Reliant FORM 10-K manual Employee benefit plans, Net Operating Capital Tax Losses, Credits b Total

The following table shows the significant components included in deferred income taxes as of December 31:

		2003		2002
Assets:
Tax benefit of loss carryforwards and tax credits	$	5,633	$	4,602
Provisions and reserves		714		1,735
Post-retirement benefits other than pensions		234		104
Plant and equipment		122		72
Pension plan liabilities		433		285
Deferred compensation		277		32
Unrealized losses on investments		–		3
		7,413		6,833
Valuation allowance		(3,344)		(3,024)
		4,069		3,809
Liabilities:
Acquired technology		–		38
Provisions and reserves		341		679
Plant and equipment		48		6
Other		105		51
		494		774
Net deferred income tax assets	$	3,575	$	3,035

Subsequent to 2003, Nortel Networks determined that it expects to settle certain income tax matters which will result in a reduction of its provisions and reserves liability along with an offsetting reduction in its tax benefit of loss carryforwards and tax credits of approximately $140. The balance of the provisions and reserves liability relates to certain tax credit and transfer pricing matters, including the retroactive application of the APA.

Nortel Networks has not provided for foreign withholding taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of foreign subsidiaries since Nortel Networks does not currently expect to repatriate these earnings. It is not practical to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.

As of December 31, 2003, Nortel Networks had the following net operating and capital loss carryforwards and tax credits which are scheduled to expire in the following years:

		Net
	Operating			Capital		Tax
		losses		losses(a)	credits(b)			Total
2004 - 2006	$	102	$	–	$	268	$	370
2007 - 2009		776		–		319		1,095
2010 - 2016		1,806		80		550		2,436
2017 - 2023		3,251		–		243		3,494
Indefinitely		1,784		4,426		23		6,233
	$	7,719	$	4,506	$	1,403	$	13,628

(a)The capital losses related primarily to the U.K. and may only be used to offset future capital gains. Nortel Networks has recorded a full valuation allowance against this future tax benefit.

(b)Global investment tax credits of $41, $78 and $154 have been applied against the income tax provision in 2003, 2002 and 2001, respectively. Unused tax credits can be utilized to offset future income taxes payable primarily in Canada.

9.Employee benefit plans

Nortel Networks maintains various retirement programs covering substantially all of its employees, consisting of defined benefit, defined contribution and investment plans.

Nortel Networks has four kinds of capital accumulation and retirement programs: balanced capital accumulation and retirement programs (the “Balanced Program”) and investor capital accumulation and retirement programs (the “Investor Program”) available to substantially all of its North American employees; flexible benefits plan, which includes a group personal pension plan (the “Flexible Benefits Plan”), available to substantially all of its employees in the U.K.; and traditional capital accumulation and retirement programs that include

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