Participant's death unless such surviving spouse
elects a later date.  A surviving spouse's benefit will be paid in a lump sum
upon such spouse's written request made prior to the date benefit payments
begin.  The date on which a surviving spouse begins to receive payments as an
annuity or receive a lump sum payment under this Section 8.2 shall be referred
to as the "Survivor Annuity Starting Date".

     Section 9.  OPTIONAL METHODS OF PAYMENT.  If a married Participant has duly
waived the Qualified Joint and Survivor Annuity form of benefit or if an
unmarried Participant has duly waived the life annuity form of benefit in
accordance with the requirements of Section 8.1, upon the written request of
such a Participant filed with the Committee before the Annuity Starting Date in
accordance with the rules governing such requests, the Committee shall provide
for him an optional form of Retirement Benefit, in one of the forms set forth
below, which shall be the Actuarial Equivalent of the Retirement Benefit to
which he would be otherwise entitled hereunder except that no optional form
shall be granted which would reduce the value of the Participant's Retirement
Benefit payable to him personally by more than fifty percent (50%):

     (i)   a lump sum payment;

     (ii)  in the case of a married Participant, in the form of a life annuity;
     or

     (iii) a life-ten years certain form as set forth in Section 6.7 (b) of the
     Pension Plan.

     Section 10.  LIMITATIONS ON BENEFITS.  All rights and benefits, including
elections, provided to a Participant in the Plan shall be subject to the rights
afforded to any alternate payee under a qualified domestic relations order as
those terms are defined in Section 206 (d) of ERISA.

     Section 11.  NONALIENATION OF BENEFITS.  No benefit which shall be payable
out of the Trust Fund to any person (including a Participant or his
beneficiary), or any other amount or asset set aside or purchased under Section
13 to fund a Participant's Retirement Benefit, shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall in any
manner be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to attachment
or legal process for or against such person, and the same shall not be
recognized by the Trustee, except to such extent as may be required by law.
This provision shall also apply to the creation,

                                       13

<PAGE>

assignment or recognition of a right to a benefit payable with respect to a
Participant pursuant to a domestic relations order as defined in Section 206(d)
of ERISA unless such order is determined to be a qualified domestic relations
order as defined in Section 206(d) of ERISA; provided, however, a domestic
relations order entered prior to January 1, 1985 may, in the discretion of the
Officers Plan Committee or its delegate, be treated as a Qualified Domestic
Relations Order, even though the order does not satisfy the requirement of
Section 206(d) of ERISA.  The Committee shall establish a written procedure to
determine the qualified status of domestic relations orders and to administer
distributions under such qualified orders.

     Section 12.  ADMINISTRATION.

     12.1 OFFICERS PLAN COMMITTEE:  The Board of Directors shall appoint a
committee to be known as the Officers Plan Committee to administer the Plan.
The Committee shall be the Named Fiduciary for purposes of Section 402(a) of the
Act.  The Committee shall consist of one or more persons appointed by the Board
of Directors, and each member shall serve until his resignation or removal or
until his successor is appointed.  Each member may, but need not, be a director,
officer or employee of the Company.  A member of the Committee may resign by
delivering his written resignation to the Board of Directors.  Any member of the
Committee may be removed, with or without cause, by the Board of Directors.

     12.2 POWERS AND DUTIES OF THE COMMITTEE:  The Committee shall carry out the
duties assigned to it under the Plan and shall administer the Plan in accordance
with its terms.  The Committee shall have all powers as may be necessary to
carry out its duties under the Plan, including, but not by way of limitation,
the following:  to construe and interpret the provisions of the Plan; to decide
any disputes which may arise under the Plan; to decide all questions that shall
arise under the Plan, including questions as to the eligibility to become
Participants, and the amount, manner and time of payment of any benefits under
the Plan; to decide questions submitted by the Trustee on all matters necessary
for it to properly discharge its duties, powers and obligations; to employ or
appoint legal counsel, accountants, actuaries, consultants or any person to
assist in the administration of the Plan and any other agents it deems
advisable.  The Committee shall also have the power to allocate and delegate
fiduciary responsibilities.  The Committee shall have the power and authority to
direct the investment of the Trust Fund, and in connection with such power, may
delegate in writing authority to manage assets of the Trust Fund to one or more
investment managers.  The Committee may adopt from time to time written
investment policies and guidelines which shall govern the manner in which the
assets of the Trust Fund are to be invested, which

                                       14

<PAGE>

policies and guidelines shall be followed by the investment managers.  With
respect to Retirement Benefits funded under Section 13.1(b) or (c) hereof, the
Committee shall have the discretion to appoint such agents as are necessary to
act on its behalf and shall have the authority to direct the investment of
amount held to fund such Retirement Benefits.

     12.3 MEETINGS OF THE COMMITTEE:  The Committee shall act by a majority of
its members at the time in office, and such action may be taken either by a vote
at a meeting or in writing without a meeting.  The Committee may authorize any
person or persons, who may but need not be a member or members of the Committee,
to execute any document or documents on behalf of the Committee, in which event
the Committee shall notify the Trustee in writing of such action and the name or
names of such person or persons so designated.  The Trustee thereafter may
accept and rely upon any document executed by such person or persons as
representing action by the Committee until the Committee shall file with the
Trustee a written revocation of such designation.

     12.4 ADOPTION OF RULES BY THE COMMITTEE:  The Committee may adopt such
rules as it deems necessary, desirable or appropriate.  All rules and decisions
of the Committee shall be uniformly and consistently applied to all Participants
in similar circumstances.  When making a determination or calculation, the
Committee shall be entitled to rely upon information furnished by a Participant
or beneficiary, the Company, the legal counsel of the Company, or the Trustee.

     12.5 INSTRUCTIONS TO TRUSTEE:  The Committee shall advise the Trustee in
writing with respect to all benefits which become payable under the terms of the
Plan and shall direct the Trustee to pay such benefits from the Trust Fund.

     12.6 REPORTS AND RECORDS:  The Committee shall keep a record of all its
proceedings and acts and shall keep all such books of account, records, and
other data as may be necessary for the proper administration of the Plan.  The
Committee shall file or cause to be filed all such annual reports, financial and
other statements as may be required by any federal or state statute, agency or
authority within the time prescribed by the law or regulations for filing said
documents. The Committee shall furnish such reports, statements and other
documents to Participants and Beneficiaries of the Plan as may be required by
any federal or state statute or regulation within the time prescribed for
furnishing such documents.

     12.7 INSPECTION OF RECORDS OF THE COMMITTEE:  The Committee's records and
books of account shall be open to inspection at all reasonable times by the
Company or the Board of

                                       15

<PAGE>

Directors, or both, or any person designated from time to time by the Company or
Board of Directors.

     12.8 INDEMNIFICATION:  The Company shall indemnify each member of the
Committee, and the directors, officers and employees of the Company involved in
the operation and administration of the Plan against any and all claims, losses,
damages, expenses and liabilities arising from any action or failure to act,
except when the same is determined by the Board of Directors to be due to gross
negligence or willful misconduct of such member.

     12.9 CLAIMS PROCEDURE:  The Committee shall make all determinations as to
the right of any person to a benefit.  Any denial by the Committee of the claim
for benefits under the Plan by a Participant or beneficiary shall be stated in
writing by the Committee and delivered or mailed to the Participant or
beneficiary.  Such notice shall set forth the specific reasons for the denial,
written in a manner that may be understood without legal or actuarial counsel.
In addition, the Committee shall afford a reasonable opportunity to any
Participant or beneficiary whose claim for benefits has been denied for a review
of the decision denying the claim.

     Section 13.  FUNDING OF RETIREMENT BENEFITS.

     13.1 DISCRETION OF COMMITTEE ON FORM OF FUNDING:  The Plan is intended to
be a funded plan for purposes of ERISA, and is intended to be a permanent as
distinguished from a temporary program.  Provided that the minimum funding
standards of ERISA are met, the Committee shall have the discretion to fund the
payment of each Participant's vested Retirement Benefit through one or more of
the following:

     (a)  making contributions on such Participant's behalf to the Trust;

     (b)  purchasing a commercial annuity contract or contracts and, to the
     extent the Committee deems advisable, transferring the annuity contract or
     contracts to such Participant; or

     (c)  implementing any other funding method which the Committee, in its sole
     discretion, shall consider appropriate.

     The Committee's decision to use one method for funding one Participant's
Retirement Benefit shall not in any way limit the Committee's discretion to use
any other method for funding another Participant's Retirement Benefit.
Similarly, the Committee's decision to use one method for funding a portion of a
particular Participant's Retirement Benefit shall not limit the Committee's

                                       16

<PAGE>

discretion with respect to the funding of the remainder of such Participant's
Retirement Benefit.  Moreover, the Committee shall have the discretion to
change, to the extent practicable, the method for funding any Participant's
Retirement Benefit.  If at any time a Participant's Retirement Benefit is funded
through one or more methods which do not require the use of the Trust, all
references herein to the Trust, the Trust Fund and the Trustee shall, with
respect to such Participant, be disregarded.

     13.2 EARLY DISTRIBUTION:  Under Section 13.1, the Committee may select a
method of funding that provides for distributions to be made to a Participant or
beneficiary before the Annuity Starting Date or the Survivor Annuity Starting
Date, as the case may be; provided, however, that to the extent ERISA requires
the consent of the Participant, his spouse, a beneficiary, or any combination
thereof, to any such distribution, no distribution shall be made unless such
consent or consents have been given.

     13.3 EMPLOYEE CONTRIBUTIONS:  Under Section 13.1, the Committee may select
a method of funding that permits Participants to make contributions to fund
Retirement Benefits.

     13.4 PAYMENTS FOR TAXES:  To the extent that the Committee's funding of a
Participant's Retirement Benefit pursuant to Section 13.1 results in adverse
foreign (non-United States), federal, state or local tax consequences to such
Participant which would not have resulted if such Participant's Retirement
Benefit had not been funded, the Committee may, in its discretion, authorize the
payment to such Participant, either by the Company or out of the Trust Fund, of
an amount sufficient to indemnify such Participant against some or all of such
adverse tax consequences.

     13.5 OVERFUNDING OF BENEFITS:  The funding of Retirement Benefits under
Section 13.1 is intended solely to allow the Committee to establish a fund from
which the Company's liability to pay Retirement Benefits to Participants may be
satisfied, and not to increase in any way the Retirement Benefit to which a
Participant is entitled.  Accordingly, to the extent the Committee funds a
Participant's Retirement Benefit pursuant to Section 13.1 based on certain
assumptions, but the actual payments resulting from such funding would exceed
such Participant's Retirement Benefit as determined under Section 6, the
Committee may, in its discretion, reallocate the excess among other Participants
who are presently covered by the Plan or who may be so covered in the future.
The Company shall have no right, title or interest in or to amounts or assets
used to fund Retirement Benefits, and no part of any such amounts or assets
shall revert to the Company except that any amounts or assets remaining, because
of overpayments, after satisfaction of all liabilities of the Plan with regard
to

                                       17

<PAGE>

Participants may revert to the Company.  Any amounts or assets contributed to
fund Retirement Benefits under a mistake of fact shall be returned to the
Company, to the extent practicable, upon request within one (1) year after such
funding.

     13.6 UNDERFUNDED BENEFITS:  The Committee's funding of some or all of a
Participant's Retirement Benefit under Section 13.1 shall not reduce the
Company's liability to provide to a Participant the Retirement Benefit to which
he is entitled under Section 6; provided, however, that if as a result of the
funding method adopted by the Committee any Participant or his beneficiary (i)
receives any distribution of cash from the Trust or any other entity prior to
the Annuity Starting Date or the Survivor Annuity Starting Date, as the case may
be, and (ii) fails to recontribute the after-tax amount of such distribution (as
defined in the following sentence) in order to fund a portion of such
Participant's Retirement Benefit, then the Committee may reduce such
Participant's Retirement Benefit by the sum of such after-tax amounts not
recontributed and the investment income the Trust would have earned thereon.
For purposes of this Section 13.6, the after-tax amount of a distribution shall
be the amount of such distribution reduced by the amount of any federal, state
and local taxes incurred by the Participant because of such distribution;
provided, however, that no such reduction will be made to the extent that the
Participant receives a payment from the Company indemnifying him for such taxes.

     Section 14.  TRUST FUND.

     14.1 TRUST AGREEMENT:  As a part of the Plan, the Company may enter into a
Trust Agreement under which the Trustee would receive contributions of the
Company to the Trust Fund.  The provisions of and benefits under the Plan are
subject to the terms and provisions of such Trust Agreement.

     14.2 CONTRIBUTIONS TO THE TRUST FUND:  Subject to Section 13.4 hereof, no
contribution shall be required from any Participant.  An individual account will
be established in the Trust Fund for each Participant whose Retirement Benefit
is funded, in whole or in part, through the Trust.

     Section 15.  BENEFITS OF RETIRED OFFICERS AND SPOUSES OF DECEASED OFFICERS.

     15.1 FUNDING OF BENEFITS:  The benefits payable to Officers who retired
prior to the Effective Date shall continue to be paid by the Company under the
Plan provisions as they existed prior to the Effective Date; provided, however,
that on or before December 31, 1988, the Retirement Benefit of each retired
Officer shall be funded through the Trust; and, provided further, that effective
January 1, 1989, the Retirement Benefit of each

                                       18

<PAGE>

retired Officer will be recalculated under the formulas set forth in Section 6
of the Plan.  Each retired Officer will be given the right to elect, within a
time period to be set by the Committee, payment of the recalculated Retirement
Benefit in a lump sum or in the form of a Qualified Joint and Survivor Annuity
or one of the optional methods of payment specified in Section 9 of the Plan.
If a retired Officer elects to receive payment other than in a lump sum, the
Committee will direct the Trustee to purchase an annuity contract from the Trust
Fund to fund the benefit.  The benefit currently being paid to a spouse of a
deceased Officer shall remain the same except that (i) on or before December 31,
1988 the benefit payable to each such spouse shall be funded through the Trust
and (ii) each such spouse shall, within a reasonable time period to be set by
the Committee, be allowed to elect to receive a lump sum payment from the Trust
or to continue to receive installment payments.  If a surviving spouse elects to
continue to receive installment payments, the Committee will direct the Trustee
to purchase an annuity contract from the Trust Fund to fund the benefit.

     15.2 UNDERFUNDING OF BENEFITS:  The Committee's funding of some or all of a
retired Officer's or surviving spouse's benefit under Section 15.1 shall not
reduce the Company's liability to provide such retired Officer or surviving
spouse with the benefit to which he otherwise is entitled.

     15.3 PAYMENT FOR TAXES:  To the extent the funding of a retired Officer's
or surviving spouse's benefit (either through the funding of the Trust or the
purchase of an annuity) results in adverse federal, state, or local tax
consequences to such retired Officer or surviving spouse which would not have
resulted if such retired Officer's or surviving spouse's benefit had not been
funded, the Committee may, in its discretion, authorize the payment to such
retired Officer or surviving spouse, either by the Company or out of the Trust
Fund, of an amount sufficient to indemnify such retired Officer or surviving
spouse against some or all of such adverse tax consequences.

     Section 16.    MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF ASSETS.  In the
event of any merger or consolidation of the Plan with another retirement or
pension plan, or in the event of any transfer of assets or liabilities from the
Plan to another retirement or pension plan, provision shall be made so that each
Participant in the Plan on the date thereof (if the Plan then terminated), would
receive a benefit immediately after the merger, consolidation or transfer which
is equal to or greater than the benefit he would have been entitled to receive
immediately prior to the merger, consolidation or transfer (if the Plan had then
terminated).

                                       19

<PAGE>

     Section 17.    AMENDMENTS.  The Board of Directors shall have the right at
any time to amend the Plan, the Trust Agreement and any other document entered
into as a result of a funding method adopted by the Committee under Section 13.1
hereof.  However, no such amendment shall authorize or permit any part of the
Trust Fund or any other asset purchased or amount set aside to fund
Participants' Retirement Benefits (other than such part as is required to pay
administration expenses) to be used for or diverted to purposes other than for
the exclusive benefit of the Participants, either current or future, or their
beneficiaries or estates.  No such amendment shall cause any reduction in the
vested accrued benefit of any Participant.  The Company further reserves the
right to discontinue or suspend the payment of contributions to any fund held
under the Trust Agreement or under any other funding method adopted under
Section 13.1 hereof.

     Section 18.    TERMINATION.  The Board of Directors shall have the right to
terminate the Plan at any time.  Upon termination the amount credited to the
account of each Participant shall become fully vested and shall not thereafter
be subject to forfeiture.  Upon termination of the Plan, the Company, by written
notice to the Trustee, may direct either:

     (i)  continuation of the Trust and the distribution of benefits at such
     time and in such manner as though the Plan had not been terminated; or

     (ii) complete distribution of the assets in the Trust Fund to the
     Participants in a manner consistent with the Plan.  In such case, the
     Trustee shall distribute to each Participant in the Plan and to each
     retired Participant, the amount then credited to his account in the Trust
     Fund, subject to provision for expenses of administration or liquidation.

The balance, if any, of the assets due to erroneous actuarial computation held
by the Trust Fund after such distribution shall be returned to the Company, but
only after satisfaction of all liabilities with respect to Participants and
Retirement Benefits under the Plan.

     Section 19.    MISCELLANEOUS.

     19.1 NO ENLARGEMENT OF RIGHTS:  The Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Officer, or to be consideration for, or an
inducement to, or condition of, the employment of any Officer.  Nothing
contained in the Plan shall be deemed to give any Officer the right to be
retained in the employment of the Company or to interfere with the right of the
Company to discharge any Officer at any time regardless of the effect which such
discharge shall have upon him

                                       20

<PAGE>

as a Participant of the Plan.  No Officer, prior to his retirement under
conditions of eligibility for retirement benefits or prior to his acquiring
vested rights, shall have any right or interest in or to any portion of any
funds arising from Company contributions under the Plan, and no person shall
have any right to Retirement Benefits, except to the extent provided in the
Plan.

     19.2 NOTICE OF ADDRESS:  Each person entitled to benefits under the Plan
must file with the Committee, in writing, his post Office address and each
change of post office address.  Any communication, statement, or notice
addressed to such a person at his latest post office address as filed with the
Committee will be binding upon such person for all purposes of the Plan, and
neither the Trustee nor the Company shall be obliged to search for or ascertain
the whereabouts of any such person.

     19.3 DATA:  All persons entitled to benefits under the Plan must furnish to
the Committee or Trustee such documents, evidence, or information as the
Committee or Trustee considers necessary or desirable for the purpose of
administering the Plan, or to protect the Committee or Trustee, and it shall be
a condition of the Plan that each such person must furnish promptly true and
complete data, evidence, or information and sign such documents as the Committee
or Trustee may require before any benefits become payable under the Plan.  In
the event that any data so furnished is found by the Company to be incorrect,
any payments thereafter due shall be adjusted on an actuarial basis to correct
for any previous overpayments or underpayments, as the case may be.  After such
adjustment is made, all future payments shall be based on the corrected data.

     19.4 GOVERNING LAW:  The Plan shall be governed by and construed in
accordance with ERISA and the laws of the State of Illinois to the extent not
preempted by ERISA.

                                       21


<PAGE>
                                                                    Exhibit 10.9

                                 MOTOROLA, INC.
                                DEFERRED FEE PLAN
                              FOR OUTSIDE DIRECTORS



1.   Purpose:  The purpose of the Motorola Deferred Fee Plan For Outside
Directors (the "Plan") is to permit Directors who are not regular employees of
Motorola, Inc. ("Motorola") to elect to defer receipt of all or a portion of the
annual retainer and per meeting fees they receive as compensation for membership
on Motorola's Board of Directors.

2.  Definitions:

     (a)  The term "Company" shall mean Motorola, a Delaware corporation, and
     all of its subsidiaries.

     (b)  The term "Board" shall mean the Board of Directors of Motorola.

     (c)  The term "Director" shall mean a person (a) who is serving as a member
     of the Board and (b) who is not a regular employee of the Company or its
     subsidiaries.

     (d)  The term "Beneficiary" shall mean such individual(s) or such executor
     or trustee(s) of a trust as may be designated by a Director pursuant to
     paragraph 4(c) of Section 4 hereof.

3. Participation:  A Director may elect to defer receipt of either or both of
the following:

     (i)  The annual fees for services as a Director and as a member or as
          chairman of the Board's audit committee.

     (ii) The fees for attending regular or special meetings of the Board and
          committees of the Board.

     The Director may elect on or before December 31st of any year to defer for
succeeding calendar years the receipt of all or a specified

<PAGE>

                                        2

percentage of his/her Director's fees.  An election to defer the receipt of fees
continues for succeeding years unless the Director provides the Company with
written notice filed with the Company on or before December 31st of a year for
which an election is in effect that for succeeding years he/she elects to
terminate his/her election or to modify his/her election by either changing the
percentage of fees to be deferred, changing the designated beneficiary(ies) or
by changing the manner in which deferred fees are to be paid to him/her at the
end of the deferral period.

4.   Method of Deferment:  Fees, the receipt of which a Director has elected to
defer, shall be treated in the following manner:

     (a)  The Company shall accrue such deferred fees to a separate memorandum
     account on its books in the name of the electing Director.  The memorandum
     account shall be credited with interest as of the last day of each of the
     Company's fiscal quarters.  The amount of such interest shall be one-fourth
     of the annual discount rate of ninety-day United States Treasury bills
     issued during the week in which the last business day of the Company's
     fiscal quarter happens to fall.

     (b)  Commencing with the first day of the month of the calendar year
     immediately following the year in which the Director has ceased to be a
     Director, has become disabled or has attained the age designated on his/her
     Election to Defer Director's Fees, whichever date(s) the Director selected
     at the time of making his/her deferral election, the Company shall pay the
     Director his/her deferred Director's fees and interest which has
     accumulated thereon.  The Company shall make the payment in either a lump
     sum or in annual installments over a period not exceeding ten years,
     whichever method of payment the Director selected at the time of making
     his/her deferral election.  The Company may, in its discretion, accelerate
     the date upon which payment(s) to the Director shall begin.

     (c)  Upon the death of a Director prior to distribution of the entire
     amount accrued to his/her account, any such undistributed amount

<PAGE>

                                        3

     shall be paid in a lump sum to the Director's estate, to a trust or to such
     Beneficiary or Beneficiaries as the Director shall have previously
     designated in writing.  Each Director who elects to defer the receipt of
     fees pursuant to this Plan may designate upon such form or instrument as
     may be provided for that purpose, a Beneficiary or Beneficiaries who are to
     receive payments pursuant to this Section 4(c).  If the Director has not
     designated a Beneficiary in writing or if there shall be no Beneficiary
     designated or in existence at the time of the Director's death, any
     undistributed amount shall be paid to the Director's estate.

     (d)  If a Director or his/her Beneficiary who is entitled to receive
     payments under the Plan is a minor, or is ill, or is disabled due to any
     cause which in the judgment of the Company renders him/her unable to apply
     such amount to his/her own best interest and advantage, the Company may, in
     its discretion, pay all or part of the amount in one or a combination of
     the following ways as the Company may determine to be for the individual's
     best interest:

          (i)   directly to him/her;
          (ii)  to his/her legal or natural guardian or the conservator of his
                estate;
          (iii) to any person having his/her care or custody, or
          (iv)  directly for his/her care, support or education.  Such payment
                shall completely discharge all of the Company's obligations
                under the Plan.

     (e)  Amounts which a Director has deferred and any interest which has
     accumulated thereon shall constitute an unfunded general obligation of the
     Company until such time(s) as they are paid.

5.  Nonassignability:  No Director or Beneficiary shall have any power to
commute, encumber, sell or otherwise dispose of the rights provided herein and
such rights shall not be subject to anticipation, alienation, assignment, pledge
or charge.

6.  Amendment or Termination:  This Plan may be amended by the Board at any time
and from time to time provided that no such amendment shall

<PAGE>

                                        4

result in changing the provisions of paragraph 4(a) of Section 4 hereof.
Paragraphs 4(b) and 4(c) of Section 4 hereof can be amended only to change the
date after retirement upon which payments to a Director or Beneficiary shall
commence and the time, or times, at which such payments shall be made.

     This Plan may be terminated by the Board at any time, except that such
termination shall have no effect on deferred fees and interest thereon which
have accrued to the account of any Director at the time of termination.

<PAGE>
                                                                 Exhibit 11

                  Motorola, Inc. and Consolidated Subsidiaries
    Primary and Fully Diluted Earnings Per Common and Common Equivalent Share
                     (In millions, except per share amounts)
<TABLE>
<CAPTION>

                                                    For the Years Ended
                                                  ------------------------
                                                    Dec. 31,     Dec. 31,
                                                     1994         1993
                                                  ------------------------
<S>                                                  <C>         <C>
Net Income                                           $ 1,560     $ 1,022
Add:
Interest on Zero coupon notes due
     2009 and 2013, net of tax and
     effect of executive incentive and
     employee profit sharing plans                       12         15
                                                      -------   --------
Adjusted net income                                  $ 1,572   $  1,037
                                                      -------   --------
                                                      -------   --------

EARNINGS PER COMMON AND COMMON
         EQUIVALENT SHARE - PRIMARY:
Weighted average common shares
     outstanding                                      564.9        548.8
Common equivalent shares:
     Stock options                                     13.4         12.9
     Zero coupon notes due 2009 and 2013               13.4         20.9
Common and common equivalent
     shares-primary (in millions)                      591.7        582.6
                                                      -------     --------
Net earnings per share - primary                    $  2.66      $   1.78
                                                      -------     --------
                                                      -------     --------

EARNINGS PER COMMON AND COMMON
         EQUIVALENT SHARE - FULLY DILUTED:
Weighted average common shares
     outstanding                                      564.9         548.8
Common equivalent shares:
     Stock options                                      14.4         14.0
     Zero coupon notes due 2009 and 2013                13.4         20.9
Common and common equivalent
     shares-fully diluted (in millions)                 592.7        583.7
                                                      --------     --------
Net earnings per share - fully diluted              $    2.65    $   1.78
                                                      --------     --------
                                                      --------     --------
</TABLE>


<PAGE>


        FINANCIAL RESULTS  Sales and earnings again set records, with all three
of Motorola's major business segments contributing to  the continuing growth.
Sales increased 31% to $22.2 billion from $17.0 billion in 1993. Earnings were
$1.56 billion, compared with $1.02 billion a year earlier. Fully diluted
earnings per share were $2.65, up 49% from $1.78 in 1993. Net margin on sales
was 7.0% for the full year 1994 compared with 6.0% a year ago. Detailed
operating and financial results of our various businesses in 1994 appear on
pages 20-43.


<PAGE>

REVIEW OF OPERATIONS

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------
GENERAL SYSTEMS SECTOR (GSS)

Segment sales advanced 64% to $8.6 billion and orders rose 58%. Segment
operating profits were higher. Worldwide cellular sales grew rapidly for both
subscriber and infrastructure equipment. In the cellular industry, the number of
subscribers at the end of 1994 exceeded 50 million worldwide, an increase of
more than 50% from 1993.

     Customers throughout the world chose Motorola's cellular infrastructure
systems. Contracts for digital GSM (Global System for Mobile) Communications
systems were awarded to us in Andorra, France, Hong Kong, Jordan, Kuwait,
Lebanon, Lithuania, Morocco, Nigeria, Russia, South Africa, Sweden, Thailand,
Turkey and the United Kingdom. We now have more than 30 contracts for GSM
systems worldwide. New contracts for analog systems came from the Philippines,
Kazakhstan, Russia and several countries in Africa.

     In China, Motorola has been awarded more than 140 cellular infrastructure
contracts for analog and digital systems in 23 of China's 27 provinces,
including the country's largest GSM system in Beijing and an analog system
expansion in Shanghai.

     Three customers in Japan began offering digital phone service using
Motorola equipment and technology. We also reached an agreement with Nippon Idou
Tsushin to expand the service area for the Motorola Total Area Communication
System (TACS) in the Tokyo and Nagoya areas.

     In the United States, Sprint announced plans to deploy Code Division
Multiple Access (CDMA) technology from Motorola in its Las Vegas, Nev., cellular
system. AirTouch Communications agreed to purchase CDMA networks for use in
California and Georgia, and U.S. West New Vector Group awarded a CDMA
infrastructure contract for its entire Arizona network.

     Motorola also has contracts to supply commercial CDMA systems in Hong Kong
and the Philippines. Argentina plans to conduct the first trial of CDMA in Latin
America.

     We announced the INReach -TM- radiotelephone system, which enables a person
to use a cellular phone as a desk phone extension or in place of a desk phone,
within a building or campus-like setting. The new IN2 -TM- Solution Center uses
open architecture and industry standards to quickly bring to market advanced
intelligent network services for the wireless industry.

     Five new base stations were announced for analog and digital cellular and
Personal Communications Service (PCS) standards.

     New subscriber equipment included the MicroTAC [REGISTERED TRADEMARK] Elite
-TM- personal  cellular telephone. Weighing 3.9 ounces, it is the lightest such
phone available in the world. A special edition of the MicroTAC International
8200 GSM phone, the lightest digital pocket phone, also was introduced.

     To meet rapidly increasing demand, the Cellular Subscriber Group began
construction of a new manufacturing, engineering and administrative facility in
Harvard, Ill.

     Motorola's CableComm -TM- technology is to be used in a trial system in
which Teleport Communications Group will offer telephone service in Arlington
Heights, Ill., on the same coaxial cable that carries programming on the cable
television distribution network of Tele-Communications Inc. (TCI).

     The Computer Group introduced a family of board-level products based on the
PowerPC -TM- 603 and PowerPC 604 microprocessors. The group also announced entry
into the PowerPC motherboard market with its Ultra -TM- and Atlas -TM-
motherboards used in desktop personal computers.

     The PowerStack -TM- family of computers, capable of supporting a variety of
operating environments, was announced. Based on the PowerPC 603 and 604
microprocessors, the family will be available with IBM's AIX -TM- and
Microsoft's Windows NT 3.5 -TM- operating systems.

     The Computer Group plans to develop products based on the new PowerPC
Hardware Reference Platform specification by Apple Computer, IBM and Motorola.
The new platform defines an architecture that is expected to support a number of
industry operating systems and can be used by any hardware or software vendor to
build compatible PowerPC-based computer products.

SEMICONDUCTOR PRODUCTS SECTOR (SPS)

Segment sales advanced 22% to $6.9 billion, achieving 24 consecutive  quarters
of growth. Orders rose 19% and operating profits were higher.  The results
reflect the sector's focus on providing customers with systems solutions based
on leadership products.

     Double-digit order growth was recorded in all regions except Asia-Pacific.
Increases in all major market segments were paced by automotive, followed by
communication, indirect distributors, computer, personal computer/workstation,
industrial and consumer.

     In communications, bipolar complementary metal oxide semiconductor, or
BiCMOS, technology, fully emerged as a vital addition to our portfolio.

20

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

Using gallium arsenide, we introduced a chip set of three integrated circuits
for cordless phone applications that will reduce power consumption, product cost
and size and increase talk time. A family of advanced CMOS gate arrays was
introduced for high-performance communications and computing applications.

     In automotive markets, we provide 13 of the top 14 manufacturers worldwide
with microcontrollers that power engine management systems. Propelling the
growth of this market is the need for cleaner-burning engines and improvements
in fuel economy and vehicle safety. Our new System Chip integrates all functions
of a multiplex module into one chip, saving cost, space and paving the way for
further power train management integration. The embedded PowerPC MC500
microcontroller series promises even greater enhancements.

     In computing, support continued to build for the PowerPC family of reduced
instruction set computing (RISC) microprocessors being developed with IBM and
Apple Computer. Motorola is committed to making  the PowerPC architecture an
open industry standard. Volume production was achieved on the PowerPC 603 chip
(for portable and entry-level desktop computers) and sampling of the 604 chip
(for high-end desktop systems, midrange servers and high-performance graphics
workstations)  was under way at the end of 1994. First silicon was achieved for
the first 64-bit implementation of PowerPC architecture, the 620, for servers
and high-end workstations. Motorola will manufacture all three chips.

     The port of Microsoft's Windows NT 3.5 "Daytona" operating system to
PowerPC platforms was completed, and suites of software development tools for
numerous platforms enhanced programming productivity by software and hardware
vendors and original equipment manufacturers. Some 225 independent software
vendors are developing hundreds of native PowerPC applications for a variety of
operating systems and PowerPC platforms. More than 60 native PowerPC
applications were demonstrated at the industry's fall COMDEX computer show, and
in January 1995, Apple Computer announced shipment of its 500th native Power
Macintosh [REGISTERED TRADEMARK] application.

     Key consumer applications were announced, including use of embedded PowerPC
microprocessors to drive CD-ROM multimedia players from Apple Computer and
Bandai Co., 3DO's Interactive Multiplayer systems, and Microware's tools used to
develop leading interactive television applications. Demand for cache memory in
workstations and personal computers fueled rapid growth in fast static random
access memories. In the networking arena, we announced OPTOBUS -TM-, an optical
link technology that allows an inexpensive fiber optic assembly to link computer
systems over short distances, with a data transfer rate of 3 billion bits per
second.

     We added a new 32-bit product line to our 68000 family of microprocessors
and unveiled the FlexCore -TM- system, a program to enable customers to create
custom processors based on 68000 and PowerPC architectures. Microcontroller
introductions included 10 versions of low-voltage, 8-bit products for
telecommunication applications, and a new 8-bit family featuring a more powerful
processor that offers attractive price-performance benefits.

     In the consumer, entertainment and multimedia arena, we introduced  a fifth
generation of radio frequency (RF) amplifiers for cable television applications.
The industry is adopting the 68000 and PowerPC architectures for set-top
applications. Eurodec, General Instrument, Hewlett-Packard, Philips, Scientific
Atlanta and Tee-Com are among our customer partners.

     For audio, we announced an alliance with Dolby, Onkyo and Lucas Film to
bring advanced digital sound technology to home and theater applications using
our digital signal processors. We sampled a chip set developed  with BT (British
Telecom) that brings teleconferencing to the desktop. We provided a
second-generation compact-disc-interactive (CD-I) chip set to Philips. Philips
also received shipment of the world's most highly integrated color
picture-in-picture integrated circuit for consumer television applications. We
continued development of a high-definition television chip set that will meet
proposed Federal Communications Commission standards.

     In the industrial segment, we developed low-pressure sensors for appliances
and in-home and building environmental controls. We continued to expand hybrid
power module offerings to improve energy efficiency in motors and other
equipment. In network control technology, LonBuilder -TM- development systems
were shipped to several major customers. A second generation Neuron [REGISTERED
TRADEMARK] Chip was introduced for LonWorks -TM- systems.

COMMUNICATIONS SEGMENT

In this segment, composed of the Land Mobile Products Sector (LMPS) and the
Paging Products and Wireless Data Groups, sales rose 19% to $5.8 billion and
orders rose 7%. Segment operating profits were higher.

     In LMPS, new orders were higher, led by North American and European
markets. Orders increased in 1994 for the Motorola Integrated Radio

                                                                              21

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

System (MIRS -TM-), which offers voice dispatch, wireless phone, text messaging
and future data capabilities, as MIRS-based systems became operational in
several U.S. cities and in Japan and Israel. MIRS orders were, however, weak in
the fourth quarter.

     LMPS received several contracts for systems using its Astro -TM- digital
products and signed agreements with three companies to license Motorola's
digital technology to develop and produce public safety communications products
that comply with standards of the Association of Public Safety Communications
Officials International, Inc.

     The State of Michigan issued a contract for the first phase of a $187
million award for Astro digital technology for a statewide public safety
communications system. Other major Astro awards were received in Switzerland and
the United States.

     Contracts for wide-area trunking systems were awarded in Russia  and the
UK. Other major orders were received in Colombia, El Salvador, Mexico and
Poland. In Ecuador, Motorola formed a joint venture with Isaias Group to offer
shared trunked radio services in that country.

     We introduced the LINGO -TM- digital portable and mobile phones. Designed
to operate with the MIRS system, LINGO phones provide the ability to switch from
functioning as a dispatch two-way radio to a wireless phone with the touch of a
button.

     The new SP50 portable two-way radio, designed for price-sensitive  and
emerging markets, was announced at Motorola's first-ever worldwide dealer
conference, which included dealer and distributor representatives from over 20
countries. The line of VISAR [REGISTERED TRADEMARK] portable two-way radios also
was expanded with a trunked version for shared system applications in Asia. A
major order for VISAR radios was received in Thailand.

     LMPS continued to expand its worldwide network of distributors, dealers,
and resellers in Asia, Eastern Europe, and Latin America. The sector expanded
its distribution network to reach new users in the light commercial and the
outdoor recreation markets. Products to serve these markets are now sold in
various retail outlets and outdoor sports catalogs.

     In the Paging Products Group, orders continued to set records. Strong U.S.
growth was fueled by retail products such as the Memo Express -TM- pager, the
first alphanumeric model designed for the consumer market. We announced the Pro
Encore -TM- numeric display pager for use with the Flex -TM- paging protocol,
which increases channel capacity five times over the current standard.

     China continued to be a major market for paging. The Scriptor LX2 -TM- and
Instinct -TM- pagers were launched during the year. We also began producing
pagers in India, where 93 licenses for paging systems have been awarded in 27
major cities.

     In Europe, the "calling party pays" concept was introduced in various
countries and stimulated demand at the retail level. In Japan, the Ministry of
Posts and Telegraph selected Motorola's Flex coding system as the base of a
standard for the next-generation paging system. Deregulation of the paging
market in Japan, expected during 1995, will enable customers to own equipment
for the first time.

     We demonstrated two-way paging using our ReFlex -TM- protocol. Motorola
also plans to supply equipment that will function as a portable wireless
answering machine. Paging Network Inc. announced plans to introduce the VoiceNow
[REGISTERED TRADEMARK] personal communications service based on new voice
technology being developed by Motorola.

     The Wireless Data Group introduced the Envoy -TM- wireless communicator,
based on General Magic, Inc. software, and the Marco -TM- wireless communicator,
based on Apple Computer's Newton [REGISTERED TRADEMARK] platform. The devices
allow users to exchange messages with their work groups, access information,
send wireless messages to fax machines and receive news and stock market
updates.

     Sprint Cellular Co. began a field trial of Motorola's CelTAC -TM- Cellular
Digital Packet Data (CDPD) system. The field trial will allow an oil and gas
company to control and monitor its wellheads through Sprint's cellular network
channels.

     The Personal Messenger -TM- 100D, a wide-area wireless data pocket-sized PC
modem card, was introduced in the Asia-Pacific market. The group also introduced
two new versions of the InfoTAC -TM- two-way messenger.

GOVERNMENT AND SPACE TECHNOLOGY GROUP (GSTG)

Segment sales declined 3% to $829 million and orders rose 36%. The group
recorded a larger loss than in 1993. GSTG increased its presence in the space
industry while continuing its government and defense business.

     Development of the IRIDIUM [REGISTERED TRADEMARK] global wireless personal
communications system continued with all scheduled contractual milestones
achieved during the year. Iridium, Inc., the global consortium of companies
funding the system, completed its planned equity financing activity by raising
an

22

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

additional $733 million in equity commitments. Total capital committed to the
IRIDIUM system from all investors now equals $1.57 billion. Motorola owns about
26% of Iridium, Inc.

     The IRIDIUM system is expected to be the first operational global wire-less
telecommunications network enabling subscribers to make or receive telephone
calls over handheld subscriber equipment worldwide. The IRIDIUM system is
expected to become commercially available worldwide by the end of 1998.

     GSTG received contracts from the Federal Aviation Administration for the
Portable Emergency Transceiver-2000 (PET-2000) backup ground-to-air radio and
the CM-50/51 linear power amplifier. The transceivers will provide comprehensive
communications if standard ground-to-air communications systems are unavailable
due to power outages, natural disaster or other emergency conditions. The
amplifiers will provide for air traffic control communications beyond normal
ranges.

     The Department of Defense awarded a contract for development of the 21st
Century Land Warrior Generation II Soldier system. The Generation II Soldier is
an advanced head-to-toe fighting system with data, communication and protective
equipment designed for ground forces.

     The Kansas Turnpike Authority selected the Motorola/Amtech Intellitag
Products joint venture for installation of an electronic toll collection system.
Intellitag [REGISTERED TRADEMARK] 2000 toll collection equipment will record and
process vehicle transactions automatically.

AUTOMOTIVE, ENERGY AND CONTROLS GROUP (AECG)

Sales were 64% higher and orders rose 68%. Operating profits were higher. AECG's
performance was led by strong demand for component and energy products for
Motorola's wireless communications equipment, including quartz and ceramic
components, batteries and chargers, as well as electronic ballasts. The group's
results are reported as part of the "Other Products" segment.

     Demand for automotive electronics products also remained strong. Major
automotive orders included programs for engine control modules, body electronics
and sensors. This year the group launched two families of body control modules
for Ford Motor Company that include lighting, seat and door controls as well as
a remote keyless entry system, and are featured on four of Ford's large luxury
car platforms.

     This year the group also began manufacturing PC desktop video conferencing
hardware for BT (formerly British Telecom).

     Indala Corp., a wholly owned subsidiary and manufacturer of radio
frequency identification (RFID) cards, introduced a number of new and enhanced
RFID products to the proximity and access control markets. Motorola Lighting,
Inc., expanded its distribution network, signed a 10-year supply agreement with
General Electric Lighting and introduced a dimming ballast that can control
fluorescent lamps from 100% to 10% light output.

     The joint venture formed by Motorola and Schlumberger Ltd. began field
trials for its automated utility meter reading systems in North America and
Europe. Motif, Inc., a joint venture of Motorola and In Focus Systems,
restructured in 1994 to focus on the development of Active Addressing -TM-
technology for liquid crystal displays.

INFORMATION SYSTEMS GROUP (ISG)

Group sales declined 5% and orders were 8% lower. Operating profits were lower.
The group's results are reported as part of the "Other Products" segment.

     ISG moved into the retail market with the launch of the Power Class -TM-
and Lifestyle -TM- Series PC modem cards for small office and home office
environments. They operate at up to 14.4 kilobits per second for cellular and
wireline applications. ISG also introduced the industry's first V.34 modem
designed for high performance in traditional corporate markets. The Motorola
V.3400 won several industry awards.

     A number of new digital transmission products were launched, including  a
hybrid modem capable of combining Integrated Services Digital Network (ISDN)
data, high-speed analog modem and fax capabilities in a single platform. Also
introduced were several new ISDN terminal adapters as well as a new data service
unit boosting Motorola's T1 and fractional T1 capabilities. Customer response
has been strong, and Ameritech has teamed with ISG, standardizing on the TA210
for its expanding ISDN service.

     The Vanguard -TM- family of Frame Relay Access Devices (FRADs) was brought
to market in 1994, strengthening Motorola's market leadership  in this rapidly
growing market. U.S. carriers using Vanguard FRADs in their frame relay services
include USWest, MCI and Pacific Bell.

POWERPC -TM- IS A TRADEMARK OF INTERNATIONAL BUSINESS MACHINES CORP. IRIDIUM
[REGISTERED TRADEMARK] IS A REGISTERED TRADEMARK AND SERVICE MARK OF IRIDIUM,
INC. MACINTOSH [REGISTERED TRADEMARK], POWER MACINTOSH [REGISTERED TRADEMARK],
NEWTON [REGISTERED TRADEMARK] AND APPLE [REGISTERED TRADEMARK] ARE REGISTERED
TRADEMARKS OF APPLE COMPUTER, INC. NEURON [REGISTERED TRADEMARK] IS A REGISTERED
TRADEMARK OF ECHELON CORPORATION. VOICENOW [REGISTERED TRADEMARK] IS A
REGISTERED SERVICE MARK OF PAGING NETWORK, INC. INTELLITAG [REGISTERED
TRADEMARK]  IS A REGISTERED TRADEMARK OF AMTECH CORPORATION. ACTIVE ADDRESSING
-TM- IS A TRADEMARK OF MOTIF, INC.

                                                                             23

<PAGE>

FINANCIAL REVIEW

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

Motorola Management's Discussion and Analysis of Financial Condition and Results
of Operations include the Financial Results section of the Letter to
Stockholders on pages 2-3 and the Review of Operations on pages 20-23, in
addition to the following commentary. This commentary should be read in
conjunction with the Consolidated Financial Statements and Notes, presented on
pages 30-43, for a full understanding of Motorola's financial position and
results of operations.

RESULTS OF OPERATIONS
MOTOROLA, INC.
1994 COMPARED WITH 1993

Sales increased 31% to $22.2 billion from $17.0 billion in 1993. International
market sales, as measured by the locale of the end customer, represent 56% of
total sales in 1994, compared to 54% in 1993. The highest regional growth rates
were achieved in Japan, Latin America and Europe, followed by the rest of the
Asia-Pacific region, China and Canada.

     Segment operating profits were $2.87 billion in 1994 compared to $1.94
billion in 1993. The Company's increased profitability continued to be
primarily affected during 1994 by significant volume increases combined with its
efforts to contain costs.

     Net earnings in 1994 were $1.56 billion, or $2.65 per fully diluted common
and common equivalent share, compared to $1.02 billion in 1993, or $1.78 per
fully diluted common and common equivalent share. Net margin on sales was 7.0%,
compared with 6.0% during 1993.

     Sales in the fourth quarter of 1994 were $6.5 billion, up 29% from  $5.0
billion in the fourth quarter of 1993. Earnings in the fourth quarter were $515
million, or $0.86 per fully diluted common and common equivalent share, compared
with $340 million, or $0.58 cents per fully diluted common and common equivalent
share during the fourth quarter of 1993.

     Motorola's selling, general and administrative expenses during 1994 were
$4.4 billion or 20% of sales, compared to $3.8 billion or 22% of sales in the
same period a year ago. By comparison to 1993, expenditures during 1994 included
a significantly lower level of expenses for charges resulting from the Company's
ongoing evaluation of its operations, organizational structure and asset
valuations. Motorola routinely reviews its business strategies, organizational
structure and asset valuations, and implements changes deemed appropriate by
management.



24

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

     Property, plant and equipment, less accumulated depreciation, increased
$1.5 billion since December 31, 1993, primarily due to the expansion of the
Company's semiconductor business. Depreciation expense increased 30% in 1994 in
comparison to 1993 due to increased fixed asset expenditures, and is expected to
increase significantly in 1995 over 1994 levels. Fixed asset expenditures for
1994 were $3.3 billion, compared to $2.2 billion in 1993, and are expected to
increase to $4.5 billion in 1995, although that amount is an estimate and may
differ from the amount actually spent.

     The effective tax rate for 1994 of 36% was up from the 1993 rate of 33%,
principally due to comparatively more rapid profit growth in countries with high
tax rates, including the United States. The Company's expectation is that this
trend will continue, resulting in an expected 37% effective tax  rate for 1995.

     In recent years, a large and increasing portion of the Company's net sales,
operating profits and growth have come from its international operations. As a
result, the Company's business activities and its results could be significantly
affected by the policies of foreign governments and prevailing social and
economic conditions, such as unstable governments, inflation rates, monetary
fluctuations, balance of payments, foreign exchange rates and trade restrictions
or prohibitions.

1993 COMPARED WITH 1992

Sales increased 28% to $17.0 billion from $13.3 billion in 1992. International
market sales, as measured by the locale of the end customer, represented  54% of
sales in 1993, compared to 52% in 1992. During 1993, a significant portion of
the Company's growth was in the People's Republic of China/ Hong Kong and the
rest of the Asia-Pacific region.

     Segment operating profits were $1.94 billion, up from $1.14 billion in
1992. During 1993, the Company's profitability was primarily affected by
significant volume increases driven by demand for its products.

     Net earnings in 1993 were $1.02 billion, or $1.78 per fully diluted common
and common equivalent share, compared with $576 million before the cumulative
effect of the change in accounting principle, or $1.05 per fully diluted common
and common equivalent share a year earlier. During 1992, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions."

     Net margin on sales for 1993 was 6.0%, compared with 4.3% in 1992, before
the cumulative effect of the change in accounting principle.


                                                                              25

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

MOTOROLA, INC. SEGMENTS

The following commentary should be read in conjunction with the financial
results of each reporting segment as detailed in note 7, "Information by
Industry Segment and Geographic Region," to the Consolidated Financial
Statements in this Annual Report.

GENERAL SYSTEMS PRODUCTS

The General Systems Products segment primarily develops, manufactures, sells,
installs and services cellular infrastructure and cellular telephone subscriber
units. The Motorola Computer Group, within this segment, develops, manufactures,
sells and services multi-function computer systems and board level products,
together with operating systems and system enablers. The segment also includes
the Network Ventures Division and Personal Communications Systems Division.

     Competition is worldwide across all the segment's businesses and includes
price competition. During 1994, price competition has been a contributing factor
to the segment's lower gross margins, and is expected to continue into 1995. The
segment continues to focus efforts on reducing the overall unit cost to counter
this trend. Despite lower gross margins, the  segment's operating margin
increased overall during 1994 as a result of its emphasis on efficiency in its
processes and its ability to control selling, general and administrative
expenses. Other competitive factors in the market for the products are service,
delivery, technological capability, and product quality and performance.

     The segment's infrastructure sales and profit performance is becoming
increasingly focused on large system orders, which increases the volatility of
orders, revenues and profits recognized during any particular period. The
segment's shipments of cellular telephones were extremely strong during the
fourth quarter of 1994 because of holiday demand from carriers and retailers.
During that quarter, the Company believes that U.S. carriers and distributors
built up their Motorola cellular telephone inventory to  a level several weeks
in excess of their near-term requirements and that their inventories of these
products should be gradually reduced to more normal levels during the early part
of 1995, as reduced shipments to them by Motorola continue.

     The segment's fixed costs and production facility capacity increased when
compared to 1993. The segment was able to meet, during 1994, a portion of the
demand for additional volume through expanded production lines, expanded work
weeks and emphasis on quality and efficiencies in its production processes.
During 1994, the segment began the construction of a major new facility for
manufacturing cellular telephones which is expected to begin production in 1996.

SEMICONDUCTOR PRODUCTS

The Semiconductor Products segment manufactures a broad line of semiconductor
devices for both consumer and industrial applications.

     Prices for the segment's existing products continued to decline overall, an
historical trend in the industry that is expected to continue. The segment's
revenue growth was achieved through higher sales volumes and the introduction of
new products.

     When compared to 1993, segment operating profits were higher, even though
gross margins were lower. The gross margins were lower because the segment has
experienced higher costs during 1994 resulting from the startup costs associated
with adding new manufacturing capacity, which is expected to continue into 1995.
During 1994, the segment was generally able to offset higher costs by improving
yields, increasing factory utilization rates, higher worker productivity and its
ability to control selling, general and administrative expenses.

     The segment has seen a decline in orders for the 68000 microprocessor
family of products, primarily as the result of Apple Computer Corporation's
transition to the PowerPC -TM- 601 product, which they are presently purchasing
from IBM. The segment is expected to manufacture the PowerPC 603, 604 and 620
products in 1995, and sell them to a group of customers including Apple Computer
Corporation.

     Some of the devices produced by the Semiconductor Products segment
represent the main source of supply of these devices to other operating units of
Motorola. The segment has, at times, experienced capacity constraints on some
key device types. The Company's ability to manufacture cellular telephones and
other products may be affected by changes in the available mix of semiconductor
devices supplied by this segment. If overall customer demand for semiconductors
remains strong, Motorola does not expect that these capacity constraints will
ease until sufficient wafer

26

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

fabrication capacity becomes available, which possibly could begin during 1995.
In addition, the fourth quarter inventory build-up of cellular telephones and
the weak demand for Motorola Integrated Radio Systems (MIRS -TM-) products
should moderate the rate of internal shipments of semiconductors for cellular
telephones and MIRS products until the build-up is eliminated and demand for
MIRS products increases.

     During 1994, the segment purchased a wafer fabrication facility from Harris
Corporation in Research Triangle Park, North Carolina, and has agreed to
purchase an existing manufacturing facility in South Queensferry, Scotland, from
Digital Equipment Corporation. The segment has announced the expansion of
facilities in East Kilbride, Scotland, and Toulouse, France, and opened a new
research center in Toulouse and a new design center in Sendai, Japan. In
addition to the segment's factory expansion program, it is actively pursuing
additional capacity through the sourcing of products from outside vendors.
Because of the strong market demand, the available quantity of some products has
been allocated between customers, including other Motorola operating units, from
time to time.

COMMUNICATIONS PRODUCTS

The Communications Products segment is composed of the Land Mobile Products
Sector and the Paging Products and Wireless Data Groups.

     The business of the Land Mobile Products Sector has become increasingly
focused on large system awards and their associated subscriber equipment, which
could increase the volatility of orders, revenues and profits recognized during
any particular period. The sector's revenue growth during 1994 was primarily
driven by the introduction of MIRS products. Competition is worldwide and no
single factor is dominant. Competitive factors include price, product
performance, product quality, and service and systems quality and availability.

     In August 1994, Motorola executed an agreement with Nextel Communications,
Inc. under which Motorola will receive shares of Nextel stock in exchange for
most of the segment's 800 MHz specialized mobile radio service (SMRS)
businesses, systems and licenses in the continental United States. Details of
the Nextel Agreement, including the various  conditions to closing, and the
related financing commitments, are included in note 6 to the Consolidated
Financial Statements.

     During the fourth quarter of 1994, sales and orders of MIRS products were
weak and that weakness is expected to continue for some time due to a variety of
factors, including the need by Nextel Communications, Inc. and other customers
to conclude the Nextel Agreement and other transactions, as well as financing
and system optimization and build-out issues.

     The Paging Products and Wireless Data Groups design, manufacture and
distribute paging, data and gateway communications products on a worldwide
basis. The groups also have businesses which provide network services for paging
and data subscribers that are wholly owned and operated, and also through
domestic and international joint ventures.

     The groups' 1994 revenue growth has primarily resulted from volume
increases and new product deliveries. The groups do business in the competitive,
global telecommunications markets. Competition is based primarily on quality,
technology, service and price. Price competition, especially in paging products,
is expected to continue in 1995.

     Markets in the Peoples' Republic of China were the source of a significant
amount of the Paging Products Group's revenue during 1994 and 1993.  As the
China market for paging products has matured, a seasonal pattern has developed
in which orders decline in the fourth and first quarters. A significant number
of new products were introduced in each of the various operations during 1994.

GOVERNMENT AND SPACE TECHNOLOGY PRODUCTS

The Government and Space Technology Group is engaged in the design, development
and production of electronic systems and products for U.S. government projects.
The group's Satellite Communications Division is developing the IRIDIUM
[REGISTERED TRADEMARK] satellite-based communication system.

     The group's revenues and profits have been adversely affected by  the
decrease in the United States federal defense budgets. The group is expanding
the application of its core capabilities to support global growth opportunities
within other Motorola businesses.

     Competition for the IRIDIUM system is building, as at least five other
companies have announced intentions to create low-earth-orbit satellite systems.
On January 31, 1995 the Federal Communications Commission (FCC) issued a license
to a Motorola subsidiary to construct, operate and launch the IRIDIUM system,
although additional authorizations are required in the U.S. and other countries
in which the IRIDIUM service is to be offered.

                                                                              27

<PAGE>

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

OTHER PRODUCTS

The Other Products segment includes the Automotive, Energy and Controls Group
where performance was led by strong demand for component and energy products for
use primarily within Motorola's wireless communications businesses. The fourth
quarter inventory build-up of cellular telephones and the weak demand for MIRS
products should moderate the rate of internal shipment of some of the
Automotive, Energy and Controls Group products used in connection with cellular
telephones and MIRS products until the build-up is eliminated and demand for
MIRS products increases. The Other Products segment also includes the
Information Systems Group, where sales were 5% lower and operating profits were
lower.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operations reached a record $2.55 billion in 1994 compared
with $2.31 billion in 1993 and $1.96 billion in 1992.

     During 1994, the Company experienced a significant increase in its cash
requirements because of higher fixed asset expenditures, especially for the
Semiconductor segment, purchased material requirements, increasing federal
income tax payments and funding of the Motorola Profit Sharing and Pension
trusts. During November 1994, the Company completed a public offering of 17.1
million shares of common stock. The net proceeds of $973 million from the
offering were used to reduce notes payable.

     On November 1, 1994, the Company's Board of Directors approved a 43%
increase in the quarterly dividend on common stock. The Directors declared a
regular quarterly dividend of 10 cents per share, payable on January 16, 1995 to
stockholders of record on December 15, 1994. The previous dividend was 7 cents
per share. The increased dividend follows  a 2-for-1 stock split that was
distributed on April 18, 1994. At that time, the dividend was increased to 7
cents from 5.5 cents per share.

     The number of weeks that accounts receivable were outstanding increased to
6.8 for 1994 compared to 6.1 for 1993. Accounts receivable weeks for 1992 were
7.1. The main reason for the increase was a general shift towards large system
orders, which tend to have higher balances and longer customer-approval
processes. Inventory turns decreased slightly to 5.7 in 1994 from 5.8 in 1993.

     The Company's ratio of net debt to net debt plus equity was 12.1% at
December 31, 1994 compared with 11.9% in 1993 and 15.2% in 1992.

     During 1994, the Company and its finance subsidiary entered into a one-
and a five-year revolving domestic credit agreements totaling $1.5 billion with
a group of banks. These agreements replaced $800 million of bilateral domestic
credit facilities of the Company and its finance subsidiary and contain various
conditions, covenants and representations. At December 31, 1994, the Company's
total domestic and foreign credit facilities aggregated $2.6 billion, of which
$151 million were used and the remaining amount was not drawn, but was available
to back up outstanding commercial paper which totaled $745 million at December
31, 1994. Total domestic and foreign credit facilities at December 31, 1993
totaled $1.9 billion, of which $83 million were used and the remaining amount
was not drawn, but was available to back up outstanding commercial paper which
totaled $293 million at December 31, 1993.

     During 1994, the Company filed, and had declared effective, a universal
shelf registration statement with the Securities and Exchange Commission
covering up to $800 million of debt and equity securities. No securities have
been issued under this shelf registration.

     Fixed asset expenditures required to support current and long-term growth
increased to $3.3 billion from $2.2 billion in 1993. The 1992 expenditures
totaled $1.4 billion. The Semiconductor Products segment continues to comprise
the largest portion of fixed asset expenditures, with 49% of all such
investments.

IRIDIUM [REGISTERED TRADEMARK] IS A REGISTERED TRADEMARK OF IRIDIUM, INC.

OTHER MATTERS

ENVIRONMENTAL MATTERS: Regulating agencies are proposing regulations and
interpreting legislation in a manner that allows retroactive imposition of
remedial requirements. A discussion of the Company's environmental matters is
detailed in note 6 to the Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT: Expenditures increased to $1.86 billion in 1994, up
from $1.52 billion in 1993 and $1.31 billion in 1992. Over the past three years,
the Company has invested 8% to 10% of every sales dollar in product development
and technological advances, and continues to believe that a strong commitment to
research and development is required to drive long-term growth.

28

<PAGE>

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

                                   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

Management is responsible for the preparation, integrity and objectivity of the
consolidated financial statements and other financial information presented in
this report. The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles, applying certain
estimates and judgments as required.

     Motorola's internal controls are designed to provide reasonable assurance
as to the integrity and reliability of the financial statements and to
adequately safeguard, verify and maintain accountability of assets. Such
controls are based on established written policies and procedures, are
implemented by trained, skilled personnel with an appropriate segregation of
duties and are monitored through a comprehensive internal audit program. These
policies and procedures prescribe that the Company and all its employees are to
maintain the highest ethical standards and that its business practices
throughout the world are to be conducted in a manner which is above reproach.

     KPMG Peat Marwick LLP, independent auditors, are retained to audit
Motorola's financial statements. Their accompanying report is based on audits
conducted in accordance with generally accepted auditing standards, which
includes the consideration of the Company's internal controls to establish a
basis for reliance thereon in determining the nature, timing and extent of audit
tests to be applied.

     The Board of Directors exercises its responsibility for these financial
statements through its Audit Committee, which consists entirely of independent
non-management Board members. The Audit Committee meets periodically with the
independent auditors and with the Company's internal auditors, both privately
and with management present, to review accounting, auditing, internal controls
and financial reporting matters.



/s/ Gary L. Tooker                      /s/ Carl F. Koenemann
Gary L. Tooker                          Carl F. Koenemann
Vice Chairman and                       Executive Vice President
Chief Executive Officer                 and Chief Financial Officer


INDEPENDENT AUDITORS' REPORT

-------------------------------------------------------------------------------
The Board of Directors and Stockholders of Motorola, Inc.:

We have audited the accompanying consolidated balance sheets of Motorola, Inc.
and consolidated subsidiaries as of December 31, 1994 and 1993, and the related
statements of consolidated earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining,  on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as 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 financial position of Motorola,
Inc. and consolidated subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally accepted
accounting principles.

     As discussed in notes 2 and 5 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes," in 1992.



/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois

January 9, 1995

                                                                              29

<PAGE>

STATEMENTS OF CONSOLIDATED EARNINGS

<TABLE>
<CAPTION>
 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)                      MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
---------------------------------------------------------------------------------------------------------
Years ended December 31                                                          1994      1993      1992
---------------------------------------------------------------------------------------------------------
<S>                                                                          <C>        <C>      <C>
NET SALES                                                                     $22,245   $16,963  $13,303
---------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
     Manufacturing and other costs of sales                                    13,760    10,351    8,395
     Selling, general and administrative expenses                               4,381     3,776    2,951
     Depreciation expense                                                       1,525     1,170    1,000
     Interest expense, net                                                        142       141      157
---------------------------------------------------------------------------------------------------------
        Total costs and expenses                                               19,808    15,438   12,503
---------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLE                                                       2,437     1,525      800
---------------------------------------------------------------------------------------------------------
INCOME TAXES PROVIDED ON EARNINGS                                                 877       503      224
---------------------------------------------------------------------------------------------------------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
     PRINCIPLE                                                                $ 1,560   $ 1,022  $   576
---------------------------------------------------------------------------------------------------------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX                   --        --      (123)
---------------------------------------------------------------------------------------------------------
NET EARNINGS                                                                  $ 1,560   $ 1,022  $   453
---------------------------------------------------------------------------------------------------------
FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE(1),(2)
---------------------------------------------------------------------------------------------------------
     Net earnings before cumulative effect of change in accounting
       principle                                                              $  2.65   $  1.78  $  1.05
---------------------------------------------------------------------------------------------------------
     Cumulative effect of change in accounting principle                           --       --     (0.22)
---------------------------------------------------------------------------------------------------------
     Net earnings                                                             $  2.65   $  1.78  $  0.83
---------------------------------------------------------------------------------------------------------
FULLY DILUTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING           592.7     583.7    567.1
---------------------------------------------------------------------------------------------------------
<FN>
(1) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE THE SAME AS
FULLY DILUTED FOR ALL YEARS SHOWN, EXCEPT IN 1994 WHEN THEY WERE ONE CENT HIGHER
THAN FULLY DILUTED. AVERAGE PRIMARY COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING FOR 1994, 1993 AND 1992 WERE 591.7, 582.6 AND 565.6, RESPECTIVELY
(WHICH INCLUDES THE DILUTIVE EFFECTS OF THE CONVERTIBLE ZERO COUPON NOTES AND
THE OUTSTANDING STOCK OPTIONS).

(2) INCLUDES ADJUSTMENTS FOR THE 1994 AND 1992 TWO-FOR-ONE STOCK SPLITS EFFECTED
IN THE FORMS OF 100 PERCENT STOCK DIVIDENDS.
</TABLE>

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                      Common Stock and
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)                       Additional Paid-in Capital(1)              Retained Earnings
-------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                                        1994        1993        1992        1994        1993        1992
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>         <C>         <C>         <C>         <C>
Balances at January 1                                        $1,875      $1,510      $1,343     $4,534      $3,634      $3,287
     Net earnings                                                --          --          --      1,560       1,022         453
     Conversion of zero coupon notes                            251         216          11         --         --          --
     Stock issuance(2)                                          973          --          --         --         --          --
     Stock options exercised and other                           80         149         156         --         --          --
     Dividends declared ($.310 per share in 1994,
       $.220 in 1993 and $.198 in 1992)                          --          --         --        (177)       (122)       (106)
-------------------------------------------------------------------------------------------------------------------------------
Balances at December 31                                      $3,179      $1,875      $1,510     $5,917      $4,534      $3,634
-------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 1994 AND 1992 STOCK SPLITS: AN AMOUNT EQUAL TO THE PAR VALUE OF THE
ADDITIONAL SHARES ISSUED HAS BEEN TRANSFERRED FROM ADDITIONAL PAID-IN CAPITAL TO
COMMON STOCK DUE TO THE TWO-FOR-ONE STOCK SPLITS EFFECTED IN THE FORMS OF 100
PERCENT STOCK DIVIDENDS. ALL REFERENCES TO SHARES OUTSTANDING, DIVIDENDS AND PER
SHARE AMOUNTS HAVE BEEN ADJUSTED ON A RETROACTIVE BASIS.

(2) DURING NOVEMBER 1994, THE COMPANY COMPLETED A PUBLIC EQUITY OFFERING OF 17.1
MILLION SHARES OF COMMON STOCK.

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

30

<PAGE>

<TABLE>
<CAPTION>
 CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)   MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------------------------------------
December 31                                                          1994        1993
--------------------------------------------------------------------------------------
<S>                                                              <C>          <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                         $   741     $   886
Short-term investments                                                318         358
Accounts receivable, less allowance for doubtful accounts
     (1994, $118; 1993, $91)                                        3,421       2,476
Inventories                                                         2,670       1,864
Future income tax benefits                                            928         675
Other current assets                                                  847         454
--------------------------------------------------------------------------------------
     Total current assets                                           8,925       6,713
--------------------------------------------------------------------------------------
Property, plant and equipment, net                                  7,073       5,547
Other assets                                                        1,538       1,238
--------------------------------------------------------------------------------------
     Total assets                                                 $17,536     $13,498
--------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current portion of long-term debt               $   916     $   555
Accounts payable                                                    1,678       1,338
Accrued liabilities                                                 3,323       2,496
--------------------------------------------------------------------------------------
     Total current liabilities                                      5,917       4,389
--------------------------------------------------------------------------------------
Long-term debt                                                      1,127       1,360
Deferred income taxes                                                 509         433
Other liabilities                                                     887         907
--------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $3 par value
     Authorized shares: 1994, 1,400; 1993, 700
     Issued and outstanding shares: 1994, 588.0; 1993, 557.2(1)     1,764         836
Preferred stock, $100 par value issuable in series
     Authorized shares: 0.5 (none issued)                              --          --
Additional paid-in capital                                          1,415       1,039
Retained earnings                                                   5,917       4,534
--------------------------------------------------------------------------------------
     Total stockholders' equity                                     9,096       6,409
--------------------------------------------------------------------------------------
     Total liabilities and stockholders' equity                   $17,536     $13,498
--------------------------------------------------------------------------------------
 <FN>
(1) INCLUDES ADJUSTMENT FOR THE 1994 TWO-FOR-ONE STOCK SPLIT EFFECTED IN THE
FORM OF A 100 PERCENT STOCK DIVIDEND.

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                                                              31

<PAGE>

<TABLE>
<CAPTION>
 STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN MILLIONS)                                                                         MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                                                                         1994           1993           1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>            <C>            <C>
OPERATING
Net earnings                                                                                $ 1,560        $ 1,022        $   453
Add (deduct) non-cash items
     Cumulative effect of change in accounting principle                                         --            --             123
     Depreciation                                                                             1,525          1,170           1000
     Net change in deferred income taxes                                                       (177)            50            (23)
     Amortization of debt discount and issue costs                                               22             26             29
Gain on disposition of investments in affiliated companies                                       (9)            (9)           (12)
Change in assets and liabilities, net of effects of acquisitions and dispositions
     Accounts receivable, net                                                                  (945)          (439)           (82)
     Inventories                                                                               (806)          (539)           (77)
     Other current assets                                                                      (328)           (44)           (67)
     Accounts payable and accrued liabilities                                                 1,134            927            675
     Other assets                                                                               595            (95)           (16)
     Other liabilities                                                                          (19)           245            (42)
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operations                                                               2,552          2,314          1,961
----------------------------------------------------------------------------------------------------------------------------------
INVESTING
Acquisitions and advances to affiliated companies                                              (894)          (408)          (117)
Dispositions of investments in affiliated companies                                              23             67             28
Payments for property, plant and equipment                                                   (3,320)        (2,187)        (1,442)
Other changes to property, plant and equipment, net                                             183            126             59
(Increase) decrease in short-term investments                                                    40           (105)           (22)
----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                                                       (3,968)        (2,507)        (1,494)
----------------------------------------------------------------------------------------------------------------------------------
FINANCING
Net increase (decrease) in commercial paper and short-term borrowings
     less than 90 days                                                                          517            (38)          (345)
Proceeds from issuance of debt                                                                   32            521            330
Repayment of debt                                                                              (190)           (74)          (114)
Issuance of common stock                                                                      1,061            113            137
Payment of dividends                                                                           (149)          (120)          (100)
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities                                          1,271            402            (92)
----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                        $  (145)        $  209        $   375
----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year                                                $   886         $  677        $   302
----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                                      $   741         $  886        $   677
----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
(IN MILLIONS)                                                                         MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                                                                         1994           1993           1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>             <C>            <C>
NON-CASH ACTIVITIES
Conversion of zero coupon notes due 2009                                                       $251           $216            $11
Issuance of common stock for investment acquisition                                            $ --           $ 36            $19
----------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

32

 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION: The consolidated financial statements include the accounts of the
Company and those majority-owned subsidiaries where the Company has control. All
significant intercompany accounts and transactions are eliminated in
consolidation.

CASH EQUIVALENTS: The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.

MARKETABLE SECURITIES: Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which decreased other assets and
stockholders' equity as of December 31, 1994 by immaterial amounts.

REVENUE RECOGNITION: The Company uses the percentage-of-completion method to
recognize revenues and costs associated with most long-term contracts. For
contracts involving certain technologies, profits and revenues are deferred
until technological feasibility is established or customer acceptance is
obtained. For other product sales, revenue is recognized at the time of
shipment, and reserves are established for price protection and cooperative
marketing programs with distributors.

INVENTORIES: Inventories are valued at the lower of average cost (which
approximates computation on a first-in, first-out basis) or market (i.e., net
realizable value or replacement cost), less progress payments on long-term
contracts.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost
less accumulated depreciation. Depreciation is recorded principally using the
declining-balance method, based on the estimated useful lives of the assets
(buildings and building equipment, 5-50 years; machinery and equipment, 2-12
years).

FOREIGN CURRENCY TRANSLATION: Effective January 1, 1994, the Company's European
operations commenced using the local currency, instead of the U.S. dollar, as
the functional currency. The change did not have a material effect on the
Company's statement of financial position, liquidity and results of operations
as of January 1, 1994. Operations in Japan continue  to use the Japanese yen as
the functional currency. For all other operations the Company uses the U.S.
dollar as the functional currency. The effects of translating the financial
position and results of operations of local functional currency operations are
included in stockholders' equity. The effects of foreign currency transactions
and of remeasuring the financial position and results of operations into the
functional currency are included in the statement of earnings.

     The Company uses financial instruments to hedge, and therefore attempt to
reduce, its overall exposure to the effects of currency fluctuations on cash
flows of foreign operations and investments in foreign countries.  The Company's
policy is not to trade these instruments for profit on the exchange rate price
fluctuation alone, nor to trade in currencies for which there are no underlying
exposures, nor to enter into trades for any currency to intentionally increase
the underlying exposure. While these financial instruments are subject to market
risks resulting from exchange rate movements, any transaction gains and losses
on these instruments are generally expected to offset losses and gains on the
underlying operational cash flows or investments. Gains and losses on hedges of
existing assets or liabilities are marked to market on a monthly basis. Other
gains or losses on financial instruments that do not qualify as hedges are
recognized immediately as income or expense. Gains and losses on financial
instruments which hedge firm future commitments are deferred until such time as
the underlying transactions are recognized or immediately when the transaction
is no longer expected to occur.

RECLASSIFICATIONS: Certain amounts in prior years' financial statements and
related notes have been reclassified to conform to the 1994 presentation.

2. INCOME TAXES

The Company adopted, in 1992, SFAS No. 109, "Accounting for Income Taxes." The
impact of this accounting change was not material.

COMPONENTS OF EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                              <C>      <C>         <C>
United States                                    $1,140   $   360      $146
Other nations                                     1,297     1,165       654
                                                 --------------------------
     Total                                       $2,437    $1,525      $800
---------------------------------------------------------------------------
</TABLE>

COMPONENTS OF INCOME TAXES PROVIDED ON EARNINGS
<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                             <C>        <C>       <C>
Current:
     United States                              $  728      $197      $ 75
     Other nations                                 254       234       147
     State income taxes (U.S.)                      72        22         7
                                                ---------------------------
                                                 1,054       453       229
Deferred                                          (177)       50        (5)
                                                ---------------------------
Income taxes before cumulative effect
     of change in accounting principle          $  877      $503      $224
---------------------------------------------------------------------------
</TABLE>

                                                                              33

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

     Income tax payments were $962 million in 1994, $286 million in 1993 and
$132 million in 1992.

     Income taxes are generally not provided on cumulative undistributed
earnings of certain non-U.S. subsidiaries. Such undistributed earnings
aggregated $2.9 billion and $2.3 billion at December 31, 1994 and 1993,
respectively. It is intended that these earnings will be permanently reinvested
in operations outside the U.S. Should these earnings be distributed, foreign tax
credits would reduce the additional U.S. income tax which would be payable. In
cases where taxes are provided on such undistributed earnings, those taxes have
been included in U.S. income taxes.

     At December 31, 1994, certain non-U.S. subsidiaries had loss carryforwards
for income tax reporting purposes of $39.7 million, with expiration dates
starting in 1995.

DIFFERENCES BETWEEN INCOME TAX EXPENSE COMPUTED AT THE U.S. FEDERAL STATUTORY
TAX RATE OF 35% FOR 1994 AND 1993 AND 34% FOR 1992 AND INCOME TAXES PROVIDED ON
EARNINGS

<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                              <C>        <C>       <C>
Income tax expense at statutory rate              $853      $534      $272
Taxes on non-U.S. earnings                          13       (21)      (31)
State income taxes                                  46        14         7
Foreign Sales Corporation                          (46)      (29)      (18)
Tax credits                                         (6)       (4)       (2)
Other                                               17         9        (4)
                                                   ------------------------
Income taxes before cumulative effect
     of change in accounting principle            $877      $503      $224
---------------------------------------------------------------------------
</TABLE>

SIGNIFICANT DEFERRED TAX ASSETS (LIABILITIES)

<TABLE>
<CAPTION>
December 31                                                  1994      1993
---------------------------------------------------------------------------
<S>                                                       <C>       <C>
Depreciation                                               $(135)    $(134)
Deferred taxes on non-U.S. earnings                         (165)     (108)
Inventory reserves                                           255       201
Employee benefits                                            248       193
Capitalized items                                             91        71
Other deferred income taxes                                  125        19
                                                          -----------------
     Net deferred tax asset                                $ 419     $ 242
---------------------------------------------------------------------------
</TABLE>

     Gross deferred tax assets were $1,320 million and $993 million at December
31, 1994 and 1993, respectively. Gross deferred tax liabilities were $901
million and $751 million at December 31, 1994 and 1993, respectively.

     The deferred tax assets are considered realizable considering past income
and estimates of future income. These include, but are not limited to,
carrybacks, earnings trends and tax planning strategies.

     The Internal Revenue Service (IRS) has examined the federal income tax
returns for Motorola, Inc. through 1985 and the returns have been settled
through that year. The settlement did not result in a material adverse effect on
the consolidated financial position, liquidity or results of operations of the
Company. The IRS has completed its field audit of the years 1986 and 1987. In
connection with these audits, the IRS has proposed adjustments  to the Company's
income and tax credits for those years which would result in additional tax. The
Company disagrees with most of the proposed adjustments and is contesting them.
In the opinion of the Company's management, the final disposition of these
matters, and proposed adjustments from other tax authorities, will not have a
material adverse effect on the consolidated financial position, liquidity or
results of operations of the Company.

3. DEBT AND CREDIT FACILITIES

LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31                                                  1994      1993
---------------------------------------------------------------------------
<S>                                                        <C>     <C>
12% Eurodollar notes due 1994                              $   --  $     68
11.5% Eurodollar notes (retired during 1994)                   --        93
7.6% notes due 2007                                           300       300
6.5% debentures due 2008                                      199       199
Zero coupon notes due 2009                                     55       294
Zero coupon notes due 2013                                    316       309
6.75% industrial revenue bonds due 2014                        20        20
8.4% debentures due 2031
     (redeemable at the holders' option in 2001)              200       200
Other long-term debt                                           48        42
                                                          -----------------
                                                            1,138     1,525
Less current maturities                                        11       165
                                                          -----------------
Long-term debt                                             $1,127    $1,360
---------------------------------------------------------------------------
</TABLE>

SHORT-TERM DEBT

<TABLE>
<CAPTION>
December 31                                                  1994      1993
---------------------------------------------------------------------------
<S>                                                        <C>       <C>
Notes to banks                                               $147     $  83
Commercial paper                                              745       293
Other short-term debt                                          13        14
                                                          -----------------
                                                              905       390
Add current maturities                                         11       165
                                                          -----------------
Notes payable and current
     portion of long-term debt                               $916      $555
---------------------------------------------------------------------------
</TABLE>

WEIGHTED AVERAGE INTEREST RATES ON SHORT-TERM BORROWINGS

<TABLE>
---------------------------------------------------------------------------
<S>                                                        <C>       <C>
Commercial paper                                             4.6%      3.2%
Other short-term debt                                        7.5%      7.7%
---------------------------------------------------------------------------
</TABLE>

     As of December 31, 1994, the outstanding zero coupon notes due 2009,
referred to as Liquid Yield Option -TM- Notes ("LYONs" -TM-), had a face value
at maturity of $130 million. The 2009 LYONs were priced at a 6% yield to
maturity and are now convertible into 18.268 shares of Motorola common stock for
each $1,000 note. During 1994, various holders of the 2009 LYONs exercised
conversion rights for approximately 614,000 notes ($614 million face value; $251
million net carrying value).

34

<PAGE>

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

     In 1993, the Company issued additional LYONs due 2013, having a face value
of $480 million at maturity, for net cash proceeds of $301 million. The 2013
LYONs were priced to yield 2.25% to maturity and are now convertible into 11.178
shares of Motorola common stock for each $1,000 note. Both LYONs issues are
subordinated to all existing and future senior indebtedness of the Company, rank
on a parity with each other, and may be put back to  the Company by the holders
on specific dates prior to the stated maturities.

     During 1993, the Company issued $200 million in aggregate principal amount
of 6.5% debentures due 2008. During February 1993, the Company called, at a rate
of 103.1%, $45 million of the 8% sinking fund debentures due 2007 with the
remaining balance of $13 million being called at par during September 1993.
During March 1994, the Company called, at a rate of 101%, its 11.5% Eurodollar
notes due 1997 with a carrying value totaling $93 million.

     Aggregate requirements for long-term debt maturities, in millions, during
the next five years are as follows: 1995, $11; 1996, $10; 1997, $7; 1998, $6;
1999, $5.

     During 1994, the Company and its finance subsidiary entered into one- and
five-year revolving domestic credit agreements totaling $1.5 billion with a
group of banks. These agreements replaced $800 million of bilateral domestic
credit facilities of the Company and its finance subsidiary and contain various
conditions, covenants and representations. At December 31, 1994, the Company's
total domestic and foreign credit facilities aggregated $2.6 billion, of which
$151 million were used and the remaining amount was not drawn, but was available
to back up outstanding commercial paper which totaled $745 million at December
31, 1994.

     During 1994, the Company filed and had declared effective a universal shelf
registration statement for $800 million of debt and equity securities with the
Securities and Exchange Commission. As of December 31, 1994, no securities had
been issued under this universal shelf statement.

     Outstanding letters of credit aggregated approximately $426 million and
$189 million at December 31, 1994 and 1993, respectively.

LYON -TM- IS A TRADEMARK OF MERRILL LYNCH & CO., INC.

4. OTHER FINANCIAL DATA

INCOME STATEMENT AND BALANCE SHEET INFORMATION
INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                             <C>       <C>       <C>
Research and development                        $1,860    $1,521    $1,306
                                                ---------------------------
Maintenance and repairs                            276       267       236
                                                ---------------------------
Foreign currency losses                             25        18        34
                                                ---------------------------
Interest expense, net:
     Interest expense                              192       182       196
     Interest income                               (50)      (41)      (39)
                                                ---------------------------
        Interest expense, net                   $  142    $  141    $  157
---------------------------------------------------------------------------
</TABLE>

     The Company's cash payments for interest expense were $209 million in 1994,
$126 million in 1993 and $121 million in 1992.

BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
December 31                                                  1994      1993
---------------------------------------------------------------------------
<S>                                                      <C>        <C>
Inventories:
     Finished goods                                       $   699   $   584
     W.I.P. and production materials                        1,971     1,280
                                                         ------------------
Total                                                      $2,670    $1,864
                                                         ------------------
Property, plant and equipment:
     Land                                                 $   169   $   151
     Buildings                                              3,504     2,475
     Machinery                                              9,728     6,690
     Equipment leased to others                               329       391
                                                         ------------------
                                                           13,730     9,707
     Less accumulated depreciation                          6,657     4,160
                                                         ------------------
Total                                                      $7,073    $5,547
                                                         ------------------
Accrued liabilities:
     Compensation                                         $   613   $   491
     Deferred revenue                                         219       223
     Accrued warranties                                       283       166
     Taxes other than income                                  162       137
     Income taxes payable                                      76       158
     Contribution to employees'
       profit sharing funds                                   176       107
     Dividends payable                                         59        31
     Other                                                  1,735     1,183
                                                         ------------------
Total                                                      $3,323    $2,496
---------------------------------------------------------------------------
</TABLE>

DERIVATIVE FINANCIAL INSTRUMENTS

As of December 31, 1994 and 1993, the Company had net outstanding  foreign
exchange contracts totaling $1.2 billion and $1.0 billion, respectively. Most of
the hedge contracts, which are over-the-counter instruments, were scheduled to
mature within three months with the longest maturity extending out 39 months.
Management believes that these forward contracts should not subject the Company
to undue risk due to foreign exchange movements because gains and losses on
these contracts should offset losses and gains on the assets, liabilities and
transactions being hedged. At December 31, 1994, deferred gains and losses
totaled $1.2 million and $0.2 million, respectively. The following schedule
shows the five largest net foreign exchange hedge positions as of December 31,
1994:

FOREIGN EXCHANGE NET HEDGE POSITIONS AT DECEMBER 31 IN MILLIONS OF U.S. DOLLARS

<TABLE>
<CAPTION>
Buy (Sell)                                                   1994      1993
---------------------------------------------------------------------------
<S>                                                       <C>       <C>
Japanese Yen                                               $(578)    $(338)
British Pound Sterling                                      (227)     (215)
German Deutsche Mark                                        (162)     (143)
Italian Lira                                                 (53)      (73)
French Franc                                                 (41)      (44)
---------------------------------------------------------------------------
</TABLE>

                                                                              35
 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

     The Company is exposed to credit-related losses if counterparties to
financial instruments fail to perform their obligations. However it does  not
expect any counterparties, which presently have high credit ratings, to fail to
meet their obligations.

     The Company's finance subsidiary has outstanding floating to fixed interest
rate commercial paper swaps totaling $50 million at December 31, 1994. These
instruments mature at a rate of $25 million per year in 1995 and 1996. Amounts
receivable or payable and gains or losses realized under  swap agreements are
recognized as yield adjustments over the life of the related debt.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include accounts receivable, short-term
investments, long-term receivables, accounts payable, notes payable, long-term
debt, foreign currency contracts and other financing commitments. The fair
values of such financial instruments have been determined based on quoted market
prices and market interest rates, as of December 31, 1994.

     At December 31, 1994, the fair value of the convertible zero coupon notes
due 2009 was $138 million compared to the carrying value of $55 million. Such
notes, however, are callable by the Company at the carrying value at any time.
The fair values of all other financial instruments were not materially different
than their carrying (or contract) values.

FINANCE SUBSIDIARY

The Company's finance subsidiary purchases customer obligations under long-term
contracts from the Company at net carrying value.

     The finance subsidiary's interest revenue is included in the Company's
consolidated net sales. Interest expense totaling $15 million in 1994,  $12
million in 1993 and $11 million in 1992 is included in manufacturing and other
costs of sales. In addition, long-term finance receivables of $257 million in
1994 and $282 million in 1993 are included in other assets.

FINANCIAL DATA OF CONSOLIDATED FINANCE SUBSIDIARY

<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                             <C>       <C>       <C>
Total revenue                                   $   40    $   37    $   29
                                                ---------------------------
Net earnings                                        16        16        12
                                                ---------------------------
Total assets                                       339       361       295
                                                ---------------------------
Total liabilities                                 (285)     (298)     (248)
                                                ---------------------------
Stockholder's investments
     and advances                               $   54    $   63    $   47
---------------------------------------------------------------------------
</TABLE>

LEASES

The Company owns most of its major facilities, but does lease certain office,
factory and warehouse space, land, and data processing and other equipment under
principally noncancellable operating leases. Rental expense, net of sublease
income, was $185 million in 1994, $152 million in 1993 and $149 million in 1992.
At December 31, 1994, future minimum lease obligations, net of minimum sublease
rentals, for the next five years and beyond are as follows: 1995, $118; 1996,
$95; 1997, $73; 1998, $49; 1999, $37; beyond, $139.

5. EMPLOYEE BENEFIT AND INCENTIVE PLANS

PENSION BENEFITS: The Company's noncontributory pension plan covers most U.S.
employees after one year of service. The benefit formula is dependent upon
employee earnings and years of service. The Company's policy is to fund the
accrued pension cost or the amount allowable based on the full funding
limitations of the Internal Revenue Code, if less.

     The Company has a noncontributory supplemental retirement benefit plan for
its elected officers. The plan contains provisions for funding the participants'
expected retirement benefits when the participants meet  the minimum age and
years of service requirements.

     Certain non-U.S. subsidiaries have varying types of retirement plans
providing benefits for substantially all of their employees. Amounts charged to
earnings for all non-U.S. plans were $68 million in 1994, $41 million in 1993
and $33 million in 1992.

     The Company uses a three-year, market-related asset value method of
amortizing asset-related gains and losses.

     Net transition amounts and prior service costs are being amortized over
periods ranging from 10 to 15 years.

     Benefits under all U.S. pension plans are valued based upon the projected
unit credit cost method. The assumptions used to develop the projected benefit
obligations for the plans for 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
                                                             1994      1993
---------------------------------------------------------------------------
<S>                                                        <C>       <C>
Discount rate for obligations                               8.50%     7.25%
Future compensation increase rate                           5.50%     5.00%
Investment return assumption (regular)                      9.00%     9.25%
Investment return assumption (elected officers)             7.75%     8.00%
---------------------------------------------------------------------------
</TABLE>

     Accounting literature requires discount rates to be established based  on
prevailing market rates for high-quality fixed-income instruments that, if the
pension benefit obligation were settled at the measurement date, would provide
the necessary future cash flows to pay the benefit obligation when due. The
Company has increased the discount rate in determining the pension obligation
from 7.25% to 8.50% to comply with these guidelines. As of December 31, 1994,
the investment portfolio was predominantly long-term bonds and equity
investments, which have historically realized annual returns at or significantly
above the assumed investment return  rate. The Company believes that discount
rate fluctuations are short term in nature and should not adversely affect the
Company's long-term obligation.

36
 <PAGE>

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

COMPONENTS OF NET U.S. PENSION EXPENSE FOR THE REGULAR PENSION PLAN

<TABLE>
<CAPTION>
                                                   1994      1993      1992
---------------------------------------------------------------------------
<S>                                              <C>       <C>       <C>
Service costs                                     $119      $ 92      $ 84
Interest cost on projected obligation               83        67        55
Actual return on plan assets                         7       (80)      (53)
Net amortization and deferral                     (113)      (11)      (25)
                                                ---------------------------
Net pension expense                              $  96      $ 68      $ 61
---------------------------------------------------------------------------
</TABLE>

     The net U.S. pension expense for the elected officers' supplemental
retirement benefit plan was $27 million in 1994, $19 million in 1993 and $17
million in 1992.

POSTRETIREMENT HEALTH CARE BENEFITS

In addition to providing pension benefits, the Company provides certain health
care benefits to its retired employees. The majority of its domestic employees
may become eligible for these benefits if they reach normal retirement age while
working for the Company. During 1992, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS
No. 106 requires that the cost of postretirement benefits be accrued during the
years that the employees render service. Prior to 1992, costs of retiree health
care were recognized as expenses when claims were paid. The Company chose to
implement SFAS No. 106 by recognizing as expense in 1992 the entire accumulated
postretirement benefit obligation as of January 1, 1992. The Company's policy is
to fund the maximum amount allowable based on funding limitations of the
Internal Revenue Code.


U.S. FUNDED PENSION PLANS
<TABLE>
<CAPTION>
 December 31                                                                                 1994                     1993
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Elected                 Elected
                                                                                     Regular    Officers     Regular    Officers
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>        <C>           <C>        <C>
Actuarial present value of:
     Vested benefit obligation                                                      $  (831)       $(40)    $  (754)       $(42)
                                                                                   ---------------------------------------------
     Accumulated benefit obligation                                                    (904)        (76)       (821)        (73)
                                                                                   ---------------------------------------------
     Projected benefit obligation for service rendered to date                       (1,239)        (96)     (1,117)        (82)

Plan assets at fair value, primarily bonds, stocks
     and cash equivalents                                                             1,090          56         991          45
                                                                                   ---------------------------------------------
Plan assets less than projected benefit obligation                                     (149)        (40)       (126)        (37)
Unrecognized net loss                                                                   127          28         106          36
Unrecognized prior service cost                                                           1          33           1          21
Unrecognized net transition (asset) liability                                           (46)          7         (57)          8
Adjustment required to recognize minimum liability                                       --         (47)         --       (56)
                                                                                   ---------------------------------------------
Pension liability recognized in balance sheet                                       $   (67)       $(19)    $   (76)       $(28)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                              37

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

     The assumptions used to develop the accumulated postretirement benefit
obligation for the retiree health care plan for 1994 and 1993 were as follows:

<TABLE>
<CAPTION>
                                                             1994      1993
---------------------------------------------------------------------------
<S>                                                       <C>       <C>
Discount rate for obligations                               8.50%     7.25%
Investment return assumption                                9.00%     9.25%
---------------------------------------------------------------------------
</TABLE>

     Net retiree health care expenses recognized in 1994 were $26 million, $23
million in 1993 and $21 million in 1992.

U.S. FUNDED RETIREE HEALTH CARE PLAN

<TABLE>
<CAPTION>
December 31                                                  1994      1993
---------------------------------------------------------------------------
<S>                                                       <C>       <C>
Actuarial present value of accumulated
     postretirement benefit obligation                     $(281)    $(263)
Plan assets at fair value, primarily listed stocks,
     bonds and cash equivalents                               64        33
Unrecognized net loss                                         49        55
                                                           ---------------
Retiree health care liability recognized in
     balance sheet                                         $(168)    $(175)
---------------------------------------------------------------------------
</TABLE>

     The health care trend rate used to determine the pre-age-65 accumulated
postretirement benefit obligation was 9.33% for 1994, decreasing  to 6% by the
year 2000 and beyond. A flat 5% rate per year is used for the post-age-65
obligation. Increasing the health care trend rate by one percentage point would
increase the accumulated postretirement benefit obligation by $32 million as of
December 31, 1994 and would increase the 1994 net retiree health care expense by
$6 million. There are no significant postretirement health care benefit plans
outside of the United States.

OTHER BENEFITS

PROFIT SHARING PLANS: The Company and certain subsidiaries have  profit sharing
plans, principally contributory, in which all eligible employees participate.
The Company makes contributions to profit sharing funds in the United States and
other nations, which are generally based upon percentages of pretax earnings, as
defined, from those operations. Company contributions to all profit sharing
plans totaled $176 million, $107 million and $59 million in 1994, 1993 and 1992,
respectively.

MOTOROLA EXECUTIVE INCENTIVE PLAN: The Company may provide up to 7% of its
annual consolidated pretax earnings, as defined in the Motorola Executive
Incentive Plan, for the payment of cash incentive awards to key employees.
During 1994, $129 million was provided for incentive awards, as compared to $78
million and $29 million in 1993 and 1992, respectively.

LONG RANGE INCENTIVE PLAN: During 1994, the shareholders approved the adoption
of a new Long Range Incentive Plan (LRIPL) which was established to reward
participating elected officers for the Company's achieving outstanding
long-range performance, based on four preestablished performance objectives
measured over a four-year cycle starting in 1994. These objectives are
benchmarked and evaluated against companies within industries similar to
Motorola's, and with similar internal objectives. The maximum amount to be
awarded to an individual participant under this plan during any cycle cannot
exceed the lesser of $5 million or 200 percent of each participants' respective
base salary. Payouts under the LRIPL will occur subsequent to 1997 at which time
the current Long Range Incentive Program (LRIPR) will terminate. During 1994,
$12 million was provided for incentive awards.

RONA INCENTIVE PROGRAM: The RONA (Return On Net Assets employed) Incentive
Program is available to eligible employees who are not participating in the
Motorola Executive Incentive Plan. RONA awards are earned and paid semiannually
to participants and depend, first, on the Company and,  in most cases, the major
business unit for which the participant works, exceeding a minimum RONA
percentage (as determined by the Company) during the six-month period and,
second, the extent to which such minimum percentage was exceeded. During 1994,
$269 million was provided for RONA awards, as compared to $205 million and $87
million in 1993 and 1992, respectively.

STOCK OPTIONS: Under the Company's employee stock option plans, shares of common
stock have been made available for grant to key employees. The exercise price of
each option granted is 100% of market value on the date of the grant.

     Options exercised during 1994 were at per share prices ranging from $7.96
to $46.16. Options outstanding at December 31, 1994 were at per share prices
ranging from $7.79 to $59.81. There are approximately 8,700 total current stock
option holders. All share amounts and prices have been adjusted to reflect the
1994 and 1992 two-for-one stock splits.

SHARES SUBJECT TO OPTIONS

<TABLE>
<CAPTION>
(In thousands, except employee data)               1994      1993      1992
---------------------------------------------------------------------------
<S>                                             <C>       <C>       <C>
Options outstanding at January 1                22,906    26,018    29,980
Additional options granted                       3,972     3,530     6,696
Options exercised                               (2,654)   (6,326)  (10,500)
Options terminated, cancelled or expired          (120)     (316)     (158)
                                               ----------------------------
     Options outstanding at December 31         24,104    22,906    26,018
Shares reserved for future option grants        13,602    17,454    20,668
                                               ----------------------------
     Total shares reserved                      37,706    40,360    46,686
                                               ----------------------------
     Total options exercisable                  20,137    19,376    19,344
                                               ----------------------------
Approximate number of employees
      granted options                            7,300     5,100     4,600
---------------------------------------------------------------------------
</TABLE>

38

<PAGE>

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

6. COMMITMENTS AND CONTINGENCIES

FINANCIAL: In August 1994, Motorola signed an agreement, now expiring June 14,
1995, with Nextel Communications, Inc. under which Motorola will receive up to
59.5 million shares of Nextel in exchange for most of Motorola's 800 MHz
specialized mobile radio service (SMRS) businesses, systems and licenses in the
continental United States. The agreement is subject to various conditions,
including regulatory approvals, approval by Nextel stockholders and approval by
Nextel public debt holders or satisfaction of provisions of Nextel's debt
indentures. Nextel has agreed to purchase substantial quantities of MIRS -TM-
equipment over a five-year period, and Motorola has agreed to provide up to $260
million of secured vendor financing for such equipment and related services,
conditioned upon and following the closing of the Nextel agreement. The
financing would be in addition to the $260 million secured credit arrangement
previously provided by Motorola to Nextel subsidiaries. Motorola has also agreed
to provide up to $165 million in secured vendor financing for OneComm upon
completion of the planned merger of OneComm into Nextel. Nextel has indicated
that  it will require additional financing in order to complete its currently
planned networks and acquisitions. This funding need, delays in closing the
transactions under the Nextel agreement and delays in other transactions and
system optimization and build-out issues, among others, could affect sales and
orders of MIRS equipment to Nextel and others. Early in 1995, the Company made a
short-term loan commitment of $55 million to OneComm, secured by its MIRS
equipment sold to OneComm, which will become payable upon completion of the
OneComm-Nextel merger. During 1995, concentrations of credit risk may be
affected by the outcome of the Nextel agreements; however, as of December 31,
1994, the Company had no significant concentrations of credit risk.

     The Company further advanced its strategic investment in the IRIDIUM
[REGISTERED TRADEMARK] global communications system. At December 31, 1994, the
Company's equity investment in and commitments to make equity investments in
Iridium, Inc. was approximately $413 million; additionally, it has committed,
subject to action by the Iridium, Inc. Board, to additional equity investments
totaling approximately $60 million. The Company's investment in Iridium, Inc. is
included in the Consolidated Balance Sheet category "Other Assets." Iridium,
Inc. will require additional funding from various sources in order  to complete
the global communications system, which is expected to take place over the next
four years.

     The Company has executed two contracts with Iridium, Inc. for the
construction and operation of the global communications system, providing for
approximately $6.3 billion in payments by the consortium over a ten-year period
which began in 1993. The Company has in turn entered into significant
subcontracts for portions of the system, for which it will generally remain
obligated even if Iridium, Inc. is unable to satisfy the terms of the contracts
with the Company, including funding. Separately, the Company is making
significant investments to produce ancillary products for the system, such as
subscriber units. On January 31, 1995, the Federal Communications Commission
(FCC) issued a license to a Motorola subsidiary to construct, operate and launch
the IRIDIUM system. However, other authorizations are still required for the
IRIDIUM system to begin commercial service in the U.S. and in other countries in
which service will be provided.

     The Company has entered into arrangements with a non-consolidated affiliate
whereby the Company may increase, for an amount up to approximately $420
million, its percentage interest in the affiliate at the option of the affiliate
or Motorola at various dates starting during 1995 which are not to extend beyond
June 1997.

     Other off-balance-sheet commitments to extend or guarantee financing and
recourse obligations under receivable sales arrangements which represent firm
obligations at December 31,1994, aggregated approximately  $273 million.
Commitments to extend or guarantee financing include commitments for customer
financing and for the financing of non-consolidated affiliates. Customer
financing commitments require the customer to meet certain conditions
established in the financing arrangements. Commitments represent the maximum
amounts available under these arrangements and may not be completely utilized.


ENVIRONMENTAL AND LEGAL: Under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended (CERCLA, or Superfund), the
Company has been designated as a potentially responsible party by the United
States Environmental Protection Agency with respect to certain waste sites with
which the Company may have had direct or indirect involvement. Such designations
are made regardless of the extent of the Company's involvement. These claims are
in various stages of administrative or judicial proceedings. They include
demands for recovery of past governmental costs and for future investigations or
remedial actions. In many cases, the dollar amounts of the claims have not been
specified, and have been asserted against a number of other entities for the
same cost recovery or other relief as was asserted against the Company. The
Company accrues costs associated with environmental matters when they become
probable and reasonably estimable, which totaled $70 million as of December 31,
1994. The amount of such charges to earnings, which did not include potential
reimbursements from insurance coverage, was $20 million, $36 million and $17
million in 1994, 1993 and 1992, respectively. However, due to their uncertain
nature, the amounts accrued could differ, perhaps significantly, from the actual
costs that will be incurred. These amounts assume no substantial recovery of
costs from any insurer. The remedial efforts include environmental cleanup
costs, and communication programs. These liabilities represent only the
Company's share of any possible costs incurred in environmental cleanup sites,
since in most cases, potentially responsible parties other than the Company may
exist.

     The Company is a defendant in various suits, including environmental ones,
and is subject to various claims which arise in the normal course of business.
In the opinion of management the ultimate disposition of these matters will not
have a material adverse effect on the consolidated financial position, liquidity
or results of operations of the Company.

                                                                              39

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

7. INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC REGION

The Company operates predominantly in the wireless communication, semiconductor
technology and advanced electronic industries. Operations involve the design,
manufacture and sale of a diversified line of products, which include, but are
not limited to, two-way radios, pagers, cellular telephones and systems;
semiconductors, including integrated circuits and microprocessor units; data
communication and distributive data processing equipment and systems; and
electronic equipment and industrial electronic products. Manufacturing and
distribution operations in any one foreign country do not account for more than
10% of consolidated net sales or total assets.

     Operating profit (revenues less operating expenses) excludes general
corporate expenses, net interest and income taxes. Intersegment and
intergeographic transfers are accounted for on an arm's length pricing basis.

     Identifiable assets (excluding intersegment receivables) are the Company's
assets that are identified with classes of similar products or operations in
each geographic area. Corporate assets primarily include cash, marketable
securities, equity investments and the administrative headquarters of the
Company.

     In 1994, no single customer or group under common control represented 10%
or more of the Company's sales. The equity in net assets of non-U.S.
subsidiaries amounted to $4.21 billion at December 31, 1994 and $3.28 billion at
December 31, 1993.


INDUSTRY SEGMENT INFORMATION

<TABLE>
<CAPTION>

                                                             Net Sales                        Operating Profit
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                       1994      1993      1992           1994                1993                1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>        <C>        <C>       <C>      <C>         <C>     <C>        <C>
General Systems
Products                                  $ 8,613   $ 5,236   $ 3,662    $1,214     14.1%    $  718      13.7%   $  420      11.5%
Semiconductor Products                      6,936     5,707     4,475       996     14.4%       801      14.0%      464      10.4%
Communications Products                     5,776     4,834     3,906       589     10.2%       354       7.3%      192       4.9%
Government and Space
     Technology Products                      829       858       650      (55)     (6.6)%      (17)     (2.0)%      (7)     (1.1)%
Other Products                              2,434     1,762     1,452       156      6.4%        95       5.4%       77       5.3%
Adjustments and eliminations               (2,343)   (1,434)     (842)      (29)      --        (11)       --        (4)       --
                                          ----------------------------    ------             -------             -------
     Industry segment totals              $22,245   $16,963   $13,303     2,871     12.9%     1,940      11.4%    1,142       8.6%
                                          ----------------------------
General corporate expenses                                                 (292)               (274)               (185)
Interest expense, net                                                      (142)               (141)               (157)
                                                                          ------             -------             -------
Earnings before income taxes
     and cumulative effect of change
     in accounting principle                                             $2,437     11.0%    $1,525      9.0%   $   800      6.0%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                       Assets               Fixed Asset Expenditures        Depreciation Expense
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                       1994      1993      1992      1994      1993      1992      1994      1993      1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>     <C>       <C>        <C>       <C>       <C>       <C>       <C>        <C>
General Systems
Products                                    $4,740  $  3,223  $  2,108   $   621   $   453   $   334   $   327   $   227   $   171
Semiconductor Products                       5,886     4,507     3,618     1,640     1,120       666       683       529       429
Communications Products                      4,319     3,202     2,925       451       363       263       265       238       207
Government and Space
     Technology Products                       565       304       312        41        31        24        35        33        33
Other Products                                 905       957       826       315       120       101       152        89       106
Adjustments and eliminations                   (72)      (24)      (32)       --        --        --        --        --        --
                                           ---------------------------   ---------------------------   ---------------------------
     Industry segment totals                16,343    12,169     9,757     3,068     2,087     1,388     1,462     1,116       946
General corporate                            1,193     1,329       872       254       100        54        63        54        54
                                           ---------------------------   ---------------------------   ---------------------------
     Consolidated totals                   $17,536   $13,498   $10,629    $3,322    $2,187    $1,442    $1,525    $1,170    $1,000
----------------------------------------------------------------------------------------------------------------------------------
 <FN>

1993 AND 1992 HAVE BEEN RECLASSIFIED TO REFLECT THE REALIGNMENT OF VARIOUS
BUSINESS UNITS.
</TABLE>

40

<PAGE>

(IN MILLIONS, EXCEPT AS NOTED)     MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------------------

GEOGRAPHIC AREA INFORMATION(1)

<TABLE>
<CAPTION>

                                                     Net Sales                                Operating Profit
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                       1994      1993      1992           1994                1993                1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>       <C>        <C>        <C>     <C>        <C>      <C>         <C>
United States                              $16,297   $12,924   $10,232    $1,932     11.9%   $   970      7.5%   $   624      6.1%
Other nations                               12,758    10,066     8,017     1,292     10.1%     1,164     11.6%       706      8.8%
Adjustments and eliminations                (6,810)   (6,027)   (4,946)     (353)      --       (194)      --       (188)      --
                                          ----------------------------    ------             -------              ------
     Geographic totals                     $22,245   $16,963   $13,303     2,871     12.9%     1,940     11.4%     1,142      8.6%
                                          ----------------------------
General corporate expenses                                                  (292)               (274)               (185)
Interest expense, net                                                       (142)               (141)               (157)
                                                                          ------             -------              ------
Earnings before income taxes
     and cumulative effect of change
     in accounting principle                                              $2,437     11.0%    $1,525      9.0%    $  800      6.0%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                   Assets
----------------------------------------------------------------------------------------------------------------------------------
December 31                                                                                               1994      1993      1992
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>       <C>       <C>
United States                                                                                          $10,750  $  7,731  $  6,297
Other nations                                                                                            5,943     4,674     3,668
Adjustments and eliminations                                                                              (350)     (236)     (208)
                                                                                                     -----------------------------
     Geographic totals                                                                                  16,343    12,169     9,757
General corporate assets                                                                                 1,193     1,329       872
                                                                                                     -----------------------------
     Consolidated totals                                                                               $17,536   $13,498   $10,629
----------------------------------------------------------------------------------------------------------------------------------
<FN>

(1) AS MEASURED BY THE LOCALE OF THE REVENUE-PRODUCING OPERATIONS.

1993 AND 1992 HAVE BEEN RECLASSIFIED TO REFLECT THE REALIGNMENT OF VARIOUS
BUSINESS UNITS.
</TABLE>

8. STOCKHOLDER RIGHTS PLAN

Each outstanding share of the Company's common stock carries with it one-quarter
of a preferred share purchase right. Each right becomes exercisable for
one-thousandth of a share of the Company's junior participating preferred stock,
series A, at an exercise price of $150 per one-thousandth of a share (subject to
adjustment) if a person or group acquires 20% or more of the Company's common
stock or announces a tender or exchange offer for 30% or more of the Company's
common stock. If a person or group acquires 20% or more of the Company's common
stock and in certain other circumstances, each right (except, in some instances,
those held by an acquiror) becomes exercisable for an amount of the Company's
common stock (or that of an acquiror) having a market value of twice the
exercise price. In some cases, the Board of Directors may exchange rights for
four shares (subject to adjustment) of the Company's common stock (or the
equivalent) and may suspend the exercisability of the rights. The rights have no
voting power, expire on November 20, 1998, and may be redeemed for $.05 per
right prior to a public announcement that 20% or more of the Company's shares
have been accumulated by a person or group.

                                                                              41

<PAGE>

FIVE YEAR FINANCIAL SUMMARY

<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)                                MOTOROLA, INC. AND CONSOLIDATED SUBSIDIARIES
----------------------------------------------------------------------------------------------------------------------------------
Years ended December 31                                           1994           1993           1992           1991           1990
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>           <C>            <C>            <C>
OPERATING RESULTS
Net sales                                                      $22,245        $16,963        $13,303        $11,341        $10,885
Manufacturing and other costs of sales                          13,760         10,351          8,395          7,134          6,787
Selling, general and administrative expenses                     4,381          3,776          2,951          2,579          2,509
Depreciation expense                                             1,525          1,170          1,000            886            790
Interest expense, net                                              142            141            157            129            133
     Total costs and expenses                                   19,808         15,438         12,503         10,728         10,219
Earnings before income taxes and cumulative effect
     of change in accounting principle                           2,437          1,525            800            613            666
Income taxes provided on earnings                                  877            503            224            159            167
Net earnings before cumulative effect of change
     in accounting principle                                   $ 1,560        $ 1,022        $   576        $   454        $   499
Net earnings                                                   $ 1,560        $ 1,022        $   453        $   454        $   499
Net earnings before cumulative effect of change
     in accounting principle as a percent of sales                 7.0%           6.0%           4.3%           4.0%           4.6%
Net earnings as a percent of sales                                 7.0%           6.0%           3.4%           4.0%           4.6%
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (in dollars)(1),(2)
Fully diluted
     Net earnings before cumulative effect of change
       in accounting principle                                 $  2.65        $  1.78        $  1.05        $  0.84        $  0.93
     Cumulative effect of change in accounting
       principle                                                    --             --         (0.22)             --             --
     Net earnings                                              $  2.65        $  1.78        $  0.83        $  0.84        $  0.93
     Average common and common equivalent shares
       outstanding                                               592.7          583.7          567.1          558.5          555.7
Dividends declared per share                                   $ 0.310        $ 0.220        $ 0.198        $ 0.190        $ 0.190
----------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET
Total assets                                                   $17,536        $13,498        $10,629        $ 9,375        $ 8,742
Working capital                                                  3,008          2,324          1,883          1,424          1,404
Long-term debt                                                   1,127          1,360          1,258            954            792
Total debt                                                       2,043          1,915          1,695          1,806          1,787
Total stockholders' equity                                     $ 9,096        $ 6,409        $ 5,144        $ 4,630        $ 4,257
----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Current ratio                                                     1.51           1.53           1.56           1.46           1.46
Return on average invested capital before cumulative
     effect of change in accounting principle                     17.5%          15.3%           9.4%           7.8%           9.4%
Return on average invested capital                                17.5%          15.3%           7.5%           7.8%           9.4%
Return on average stockholders' equity before cumulative
     effect of change in accounting principle                     21.0%          17.8%          11.7%          10.2%          12.3%
Return on average stockholders' equity                            21.0%          17.8%           9.4%          10.2%          12.3%
Fixed asset expenditures                                       $ 3,322        $ 2,187        $ 1,442        $ 1,387        $ 1,371
     % to sales                                                   14.9%          12.9%          10.8%          12.2%          12.6%
Research and development expenditures                          $ 1,860        $ 1,521        $ 1,306        $ 1,133          1,030
     % to sales                                                    8.4%           9.0%           9.8%          10.0%           9.5%
Year-end employment (in thousands)                                 132            120            107            102            105
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) ALL EARNINGS PER SHARE, DIVIDENDS AND OUTSTANDING SHARES DATA HAVE BEEN
RESTATED TO REFLECT THE  1994 AND 1992 TWO-FOR-ONE STOCK SPLITS.

(2) PRIMARY EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE WERE THE SAME AS
FULLY DILUTED FOR ALL YEARS SHOWN EXCEPT IN 1994 AND 1991 WHEN PRIMARY EARNINGS
PER SHARE WERE ONE CENT HIGHER THAN FULLY DILUTED. AVERAGE PRIMARY COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING FOR 1994, 1993, 1992, 1991 AND 1990 WERE
591.7, 582.6, 565.6, 555.6 AND 555.7, RESPECTIVELY.
</TABLE>

42

<PAGE>

QUARTERLY AND OTHER FINANCIAL DATA

<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)                      1994                                    1993
----------------------------------------------------------------------------------------------------------------------------------
Quarterly                                                1ST       2ND       3RD       4TH       1st       2nd       3rd       4th
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>       <C>       <C>       <C>      <C>       <C>       <C>
OPERATING RESULTS
Net sales                                             $4,693    $5,439    $5,660    $6,453    $3,626   $ 3,936    $4,408    $4,993
Gross profit                                           1,785     2,060     2,121     2,519     1,391     1,556     1,696     1,969
Net earnings                                             298       367       380       515       204       224       254       340
Net earnings as a percent of sales                       6.4%      6.7%      6.7%      8.0%      5.6%      5.7%      5.8%      6.8%
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA (in dollars)(1)
Primary net earnings per common
     and common equivalent share                     $  0.51   $  0.63   $  0.65   $  0.87   $  0.36  $   0.40   $  0.44   $  0.58
Fully diluted net earnings per common
     and common equivalent share                     $  0.51   $  0.63   $  0.65   $  0.86   $  0.36  $   0.40   $  0.44   $  0.58
----------------------------------------------------------------------------------------------------------------------------------
Dividends declared                                    $0.070    $0.070    $0.070    $0.100    $0.055   $ 0.055    $0.055    $0.055
Dividends paid                                        $0.055    $0.070    $0.070    $0.070    $0.055   $ 0.055    $0.055    $0.055
STOCK PRICES
     High                                             $54.83    $54.00    $55.75    $61.13    $33.56   $ 44.31    $52.56    $53.75
     Low                                              $43.25    $42.13    $43.38    $49.00    $24.31   $ 31.63    $41.25    $42.38
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) ALL EARNINGS PER SHARE, DIVIDEND AND STOCK PRICE DATA HAVE BEEN RESTATED TO
REFLECT THE 1994 TWO-FOR-ONE STOCK SPLIT.

THE NUMBER OF STOCKHOLDERS OF RECORD OF MOTOROLA COMMON STOCK ON JANUARY 31,
1995, WAS 39,624.
</TABLE>

                                                                              43


<PAGE>
                                                            Exhibit 21

                            SUBSIDIARIES OF MOTOROLA

The following subsidiaries are wholly-owned, directly or indirectly through
wholly-owned subsidiaries of Motorola.

                                                              Jurisdiction
Name of Subsidiary                                          of Incorporation
------------------                                          ----------------

Motorola Australia Proprietary Limited                      Australia
Motorola Canada Limited/Motorola Canada Limitee             Canada
Motorola (China) Electronics Ltd.                           China
Motorola de Puerto Rico, Inc.                               Delaware
Motorola Credit Corporation                                 Delaware
Motorola International Capital Corporation                  Delaware
Motorola International Development Corporation              Delaware
Motorola International Sales, Inc.                          Delaware
Motorola Lighting, Inc.                                     Delaware
Motorola A/S                                                Denmark
Motorola Limited                                            England
Motorola Electronique Automobile                            France
Motorola S.A.                                               France
Motorola Semiconducteurs S.A.                               France
Motorola Electronic G.m.b.H.                                Germany
Motorola G.m.b.H.                                           Germany
Motorola B.V.                                               Holland
Motorola Asia Limited                                       Hong Kong
Motorola Semiconductors Hong Kong, Limited                  Hong Kong
Motorola Communications Israel Limited                      Israel
Motorola Israel Limited                                     Israel
Motorola Pelephone Cellular Communications Ltd.             Israel
Motorola S.p.A.                                             Italy
Nippon Motorola, Limited                                    Japan
Motorola Korea Limited                                      Korea
Motorola Electronics Sdn. Bhd.                              Malaysia
Motorola Malaysia Sdn. Bhd.                                 Malaysia
Motorola Semiconductor Sdn. Bhd.                            Malaysia
Motorola de Mexico, S.A.                                    Mexico
Embarc Communication Services, Inc.                         Nevada
Motorola Philippines, Inc.                                  Philippines
Motorola Electronics Pte. Ltd.                              Singapore
Motorola Espana S.A.                                        Spain
Motorola A. B.                                              Sweden
Motorola Electronics Taiwan, Ltd.                           Taiwan
Motorola Foreign Sales Corporation                          Virgin Islands

The names of other subsidiaries have been omitted because, considered in the
aggregate as a single subsidiary, they would not constitute a significant
subsidiary.

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1994
<PERIOD-START>                             JAN-01-1994
<PERIOD-END>                               DEC-31-1994
<CASH>                                             741
<SECURITIES>                                       318
<RECEIVABLES>                                     3539
<ALLOWANCES>                                       118
<INVENTORY>                                       2669
<CURRENT-ASSETS>                                  8925
<PP&E>                                           13730
<DEPRECIATION>                                    6657
<TOTAL-ASSETS>                                   17536
<CURRENT-LIABILITIES>                             5917
<BONDS>                                           1127
<COMMON>                                          1764
                                0
                                          0
<OTHER-SE>                                        7332
<TOTAL-LIABILITY-AND-EQUITY>                     17536
<SALES>                                          22245
<TOTAL-REVENUES>                                     0
<CGS>                                            13760
<TOTAL-COSTS>                                    18116<F1>
<OTHER-EXPENSES>                                  1525<F2>
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 142
<INCOME-PRETAX>                                   2437
<INCOME-TAX>                                       877
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                      1560
<EPS-PRIMARY>                                     2.66
<EPS-DILUTED>                                     2.65
<FN>
<F1>Total cost includes cost of goods sold and selling, general and administrative
expenses.
<F2>Other expenses include depreciation expense.
</FN>
        

</TABLE>

<PAGE>
                                                            Exhibit 99.2


                         AMENDMENT TO AGREEMENT AND PLAN
                           OF CONTRIBUTION AND MERGER


     THIS AMENDMENT TO AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
(hereinafter called this "Amendment"), is entered into as of February 12, 1995,
among Nextel Communications, Inc., a Delaware corporation (the "Company"),
Motorola, Inc., a Delaware corporation ("Motorola"), ESMR, Inc., a Delaware
corporation and a Wholly-Owned Subsidiary of Motorola ("New Sub"), ESMR Sub,
Inc., a Delaware corporation and a Wholly-Owned Subsidiary of New Sub ("ESMR
Sub"), and the other Subsidiaries of Motorola listed as signatories hereto (the
"Motorola SMR Subsidiaries"), and is made with reference to that certain
Agreement and Plan of Contribution and Merger dated August 4, 1994 (as
heretofore amended by letters between the Company and Motorola dated October 5,
1994 and January 31, 1995, the "Contribution and Merger Agreement") among the
Company, Motorola, New Sub, ESMR Sub and the Motorola SMR Subsidiaries
(collectively, the "Parties").  Capitalized terms used herein shall have the
meanings assigned in the Contribution and Merger Agreement unless otherwise
defined herein.

     WHEREAS, the Parties desire to amend the Merger Agreement to amend and add
certain provisions therein.

     NOW, THEREFORE in consideration of the premises and of the agreements
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:

     1.   PRE-CLOSING ACTIONS.  Section 2.2(a) of the Contribution and Merger
Agreement is hereby amended to replace the language set forth following (i) and
preceding (ii) with the following language:

          "(i)  change the name of New Sub to "Nextel Communications, Inc." and
          provide that the authorized capital stock of New Sub shall consist of
          430,000,000 shares of capital stock, consisting of 400,000,000 shares
          of New Sub Class A Common

<PAGE>

          Stock, 20,000,000 shares of New Sub Class B Common Stock and
          10,000,000 shares of preferred stock, par value $.01 per share, of New
          Sub and".

     2.   TERMINATION.  Section 9.2 of the Contribution and Merger Agreement is
hereby amended to replace "March 31, 1995" with "June 14, 1995."  The extension
hereunder is expressly conditioned upon the mailing of the Proxy
Statement/Prospectus to stockholders of the Company no later than May 2, 1995.

     3.   PROXY STATEMENT/PROSPECTUS.  Pursuant to Sections 7.3 through 7.5 of
the Contribution and Merger Agreement the Parties confirm their mutual
understanding and objective to expeditiously finalize the Proxy
Statement/Prospectus that will be used in conjunction with the Nextel Merger
reflecting an updated financial and business plan, including plans for existing
debt and future financing, prepared by the Company and substantiated to the
reasonable satisfaction of Motorola.

     4.   PUBLIC ANNOUNCEMENTS.  Motorola and the Company will agree upon the
timing and content of the initial press release describing this Amendment and
will not make statements prior to or following such release that are
inconsistent therewith.

     5.   COUNTERPARTS.  This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.


                              NEXTEL COMMUNICATIONS, INC.

                              By:        /s/  Brian McAuley
                                 ---------------------------------


                                        2

<PAGE>

                              MOTOROLA, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              ESMR, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              ESMR SUB, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              METRACOM TRUNKED RADIO
                              COMMUNICATIONS SYSTEMS, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              MIJAC ENTERPRISES, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              MOTOROLA SF, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              MOTOROLA SMR, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                                        3

<PAGE>

                              NATIONAL TOWER TRUNKING
                              SYSTEMS, INC.

                              By:        /s/  R.D. Severns
                                 -----------------------------------


                              AIRWAVE COMMUNICATIONS CORP.

                              By:        /s/  R.D. Severns
                                 -----------------------------------

                              MOTOROLA CANADA LIMITED

                              By:        /s/  Joyce Reed
                                 -----------------------------------


                                        4


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