European Aeronautic Defence
and Space Company EADS N.V.
Le Carré, Beechavenue 130–132
1119 PR Schiphol-Rijk
The Netherlands

This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.

3

www.eads.com

In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France

European Aeronautic Defence and Space Company EADS N.V.

In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain

Business,
Legal andCorporate
Responsibility
2005

Business, Legal and Corporate Responsibility 2005

The complete EADS Annual Report Suite2005 consists of:Annual Review
2005 (1)Financial Statements andCorporate Governance2005 (2)Business, Legal andCorporate Responsibility
2005 (3)(available on request)The online version of the Annual
Report Suite 2005 is available atwww.reports.eads.com

Cover image
Airbus A380

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EADS

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BUSINESS, LEGALAND CORPORATERESPONSIBILITY

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EADS Registration Document
Part 2(Business, Legal and Corporate Responsibility)
European Aeronautic Defence and Space Company EADS N.V. (the “Company” or “EADS”) is a Dutch company, which
is listed in France, Germany and Spain. Given this fact, the applicable regulations with respect to public information andprotection of investors, as well as the commitments made by the Company to securities and market authorities, are describedin this registration document (the “Registration Document”).
This Registration Document was prepared in accordance with Annexe 1 of the EC Regulation 809/2004, filed
in English with, and approved by, the Autoriteit Financiële Markten (the “AFM”) on 26th April 2006 in its
capacity as competent authority under the Wet toezicht effectenverkeer 1995 (as amended) pursuant to the
Directive 2003/71/EC. When used as a Registration Document, this document entitled Business, Legal andCorporate Responsibility - (Registration Document Part 2) must be read in conjunction with the document entitledFinancial Statements and Corporate Governance - (Registration Document Part 1). This Registration Document
may be used in support of a financial transaction as a document forming part of a prospectus in accordance with
Directive 2003/71/EC only if it is supplemented by a securities note and a summary approved by the AFM.

EADS Business, Legal and Corporate Responsibility

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Business, Legaland Corporate Responsibility
Registration Document - Part 2

1

Information
on EADS Activities

2

Corporate Social
Responsibility

3

General Descriptionof the Company
and its Share Capital

4

Entity Responsible
for the Registration
Document

EADS Business, Legal and Corporate Responsibility

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General Table of Contents / Registration Document — Parts 1 and 2

NONACTIVE SUMMARY. PLEASE, GO TO BOOK 2

Financial Statements
and Corporate GovernanceRegistration Document – Part 1
Risk Factors

p. 7

1.

Financial Market Risks

p. 8

2.

Business-Related Risks

p. 10

3.

Legal Risks

p. 13

4.

Industrial and Environmental Risks

p. 14

Chapter 1 - Net Assets
Financial Position Results
1.1

1.1.1

p. 15

Management’s Discussion
and Analysis of Financial Condition
and Results of Operations
Certain Information

p. 16

Exchange Rate Information
Ratings

1.1.2

Overview

p. 17

1.1.3

Critical Accounting Considerations,
Policies and Estimates

p. 18

1.1.4.1 Order Backlog
1.1.4.2 Use of EBIT*
1.1.4.3 EBIT* Performance by Division

Consolidated Revenues
Consolidated Cost of Sales
Consolidated Selling and Administrative Expenses
Consolidated Research and Development Expenses
Consolidated Other Income and Other Expense
Consolidated Amortisation of Goodwill
Consolidated Share of Profit from Associates and Other Income(Expense) from Investments
Consolidated Interest Result
Consolidated Other Financial Result
Consolidated Income Taxes
Consolidated Minority Interests
Consolidated Net Income (Profit for the Period Attributable
to Equity Holders of the Parent)
Earnings per Share (EPS)

1.1.6

1.1.7

Statement of Changes in Consolidated
Total Equity (including Minority Interests)

p. 22
p. 22
p. 24
p. 25

p. 28
29
31
32
32
32
32
32
33
33
33
34
34
34
p. 35
35
36

Liquidity and Capital Resources

p. 36

1.1.7.1 Cash Flow
1.1.7.2 Consolidated Cash and Cash Equivalents
1.1.7.3 Consolidated Financial Liabilities
1.1.7.4 Sales Financing

p. 37
p. 39
p. 40
p. 40

1.1.8

1.1.3.1 Scope of and Changes in Consolidation Perimeterp. 18
1.1.3.2 Fair Value Adjustments
p. 19
1.1.3.3 Impairment of Assets
p. 19
1.1.3.4 Research and Development Expenses
p. 20
1.1.3.5 Accounting for Hedged Foreign Exchange Transactions in
the Financial Statements
p. 20
1.1.3.6 Accounting for Foreign Currency Denominated Operations in
the Financial Statements
p. 21
1.1.3.7 Accounting for Sales Financing Transactions in the Financial
Statements
p. 21

Measurement of Management’s Performance

EADS Results of Operations

IAS 39 Related Impact on AOCI
Currency Translation Adjustment Impact on AOCI

p. 16
17
17

1.1.4

1.1.5

Hedging Activities

1.1.8.1 Foreign Exchange Rates
1.1.8.2 Interest Rates

1.2

Financial Statements

1.2.1

Consolidated Financial Statements (IFRS)Appendix: Information on principal
investments - Consolidation Scope

p. 44
p. 44
p. 46

p. 47
p. 48

p. 1051.2.2

Company Financial Statements

p. 112

1.3

Statutory Auditors’ Fees

p. 124

1.4

Information Regarding
the Statutory Auditors

p. 1252 I EADS Business, Legal and Corporate Responsibility

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General Table of Contents / Registration Document — Parts 1 and 2

NONACTIVE SUMMARY. PLEASE, GO TO BOOK 2

Chapter 2 Corporate Governancep. 127

2.1

Management and Control

2.1.1

Board of Directors, Chairmen and Chief Executive
Officers
p. 1282.1.2

Audit Committee

p. 1382.1.3

Remuneration and Nomination Committee

p. 1392.1.4

Executive Committee

p. 1392.1.5

Internal Control and Risk Management Systems

p. 1412.1.5.1 Overview
2.1.5.2 Risk Management System
2.1.5.3 Internal Control Framework
2.1.5.4 Business Processes Covered
by Internal Control Framework
2.1.5.5 Outlook for Evolution of EADS’ IC and RM Systems

p. 141
p. 142
p. 1432.2
2.2.1

Interests of Directors
and Principal Executive Officers

p. 128

Options Granted to the Two
Chief Executive Officers

p. 1502.2.3

Related Party Transactions

p. 1502.2.4

Loans and Guarantees Granted to Directors

p. 151

2.3

Employee Profit Sharing
and Incentive Plans

p. 152

2.3.2

Employee Share Offeringp. 152

2.3.3

Options Granted to Employees

p. 155

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2006 Financial Outlook

p. 1603.2

2006 Calendar of Financial
Communication

p. 161

p. 152

Employee Profit Sharing
and Incentive Agreements

EADS Business, Legal and Corporate Responsibility

3.1

p. 149p. 1492.3.1

159

p. 144
p. 148Compensation Granted to Directors
and Principal Executive Officers

2.2.2

Chapter 3 - Outlook

3

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General Table of Contents / Registration Document — Parts 1 and 2

EADS Business, Legaland Corporate Responsibility
Registration Document – Part 2
Chapter 1 - Information
on EADS Activities
1.1

Presentation of the EADS Group

1.1.1

Overview

2.2

Sustainable Growth

p. 7

2.2.1

Product Quality and Customer Satisfaction

p. 69

p. 8

2.2.2

Sustaining and Protecting Innovation

p. 71

2.2.3

Supplier Management: Fosteringa Mutually Beneficial Relationshipwith EADS’ Suppliers

p. 74

2005 Highlights
Strategy
Organisation of EADS Businesses
Summary Financial and Operating Data
Relationship Between EADS N.V. and the Group

p. 8
8
8
10
12
13

1.1.2

Airbus

p. 14

1.1.3

Military Transport Aircraft

p. 23

1.1.4

Eurocopter

p. 28

1.1.5

Defence & Security Systems

p. 32

1.1.6

Space

p. 42

1.1.7

Other Businesses

p. 50

1.1.8

Investments

p. 52

1.1.9

Insurance

p. 53

1.1.10 Legal and Arbitration Proceedings

p. 54

1.1.11 Incorporation by Reference

p. 55

1.2

Recent Developments

Chapter 2 - Corporate Social
Responsibility

p. 56

p. 59

2.1

Business Ethics

2.1.1

Proper Business Practices

2.1.2

Compliance with Law Regarding
all EADS’ Activities

p. 65

Corporate Governance Standards

p. 67

2.1.3

2.1.3.1 Policy
2.1.3.2 Organisation

p. 63

2.3

Environmental Care

2.3.1

Policy

p. 78

2.3.2

Organisation

p. 78

2.3.3

Performance and Best Practices

p. 79

2.4

Human Resources: Employer –Employee Relationship

2.4.1

p. 78

p. 82

Workforce Information
and Organisation of Work

p. 82

2.4.2

Human Resources Organisation

p. 83

2.4.3

Human Resources Policies and performances

p. 84

2.4.3.1 Health and Safety: Providing a Safe
Workplace for EADS Employees and Subcontractors
2.4.3.2 Caring for EADS Employees
and EADS Know How Policy
2.4.3.3 Diversity: Commitment to Ensure
Equal Opportunity for all EADS Employees
2.4.3.4 Career Development: Efficient Managementof Skills and Know-How
2.4.3.5 Employee Relations: A Proactive Dialogue

2.5

Corporate Citizenship2.5.1

Maintaining an Open Dialogue
with EADS’ Stakeholders

p. 63

p. 68
p. 68

p. 69

2.5.1.1 Policy
2.5.1.2 Organisation
2.5.1.3 Performance and Best Practices

2.5.2

Encompassing Community Interests
in EADS’ Global Strategy

2.5.2.1 Policy
2.5.2.2 Organisation
2.5.2.3 Performance and Best Practices

p. 84
p. 84
p. 85
p. 87
p. 90

p. 92
p. 92
p. 92
p. 92
p. 92
p. 93
p. 93
p. 93
p. 93

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General Table of Contents / Registration Document — Parts 1 and 2

Chapter 3 - General Descriptionof the Company and its Share
Capitalp. 95
3.1

General Description of the Company

3.1.1

Commercial and Corporate Names,
Seat and Registered Office

p. 96

3.1.2

Legal Form

p. 96

3.1.3

Governing Law — Dutch Regulations
3.1.3.1 Ongoing Disclosure Obligations
3.1.3.2 Disclosure of Specific Information

p. 96
97
99

Date of Incorporation and Durationof the Company

p. 101

3.1.5

Objects of the Company

p. 101

3.1.6

Commercial and Companies Registryp. 101

3.1.7

Inspection of Corporate Documents

p. 101

3.1.8

Financial Year

p. 101

3.1.9

Allocation and Distribution of Income

p. 102

3.1.9.1 Dividends
3.1.9.2 Liquidation

p. 102
p. 102

3.1.10 General Meetingsp. 102

3.1.10.1 Calling of Meetings
3.1.10.2 Right to Attend Meetings
3.1.10.3 Majority and Quorum
3.1.10.4 Conditions of Exercise of Right to Vote

3.1.4

p. 96

3.3.2

Relationships with Principal Shareholders

p. 1133.3.3

Form of Sharesp. 1193.3.4

Changes in the Shareholdingof the Company Since its Incorporation

p. 1193.3.5

Persons Exercising Control over the Company

p. 121

3.3.6

Simplified Group Structure Chart

p. 121

3.3.7

Purchase by the Company of its Own Sharesp. 1233.3.7.1 Dutch Law and Information
on Share Buy-Back Programmes
3.3.7.2 French Regulations
3.3.7.3 German Regulations
3.3.7.4 Spanish Regulations
3.3.7.5 Description of the Share Buy-Back Programme
to be Authorised by the Annual General Shareholders’Meeting to be held on 4th May 2006

p. 123
p. 123
p. 124
p. 124

p. 124

3.4

Dividends

3.4.1

Dividends and Cash Distributions Paid
Since the Incorporation of the Company

p. 1283.4.2

Dividend Policy of EADS

p. 1283.4.3

Unclaimed Dividends

p. 1283.4.4

Taxationp. 129p. 102
p. 102
p. 103
p. 104

3.5

Annual Securities Disclosure Report

3.1.11 Disclosure of Holdings

p. 1043.1.12 Mandatory Tender Offers

p. 106

Chapter 4 - Entity Responsible
for the Registration Document 133

3.2
3.2.1

General Descriptionof the Share Capital

4.1

p. 1083.2.2

Issued Share Capital

p. 1083.2.3

Authorised Share Capital

p. 1093.2.4

Securities Granting Accessto the Company’s Capital

p. 109Changes in the Issued Share Capital
Since Incorporation of the Company

p. 110

3.2.5

3.3

Shareholdings and Voting Rights

3.3.1

Shareholding Structure

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p. 131

Entity Responsible
for the Registration Document

p. 134

Statement of the Entity Responsible
for the Registration Document

p. 134

4.3

Information Policyp. 135

4.4

Undertakings of the Company
Regarding Information

p. 135

p. 108

Modification of Share Capitalor Rights Attaching to the Sharesp. 1284.2

p. 111
p. 1115

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2

1

3
4

Information on
EADS Activities

1.1 Presentation of the EADS Group

p. 8

1.1.1

Overview

p. 8

1.1.2

Airbus

p. 14

1.1.3

Military Transport Aircraft

p. 23

1.1.4

Eurocopter

p. 28

1.1.5

Defence & Security Systems

p. 32

1.1.6

Space

p. 42

1.1.7

Other Businesses

p. 50

1.1.8

Investments

p. 52

1.1.9

Insurance

p. 53

1.1.10 Legal and Arbitration Proceedings

p. 54

1.1.11 Incorporation by Reference

p. 55

EADS Business, Legal And
and Corporate
CorporateResponsibility
Responsibility

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1.2 Recent Developments

p. 56

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Information on EADS Activities

2

1.1 Presentation of the EADS Group3
4

1.1 Presentation of the EADS Group
1.1.1 Overview
Due to the nature of the markets in which EADS
operates and the confidential nature of its businesses, any
statements with respect to EADS’ competitive position set
out in paragraphs 1.1 through 1.1.8 below have been basedon EADS’ internal information sources, unless anothersource has been specified below.
With consolidated revenues of €34.2 billion in 2005, EADSis Europe’s premier aerospace and defence company andthe second largest aerospace and defence company in theworld. In terms of market share, EADS is among the top
two manufacturers of commercial aircraft, civil helicopters,commercial space launch vehicles and missiles systems, anda leading supplier of military aircraft, satellites and defence
electronics. In 2005, it generated approximately 77.5% of its
total revenues in the civil sector and 22.5% in the military
sector.

2005 Highlights
Over the course of the year, EADS continued to position
itself for sustained growth and profitability, in line with
its strategy of being a leading company in the major global
aerospace and defence markets. The record order book of€253 billion at the end of 2005 (consisting of €201 billion incommercial business and €52 billion in defence) constitutes aconsiderable asset for EADS’ future growth.
EADS’ business environment in 2005 was characterisedby a record year for the aviation industry. Airlines ordered
an unprecedented number of commercial aircraft, led bystrong demand from low cost carriers and the rapid growthof commercial aviation in Asia. Higher oil prices contributed
to an increased demand for fuel-efficient aircraft. In 2005,
the two leading aircraft manufacturers combined secured
2,140 new orders for aircraft of 100 seats or more last year,
compared with the previous record of 1,528 in 1989 and
1,131 at the peak of the last cycle in 2000. As recently as
2003, orders touched a cyclical low of 524.

For the third year in a row, Airbus delivered more aircraft
and took in more orders than Boeing. Airbus received
1,111 gross orders in 2005, representing over 52% of gross
new aircraft orders for the year. Airbus delivered 378 aircraftin 2005 (320 aircraft in 2004). In 2005, the A380 made its
first flight on 27th April. At year-end, total firm orders for
the A380 stood at 159 from 16 customers. In October 2005,
to complement the long-range family of Airbus, the EADS
Board of Directors approved the industrial launch of the A350
aircraft. At the end of 2005, Airbus had obtained 172 orders
and commitments from 13 customers for the A350.
Expanding EADS’ capabilities and business revenues inthe defence sector is a core strategic priority for the Group.
Although sales in the defence sector remained subject toconstrained procurement budgets in EADS’ home markets,
defence-related revenues remain stable at €7.7 billion and thedefence-related order book grew from €49 billion at year-end
2004 to €52 billion at year-end 2005. Contributing to thisachievement in 2005 were Spain’s order for the Taurus
air-to-ground missile, an order for Eurofighter selfprotection electronics, India’s order for Exocet missiles
and France’s appointment of EADS to develop a newarmy information and communication system. As part of
the Medium Extended Air Defence System (“MEADS”)
International consortium, EADS was awarded a key role indesigning and developing the tri-national MEADS system.
The Space Division confirmed its return to profitability in 2005,
reflecting the positive impact of two years of major industrial
reengineering. EADS Space finished the year with a positive
EBIT* of €58 million (as compared to €9 million in 2004).

Strategy
In order to maximise value for its shareholders and tobalance its portfolio, the management of EADS (the“Management”) intends to position EADS as a leading
company in major global aerospace and defence markets.

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Information on EADS Activities

2

1.1 Presentation of the EADS Group

3
4
EADS has defined four strategic goals to sustain continuous
growth and profitability improvements.

Maintain the long-term parity in commercial aircraft: EADS
will strive to lead the commercial aircraft market in terms of
product innovation and customer satisfaction, and to further
develop its international partnerships.
Develop strong growth drivers in EADS’ non-Airbus
portfolio: Faced with governmental procurement budget
constraints and the scarcity of new programs in Europe,
EADS intends to pursue its growth strategy by taking a
global approach, with strategic acquisitions of businesses
in key markets and with enhanced efforts to offer new
solutions capitalizing on EADS’ ability to leverage its broadbase of capabilities and products.
Become a truly global industrial group: To insure accessto the growth potential of markets where the traditionalcommercial approach has reached its limits, EADS isdesigning a long-term industrial strategy and implementing
an industrial footprint in key markets around the world.
Achieve best-in-class profitability: EADS seeks to reach
its long-term strategic goals, while achieving best in classprofitability, in every segment in which it operates. The
Group has already increased EBIT* margin from 5.5% in 2001
to 8.3% in 2005 (its highest ever EBIT* margin level), andintends to further improve its EBIT* margin in the future.
To achieve the strategic goals outlined above, EADS’management is relying on three principal growth andprofitability drivers – internationalisation, innovation andimprovement.

Internationalisation
EADS has so far successfully built a European industrial
group, with global export sales in excess of 60% outside
Europe. While EADS has established a decisive andconclusive presence in non-European markets, it willcontinue its efforts to solidify its position as a global
industrial group. These efforts are orchestrated at the Grouplevel to allow for anticipation, cohesiveness and synergies
between the Group’s BUs.
In line with this approach, EADS is seeking to establish
itself as a strong local player in key markets such as the U.S.,
China, Russia, South Korea and India. In these markets,
EADS is seeking to construct an industrial footprint aimed

EADS Business, Legal and Corporate Responsibility

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at establishing long-term market access, while benefitingfrom high market growth potential, technology potential andstructural cost advantages, natural hedging and risk sharing
opportunities. Overall, EADS will continue to evolve withthe global industrial and commercial landscape focused not
only on the above-mentioned key markets, but on othercountries with significant potential such as Brazil, Turkey,
Poland and Australia.
In the U.S., the goal is to firmly establish a presence as avalued corporate citizen in the world’s largest Defence andHomeland Security market. EADS is in the midst of pursuing
a four-pillar strategic approach: creating a U.S. industrial
presence, developing transatlantic co-operations, acquiring
small/mid-sized defence companies and cooperating with
U.S. prime contractors. In 2005, several key agreements
were reached in line with the Group’s strategy: The MilitaryTransport Aircraft Division (the “MTA Division” or“MTA”) with Raytheon for the Future Cargo Aircraft
campaign, Northrop Grumman for KC-30 Tanker (including
the decision to build the final assembly line in Alabama) andEurocopter with Sikorsky for the Light Utility Helicopter
program.
China has been the pioneer country for the implementationof EADS’ long-term industrial approach. Industrial
cooperation has been progressively expanded over the past
several years, highlighted in 2005 by the signing of key
strategic agreements with Chinese partners. Specifically,
Eurocopter signed an agreement with AVIC II to jointly
develop and produce a new multipurpose helicopter. In
addition, Airbus is proposing risk-sharing partnerships anda potential final assembly line for Airbus single-aisle aircraftin China is under evaluation. The Group is committed tolong-term strategic partnerships in China, in order to sustain
EADS’ commercial aircraft leadership.
In South Korea, following a long competitive process,Eurocopter was selected to develop, in collaboration with
KAI, a new military transport helicopter (8-ton). This projectis expected to serve as a strong foundation for further
expansion of EADS’ position in South Korea.
India has already proven to be a growth market forcommercial opportunities (e.g., 229 Airbus orders in 2005).
The current challenge is to use these successes as a foundationfor expansion of the defence business, which represents thelargest share of potential growth on the Indian market.

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Information on EADS Activities

2

1.1 Presentation of the EADS Group

3
4
As Russia’s economy continues to develop in a promising
direction, the Russian aerospace and defence industry
is gaining new strength through restructuring andconsolidation. Through its acquisition in 2005 of a 10% stakein Irkut, EADS is investing in a key player in the futureindustrial landscape in Russia.

In addition to systems innovation, innovative service
solutions are also an important area of focus for the Group in
its efforts to broaden programme leadership. EADS intends
to further develop an outsourced service offering based on
the successes of Paradigm and the prospects of the Future
Strategic Tanker Aircraft (“FSTA”).

Innovation

Improvement

A continued focus on technological innovation is critical to
EADS’ strategy of reinforcing its role as a market leader inthe future, offering a broad spectrum of ground-breaking
solutions to its customers.

Transforming the Group’s record backlog of more than€253 billion into benchmark profitability will depend on
the Group’s ability to improve operational performance,measured in terms of time, cost and quality, both within
EADS and at its key suppliers.

Compared to its peers, EADS has consistently devoted
more resources to research and development (“R&D”)(both in terms of absolute numbers and as a percentage ofsales). In 2005, EADS self-financed €2.1 billion of R&D.
Management believes that the Group’s substantial R&D
investment is paying off, both in terms of improvements in
the Group’s competitive position and the resulting return on
investment.
EADS has established challenging targets for its technology
innovation approach. The Group’s systematic use of thelatest digital design and engineering tools underlies its
efforts to offer the capability of completing major platform
developments in relatively short time frames. EADS intends
to accelerate its review of core technologies and its processes
for creating or compensating technology gaps vis-à-vis its
competitors.
The Group also intends to focus on the screening of
disruptive technologies and maintaining openness to
outside ideas. EADS will therefore double the technologicalprograms developed in cooperation with academic andindustrial partners on an international basis.
In the defence business, the transformation processesof U.S. and European defence forces and public safety
agencies as well as the need for a more efficient use ofdefence budgets have changed the customers’ demands.
Recognizing these changes, EADS intends to offer new
solutions as lead system/capability integrator for defence andhomeland security programs as C4ISR (command, control,
communication, computers, surveillance and intelligence),
Border security, Extended Air Defence, Unmanned Aerial
Vehicles and Military Space.

Management has prioritised the successful implementationand execution of improvement plans and projects throughout
the Group. Improvements in operational performance will
require real-time visibility of the status of all operationalparts and data flows with EADS and its key suppliers. These
efforts will be supported by the integrated planning andexecution of closed-loop collaborative processes and tools
designed to support effective decision making and to enable
the launch of early recovery actions.

Organisation of EADS Businesses
EADS principal businesses fall under five Divisions:(1) Airbus, (2) Military Transport Aircraft, (3) Eurocopter,(4) Defence and Security Systems and (5) Space. The chart
set out in “— 3.3.6 Simplified Group Structure Chart”
illustrates the allocation of activities among these five
Divisions.
In June 2005, the former Aeronautics Division, which
included the Eurocopter, ATR, EADS EFW, EADS Socata
and EADS Sogerma Services BUs, was dissolved and a new
Eurocopter Division was created. Following this change to
EADS’ organisational structure, EADS EFW and EADS
Sogerma Services are under the direct responsibility of
Gustav Humbert and ATR and EADS Socata are under
the direct responsibility of Hans Peter Ring. In theadapted segment reporting, EADS allocates the four legacy
Aeronautics BUs to “Other Businesses”.

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Information on EADS Activities

2

1.1 Presentation of the EADS Group3
4
AirbusDefence and Security Systems

Airbus is one of the world’s two leading suppliers ofcommercial aircraft of more than 100 seats. Since it was
founded in 1970 up to the end of 2005, Airbus has received
6,307 orders for aircraft from 225 customers worldwide.
Its market share of annual deliveries worldwide has grownfrom 15% in 1990 to 57% in 2005, surpassing its rival Boeing
for the third time. At 31st December 2005, its backlog oforders (2,177 aircraft) stood at 80% of total EADS worldwide
backlog. Gross order intake was 1,111 aircraft and after
accounting for cancellations, net order intake for 2005 was
1,055 aircraft. In 2005, the Airbus Division of EADS earned
revenues of €22.2 billion, representing 65% of EADS total
revenues. See “— 1.1.2 Airbus”.

The Defence and Security Systems Division (the “DS
Division”) is active in the field of integrated defence
and security solutions including missile systems, combat
aircraft, defence electronics, military communications and“homeland security”. Its customers are military forces andlaw enforcement agencies worldwide. In 2005, EADS’
subsidiary MBDA maintained as the worldwide leader
missile system manufacturer. Its Military Air Systems unit
is a leading partner in the Eurofighter consortium and is also
active in the UAV field. EADS is the third largest supplierof defence electronics in Europe and plays a significant rolein the secure and encrypted military communications market.
The DS Division is also increasingly active in the ‘homeland
security’ market. On a consolidated basis, the DS Division
earned revenues of €5.6 billion for 2005, representing 16%
of EADS’ total revenues. See “— 1.1.5 Defence and Security
Systems”.

Military Transport Aircraft
The MTA Division manufactures and sells light andmedium military transport aircraft and is responsible forthe development of the European heavy military transport
A400M project. In addition, the MTA Division produces
and sells mission aircraft, which are derived from existing
platforms and dedicated to specialised military tasks such as
maritime surveillance, antisubmarine warfare and in-flightrefuelling capabilities. The MTA Division also designs andmanufactures aerostructure elements. The MTA Division
earned consolidated revenues of €763 million accountingfor 2% of EADS’ total revenues for 2005. The €19.7 billion
contract to manufacture and deliver the A400M was signed
in 2003, contributing to significant future revenue growthfor EADS. See “— 1.1.3 Military Transport Aircraft”.

Eurocopter
Eurocopter is one of the world’s leading producers ofhelicopters and the leader in the European civil and militaryhelicopter market. Management expects Eurocopter sales
in the military market to increase substantially due to thecommencement of delivery of the Tiger attack helicopter, thestrong backlog of the NH90 military transport helicopter andthe increasing demand in military and para-military export
markets. In 2005, Eurocopter captured 52% of the worldwide
market for civil helicopters and 18% of the worldwide
market for military helicopters. The Eurocopter Division
earned consolidated revenues of €3.2 billion representing 9%
of EADS’ total revenues for 2005. See “— 1.1.4 Eurocopter”.

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Space
EADS is the third largest space systems manufacturing
company in the world after Boeing and Lockheed Martin
and the leading European supplier of satellites, orbital
infrastructures and launchers. The Space Division designs,
develops and manufactures satellites, orbital infrastructuresand launchers largely through its subsidiaries EADS Astrium
and EADS Space Transportation (“EADS ST”), and provides
space services through its EADS Space Services subsidiary.
The Space Division also provides launch services, throughits shareholdings in Arianespace, Starsem and Eurockot, as
well as services related to telecommunications and earth
observation satellites, through dedicated companies, such as
Paradigm. For 2005, the consolidated revenues of the EADSSpace Division amounted to €2.7 billion, or 8% of EADS’
total revenues. See “— 1.1.6 Space”.

Investment
Among its significant investments, EADS holds a 46.3%
stake in Dassault Aviation, a major participant in the world
market for military jet aircraft and business jets.
See “— 1.1.8 Investments”.

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4
Summary Financial and Operating Data
The following tables provide summary financial and operating data for EADS for the years ended 31st December 2005,
31st December 2004 and 31st December 2003.
Consolidated Revenues for the years ended 31st December 2005, 2004 and 2003 by Division
Year ended
31st December 2005
Amountin € bn
In percentage*

Year ended
31st December 2004
Amountin € bn
In percentage*

Year ended
31st December 2003
Amountin € bn
In percentage*

Airbus

22.2

64.3%

20.2

62.7%

19.0

63.1%

Military Transport Aircraft

0.8

2.2%

1.3

4.0%

0.9

3.1%

Eurocopter***

3.2

9.3%

2.8

8.6%

2.6

8.7%

Defence and Security Systems

5.6

16.4%

5.4

16.7%

5.2

17.1%

Space

2.7

7.8%

2.6

8.0%

2.4

8.0%

Total Divisional Revenues

34.5

100.0%

32.3

100.0%

30.2

100.0%

Other Businesses***

1.1

1.1

1.2

Headquarters/Eliminations**

(1.4)

(1.6)

(1.3)

Total Consolidated Revenues

34.2

31.8

30.1

(*) Percentage of total divisional revenues before headquarters / eliminations.
(**) Includes inter-company eliminations and headquarters sales.
(***) In 2005, the former Aeronautics Division was replaced by the Eurocopter Division. The consolidated revenues of the other BUs comprising the former Aeronautics Division are now reported in
the line “Other Businesses”.

Consolidated Revenues by Geographical Area for the years ended 31st December 2005, 2004 and 2003
Year ended
31st December 2005
Amountin € bn
In percentage*

Year ended
31st December 2004
Amountin € bn
In percentage*

Year ended
31st December 2003
Amountin € bn
In percentage*

Europe

13.6

39.7%

14.6

45.7%

14.0

46.4%

North America

9.0

26.4%

8.7

27.4%

8.0

26.7%

Asia/Pacific

7.7

22.6%

4.9

15.6%

4.0

13.4%

Rest of the World**

3.9

11.3%

3.6

11.3%

4.1

13.5%

Total

34.2

100.0%

31.8

100.0%

30.1

100.0%(*) Percentage of total revenues after eliminations.
(**) Including the Middle East.

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Consolidated Orders Booked for the years ended 31st December 2005, 2004 and 2003
Year ended
31st December 2005
Amountin € bn In percentage***Year ended
31st December 2004
Amountin € bn In percentage***Year ended
31st December 2003
Amountin € bn In percentage***

Orders booked:*
Airbus**

78.3

84.5%

25.8

58.2%

39.9

53.1%

Military Transport Aircraft

1.8

2.0%

1.2

2.6%

20.3

27.0%

Eurocopter****

3.5

3.8%

3.2

7.3%

2.6

3.4%

Defence and Security Systems

6.7

7.2%

8.5

19.1%

6.3

8.4%

Space

2.3

2.5%

5.7

12.8%

6.1

8.1%

Total Divisional Orders

92.6

100.0%

44.4

100.0%

75.2

100.0%

Other Businesses****

1.9

1.1

1.2

(2)

(1.4)

(15.2)

92.6

44.1

61.2

Headquarters / Eliminations**
Total(*)Without options.
(**) Based on catalogue prices.
(***) Before headquarters/eliminations.
(****) In 2005, the former Aeronautics Division was replaced by the Eurocopter Division. The orders booked by the other BUs comprising the former Aeronautics Division are now reported in the line
“Other Businesses”.

Consolidated Backlog for the years ended 31st December 2005, 2004 and 2003 ****
Year ended
31st December 2005
Amountin € bn In percentage***Year ended
31st December 2004
Amountin € bn In percentage***Year ended
31st December 2003
Amountin € bn In percentage***

Backlog:*
Airbus**

202.0

77.0%

136.0

70.3%

141.8

74%

Military Transport Aircraft

21.0

8.0%

19.9

10.3%

20.0

10%

Eurocopter*****

10.0

3.8%

9.1

4.7%

8.7

5%

Defence and Security Systems***

18.54

7.0%

17.3

8.9%

14.3

7%

Space

10.9

4.2%

11.3

5.8%

7.9

4%

262.34100.0%

193.6

100.0%

192.7

100%

Total Divisional Backlog***
Other Businesses*****

2.1

1

1.1

Headquarters / Eliminations(11.2)(10.4)(14.5)

Total

253.2

184.3

179.3

(*)Without options.
(**) Based on catalogue prices or commercial aircraft activities.
(***) Before headquarters / eliminations.
(****)For a discussion on the calculation of backlog, see “Part 1/1.1.4.1 Order Backlog”.
(*****) In 2005, the former Aeronautics Division was replaced by the Eurocopter Division. The backlog of the other BUs comprising the former Aeronautics Division is now reported in the line “Other
Businesses”.

Relationship Between EADS N.V.
and the GroupEADS N.V. itself does not engage in the core aerospace,defence or space business of its Group but coordinates
related businesses, sets and controls objectives and approves

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major decisions for its Group. As the parent company,
EADS N.V. conducts activities which are essential to theGroup activities and which are an integral part of the overallmanagement of the Group. In particular, finance activities
pursued by EADS N.V. are in support of the businessactivities and strategy of the Group. In connection therewith,

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4
EADS N.V. provides or procures the provision of services tothe subsidiaries of the Group. General management service
agreements have been put in place with the subsidiaries andservices are invoiced on a cost plus basis.
For management purposes, EADS N.V. acts through its
Board of Directors, Executive Committee, and Chief
Executive Officers in accordance with its corporate rules

and procedures detailed in “Part 1 / Chapter 2 — Corporate
Governance”.
Within the framework defined by EADS, each Division,business unit (“BU”), and subsidiary is vested with full
entrepreneurial responsibility.
To the best knowledge of Management, there are no pledges
over any of the assets of EADS N.V.

1.1.2 Airbus
Introduction and Overview

Strategy

Airbus is one of the world’s two leading suppliers ofcommercial aircraft of more than 100 seats. Its market shareof annual deliveries worldwide has grown from 15% in 1990
to 57% in 2005. At 31st December 2005, its backlog oforders (2,177 aircraft) stood at 80% of total EADS worldwide
backlog. After accounting for cancellations, net order intake
for 2005 was 1,055 aircraft. In 2005, the Airbus Division of
EADS earned revenues of €22.2 billion, representing 65% of
EADS total revenues.

The paramount strategic goal of Airbus is to deliver first-rate
economic returns in a sustainable manner by continuing todevelop a superior family of products and commanding halfof the world commercial aircraft market over the long-term.
To achieve this end, Airbus is actively:

Based on deliveries in 2005, Airbus was the largest supplierof commercial aircraft in the world, surpassing its rival
Boeing for the third year. Since it was founded in 1970 up to
the end of 31st December 2005, Airbus has received orders
for 6,307 aircraft from approximately 225 customers aroundthe world.
Several factors have contributed to the success of Airbus:
its portfolio of modern aircraft, its consistent technologicalinnovation, its stable pool of highly skilled employees
and its concept of aircraft ‘families’ that offer customers
cost savings in crew training, maintenance and supply for
their fleets of different sized Airbus aircraft. In addition,
Management strongly believes that the international
composition of Airbus represents a competitive advantage in
the global marketplace.
Airbus S.A.S. is jointly owned by EADS (80%) and BAE
Systems (20%).

Completing the most comprehensive lineof products targeted to customer needs
This entails (i) a major effort to deliver the first A380s tocustomers before the end of 2006, (ii) the gradual extensionof relevant freighter applications across the range of Airbus
aircraft, (iii) the continuous maintenance of existing models’competitive edge in their respective markets, (iv) and theentry into the military business through new aircraft suchas the A400M or the development of military derivatives
products such as the Multi Role Tanker Aircraft (“MRTT”)
based on the A330 airframe.

Focusing on key geographic markets
Airbus is seeking to penetrate certain key markets suchas China and Russia, and to consolidate its position in the
difficult U.S. airline market, where most of the carriers arefacing financial difficulties.

Expanding its offering of services to customers
Expansion of its offering of customer services will enableAirbus to remain at the forefront of its industry by(i) designing answers to customers’ evolving needs, and

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1.1 Presentation of the EADS Group34(ii) ensuring optimal Airbus placement along the industry’svalue chain.

Perfecting its industrial operations
Management is focused on capturing the benefits ofintegration, to enhance its response to changes in volume andmix, and to carry out A380 related investments with a strong
focus on flexibility and efficiency.

MarketCyclicality and Market Drivers
The main factors affecting the aircraft market include
passenger demand for air travel, national and international
regulation (and deregulation), and the rate of replacement
and obsolescence of existing fleets. The performance,competitive posture and strategy of airlines, cargo
operators and leasing companies, wars, political unrest andextraordinary events may act as a catalyst, precipitate changes
in demand and lead to short term market imbalances.
The no-frills/low-cost carriers continue to emerge as asignificant sector within domestic markets. They havedeveloped in the U.S. and Europe by following a businessmodel that leverages the benefits of minimising costs while
stimulating demand by offering low fares to and from shortand medium range, often under-served, destinations. In
2005, new low cost carriers have emerged in India and Latin
America. The strong growth of Asian low cost carriers has
been also confirmed. This business model, which proved
to be particularly successful in the U.S. following market
deregulation, is now being adopted by a growing number ofairlines in Europe and Asia, resulting in increased demandand increasing market share for low-cost carriers. Airbus’
family of modern single aisle aircraft based on the A320
is well positioned to provide the operating cost base andflexibility demanded by this segment of the market. Airbus
already has a strong presence in the U.S. no-frills/low-costmarket with JetBlue, America West and Frontier, and has
also been successful in penetrating airlines in the growing
low cost sector in Latin America with Volaris and TACA
and in Asia, with sales and commitments from Cebu Pacific,
Air Deccan, Indigo and Air Asia, for example.

Overall Growth. The market for passenger jetliners depends
primarily on the demand for air travel, which is itself

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primarily driven by economic or gross domestic product(“GDP”) growth, fare levels and demographic growth.
Measured in revenue passenger kilometres, air travelincreased every year from 1967 to 2000, except for 1991
due to the Gulf War, resulting in an average annual growthrate of 7.9% for the period. In 2004, Airbus projected that
air travel would grow at 5.3% per annum during the period
2004-2023.

Cyclicality. Although those in the industry feel that longterm growth in air travel is secure, the market for aircraft
has proven to be cyclical, due to the volatility of airline
profitability and cycles of the world economy. When cyclical
downturns have occurred in the past, aircraft manufacturers
have typically experienced decreases in aircraft orders andlower deliveries followed by a period of sustained order anddelivery activity. 2005 has been a record year in terms oforders for civil aircraft, whereas the last record year was 2000.
Regulation / Deregulation. National and international
regulation (and deregulation) of international air services
and major domestic air travel markets affect demand forpassenger jetliners. In 1978, the United States undertook the
deregulation of its domestic air transportation system. Other
regions have followed this model, notably Europe since 1985.
The Federal Aviation Authority (“FAA”) Stage 3 anti-noise
regulations requiring operators to replace many older aircraftby the end of 1999 also had an impact on demand, resulting
in a significant increase in North American orders in theyears leading up to and following implementation of theregulations.

Airline Network Development: Hubs. As a consequenceof deregulation policies, major airlines are constantly
adapting their fleet, network and commercial strategies.
This adaptation is possible because of the availability of new
aircraft capable of meeting customer requirements in termsof cost and performance. In response to the price demandsof passengers and competition of new no frills / low cost
carriers, major airlines have organised their operations
around strategically located “hub” airports enabling them tolink more cities at lower fares. This affects demand as hubs
permit fleet standardisation around both smaller aircraft
types for the short, thin and high frequency routes feeding
the hubs (between hubs and spokes) and larger aircraft for
longer and higher density routes between hubs (hub-tohub). As a result, worldwide deregulation has contributed

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to the diversification of airline strategies, which in itself
has resulted in airlines requiring a wider range of aircraft to
implement such strategies.

Fragmentation. The term “fragmentation” describes markets
in which point-to-point services replace or take a share of
traditional hub and spoke/connection traffic. Fragmentationof this type has primarily occurred on short and medium
range domestic U.S. routes, in response to competition andas a means for airlines to differentiate their services from one
another.
The trend towards fragmentation on long and very long haulroutes, driven by the development of new routes between
secondary cities, will be facilitated by the availabilityof more modern, efficient aircraft. In the trans-atlantic
market, the development of new non-stop services between
secondary cities is expected to drive demand for intermediate
wide body aircraft such as the A330 or the A350. Airbus
believes that it is, with its complete family of products fromthe 107-seat A318 to the 555-seat A380, well-positioned tomeet future market requirements.

Alliances. The development of world airline alliancesis reinforcing these strategies. According to data from
Airclaims, a U.K.-based aviation industry consultancy, halfof the world’s jetliner fleet of over 100 seats was operated
by 35 airlines as of December 2005. In the 1990s, themajor airlines began to enter into alliances that give eachalliance member access to the other alliance members’ hubs
and routings, allowing airlines to concentrate their hub
investments while extending their product offering.
Governmental Funding. A 1992 bilateral agreement between
the E.U. and the U.S. provided for ceilings on reimbursable
launch investments (typically used by European governments)of 33% of the total development costs of new large civil aircraft
programmes. It also set a ceiling at 3% of industry revenues
for indirect support in relation to the development or
production of large civil aircraft (typically the Department of
Defence and National Aeronautics and Space Administration(“NASA”) mechanisms used in the U.S.). This bilateralagreement had provided a level playing field for government
support, reflecting the needs of both Europe and the U.S.
The unilateral withdrawal from the 1992 agreement by the
U.S. government in late 2004 eventually led to formal claims
and counterclaims being made by the U.S. and the E.U.
respectively with the World Trade Organisation. The E.U.

and the U.S. have also entered into negotiations to seek aresolution to the issues being disputed in the formal World
Trade Organisation (“WTO”) process, with the goal ofagreeing a new system that provides for a level playing field
when funding future aircraft developments.

Market Structure and Competition
Market Segments. Currently, Airbus competes in each of
the three principal market segments. “Single aisle” aircraft,such as the A320 Family, have 100-210 seats in two rows
divided by one aisle and are used principally for shortrange and medium-range routes. “Twin aisle” or “widebody” aircraft, such as the A300/A310 and A330/A340
Families, have a wider fuselage with more than 210 seatsin three rows divided by two aisles. Both the A300/A310
and A330/A340 Families are used on short-range andmedium-range routes, with the A330/A340 Family being
capable of ultra-long range operations. “Very large aircraft”,
such as the A380 Family, are designed to carry more than
400 passengers non-stop over very long-range routes withsuperior comfort standards and with significant cost-per-seatbenefits to airlines. Freight aircraft, which form a fourth,related segment, are often converted ex-passenger aircraft.
See “— 1.1.7 Other Businesses — Aircraft Conversion
and Floor Panels”. In addition, the A300-600 has beena successful all-new freight aircraft (A300-600F) withincreasing popularity among major express courier providers
and airlines, such as Federal Express, UPS and Air HongKong. Nevertheless, Airbus announced in March 2006
that the last A300-600 will be delivered in July 2007, after
35 years of commercialisation and production of the A300
aircraft. Airbus also competes in the corporate, VIP businessjet market with the ACJ an A319-based Corporate Jetliner,
which has proved popular as a corporate shuttle and ingovernment/VIP roles.
According to a study conducted by Airbus, a totalof 11,850 aircraft with more than 100 seats were in service
during December 2005 (as compared to 10,800 aircraft at theend of 2004).
The high proportion of single aisle aircraft in both North
America and Europe reflects the predominance of domestic
short-range and medium-range flights, particularly inNorth America due to the development of hubs following
deregulation. In comparison with North America and16 I EADS Business, Legal and Corporate Responsibility

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Europe, the Asia-Pacific region uses a greater proportionof twin aisle aircraft, as populations tend to be moreconcentrated in fewer large urban centres than in the U.S.
This distinction is compounded by the fact that many of theregion’s major airports limit the number of flights either due
to environmental concerns or to infrastructure constraints
limiting the ability to further increase flight frequency.
These constraints necessitate higher average aircraft seating
capacity per flight.

Competition. Airbus has been operating in a duopoly since
Lockheed’s withdrawal from the market in 1986 andBoeing’s acquisition of McDonnell Douglas in 1997. As aresult, the market for passenger aircraft of more than 100
seats is now effectively divided between Airbus and Boeing.
According to manufacturers’ published figures, in 2005
Airbus and Boeing, respectively, accounted for 57% and 43%
of total deliveries, 52% and 48% of total gross orders, and
53% and 47% of the total year-end backlog.
The significant barriers to entry into the market forpassenger aircraft of more than 100 seats make it unlikelythat a newcomer will be able to compete effectively witheither of the established suppliers in the foreseeable future.

Customers
As of 31st December 2005, Airbus had approximately
225 customers, 4,130 Airbus aircraft had been delivered
to operators worldwide since the creation of Airbus, and2,177 aircraft were on order. The table below shows Airbus’
most significant gross firm orders, by number of aircraft,
for the year 2005.
Customer

Firm Orders*

CASC (China)

150

Indigo100

Aercap70

Air Asia

60

GECAS

40

Air Deccan

30

Kingfisher

30(*) Options are not included in orders booked or year-end backlog.

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Organisation of Airbus
Integration of the Airbus Activities
EADS has an 80% interest in Airbus S.A.S., and has effective
management control over its operations, while BAE Systems,
holding the remaining 20%, enjoys specific minority
rights. Certain strategic decisions, such as acquisitions anddivestitures valued at more than U.S.$500 million, approvalof the three-year Business Plan (but not the annual budgets
or the launch of new programmes) as well as certain actions
which would dilute the ownership interest of BAE Systems
in Airbus S.A.S., require unanimous agreement.
Following the integration of Airbus in 2001, theshareholders of Airbus agreed to grant BAE Systems an
option to sell its Airbus S.A.S. shares at market value to
EADS, either for cash consideration or in exchange for
EADS shares, as determined by EADS. However, BAE
Systems may elect to receive cash where the issue of
EADS shares would require prior burdensome regulatory
authorisations impacting significantly the allocation of the
EADS shares. EADS benefits from a call option at market
value on the Airbus S.A.S. shares in case of a change ofcontrol of BAE Systems in certain circumstances. Likewise,
under certain circumstances, BAE Systems can require EADS
to purchase its Airbus S.A.S. shares at market value in theevent of a change in control of BAE Systems or EADS.
Beginning with the 2003 financial year, BAE Systems
became entitled to receive enhanced dividends, subject todeliveries of A340-500/600 aircraft exceeding an agreed
target rate. The enhanced dividends, which are indexed to
Airbus’ future growth, could represent a non-indexed value
from zero up to a cap of €237.5 million (based on current
economic conditions) over the following ten years.
Shareholder and strategic matters relating to Airbus
S.A.S. are decided by a shareholders’ committee, to which
EADS has appointed five members and BAE Systems two
members. Mr. Noël Forgeard, Chief Executive Officer of
EADS, is the chairman of the Shareholders’ Committee.
Mr. Gustav Humbert, as President and Chief Executive
Officer of Airbus S.A.S., is responsible for the operational
management of the Airbus business, together with the
Executive Committee, consisting of himself and up to ten
other members, two of whom are members proposed by
BAE Systems, all of whom are agreed upon by the President

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and Chief Executive Officer of Airbus S.A.S. and appointed
by the Shareholders’ Committee.
As a consequence of its majority interest in Airbus S.A.S.
and of the control provided by the shareholders’ agreement
related to Airbus S.A.S., EADS consolidates 100% of
the integrated Group in its financial statements as from
1st January 2001.

Products and Services
Technological Breakthroughs
Technological innovation has been at the core of Airbus’
strategy since its creation. Many of the innovations thatprovided a distinct competitive advantage have subsequently
become standard in the aircraft industry.

A300 — The A300 was the world’s first twin-engine twin
aisle commercial aircraft. This feature gave it a distinctive
advantage in terms of fuel burn and maintenance costs overits three-engine and four-engine competitors for the shortand medium range. The A300 B4, a derivative of the original
A300, was the first twin aisle commercial aircraft certified
for a two-member flight crew, resulting in lower operationalcosts as compared to three-member crew operated aircraft
which was the industry standard at the time.
A310 — The A310, brought to the market in 1983, featured
the first digitally imaged cockpit displays, using cathoderay tubes as opposed to the traditional mechanical display.
This made it possible to provide the pilot with improved
flight and navigation displays and unique centralised, easy
access aircraft monitoring. The implementation of automatedsystems and the integration of Digital Flight Guidance both
helped to further improve safety levels.
New efficient aerodynamic concepts were also introduced,
such as a supercritical airfoil and the high aspect-ratio
transonic wing, which brought a significant improvementin fuel burn. Carbon fibre reinforced composite materials
were introduced for major structures such as the vertical
fin and rudder, with significant weight savings as comparedto aluminium, resulting in increased payload capability.
The installation of a trim tank in the horizontal stabiliser
increased operators’ savings significantly by optimising
aircraft attitude during the flight.

A320 — Airbus was the first to introduce digital fly-by-wire
controls with the A320 in 1988, introducing pilot commands

through a side stick controller instead of the traditional
control column. Flight-control computers translate thesecommands into electrical signals for the moving surface
actuators and, at the same time, can prevent the aircraft going
beyond the prescribed safe flight envelope. Compared to the
traditional mechanical flight controls, this brought increased
manoeuvrability, simplified operations through digital link-up
with the autopilot system and weight reduction. The fly-by-wireconcept is now featured on all A320 Family aircraft as wellas the A330/A340 Family. Airbus’ U.S. competitors did not
introduce fly-by-wire controls for civil aircraft until later.
Composite materials have been extended in the A320 to thehorizontal tail plane.

A330/A340 — Four models of this twin aisle family
feature wing commonality for two and four-engine variantsof an otherwise similar airframe — a unique concept that
permits each model to be optimised around different market
requirements. The ultra-long-range A340-500/-600 featurea larger wing and introduce further breakthroughs in theuse of weight saving composite materials for a large primarystructure (the 15m-long keel beam and rear cabin pressurebulkhead).
A350 — The ‘sister ship’ of the A380, the A350 is Airbus’
response to perceived customer demand. The A350, which isin the early stages of development, will exploit technologies
developed and studied for the A380. Available in two
versions, the A350 will have 90% new part numbers, a
new landing gear, a cockpit derived from the A380 and anumber of other innovations including the extensive use ofcomposites and aluminum-lithium (including, for example,
a composite wing), raising the use of new light weightmaterials to 60%. Nevertheless, the A350 will retain fulloperational commonality with the rest of the Airbus aircraft
family. The A350 is intended to offer more seats, morerange, a lower fuel burn per seat and a lower cash operating
cost per seat than the competition.
A380 — The very large aircraft will bring further
development of advanced technologies and allow for theirbroader application. Approximately 25% of the aircraft
structure is to be manufactured using carbon composites
and advanced metallic hybrid materials, while innovative
manufacturing techniques such as laser beam welding will
eliminate fasteners, reduce weight and provide enhanced
fatigue tolerance.

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The Family Concept – Commonality acrossthe Fleet
Airbus’ four aircraft families promote fleet commonality.
This philosophy takes a central aircraft and tailors it to create
derivatives to meet the needs of specific market segments.
This approach means that all new-generation Airbus aircraft(i.e., excluding A300/310) share the same cockpit design,
fly-by-wire controls and handling characteristics. Pilots
can transfer among any aircraft within the Airbus familywith minimal additional training. Cross-crew qualification(“CCQ”) across families of aircraft provides airlines withsignificant operational flexibility.
This commonality philosophy to reduce development costs
also permits aircraft operators to realise significant costsavings in crew training, spare parts, maintenance and aircraftscheduling.
The extent of cockpit commonality within and acrossfamilies of aircraft is a unique feature of Airbus that, inManagement’s opinion, constitutes a sustainable competitive
advantage.

Short- and medium-range single aisle aircraft: the A320
Family. Airbus’ family of single aisle aircraft, based on
the A320 (which entered service in 1988 following adevelopment programme launched in 1984), includes theA318, A319 and A321 derivatives, as well as the A319based Airbus Corporate Jetliner, a business jet derivative,
which Airbus launched in June 1997.
At 3.96 metres diameter, the A320 Family has the widest
fuselage cross-section of any competing single aisle aircraft.
This provides a roomy passenger cabin, a high comfort
level and a more capacious underfloor cargo volume thanits competitors. The A320 Family incorporates digital flyby-wire controls, an ergonomic cockpit and a lightweight
carbon fibre composite horizontal stabiliser, derived from the
A310-300. The use of composite has also been extended to
the vertical stabiliser. The A320 Family’s competitors are the
Boeing 737, 757 and 717 aircraft.
The A318. The A318 aircraft is a shortened version of theA319, designed to satisfy demand for aircraft in the 100 to
120-seat range.

Single Aisle Technical Features
Model

Entry into
service

Passenger
capacity*

Maximumrange (km)Length(meters)

Wingspan(meters)

A318

2003

107

6,000

31.4

34.1

A319

1996

124

6,800

33.8

34.1

A320

1988

150

5,700

37.6

34.1

A321

1994

185

5,600

44.5

34.1

(*) Two-class layout.

In 2005, Airbus received 918 orders for A318, A319, A320
and A321 aircraft and delivered 289 A320 Family aircraft.

Short- and medium-range twin aisle aircraft: the A300 /A310. The A300 / A310 aircraft were the initial modelsof the Airbus product line and are designed for short-andmedium range routes. The A300, which entered into service
in 1974, was the world’s first twin aisle,
twin-engine aircraft. Its current version A300-600 is alsoavailable in freighter and convertible passenger-freighter
configurations, in service with both Federal Express and UPS.

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In 1988, Airbus introduced the extended-range A300-600R,
which incorporated the lightweight carbon fibre composite
horizontal stabiliser developed for the A310. The A310,
which was based on the A300, entered into service in 1983,
and introduced the first electronic cockpit in civil aviation
history.

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A300/A310 Technical Features
Model*

Entry into
service

Passenger
Capacity**

Maximumrange (km)Length(meters)

Wingspan(meters)

A300

1974

266

7,500

54.1

44.8

A310

1983***

220

9,600

46.7

43.9

(*) All versions of A300/A310 including freighters.
(**) Two-class layout.
(***) Airbus has announced in March 2006 that the last A300-600 will be delivered in July 2007.

In 2004, Airbus received two orders for A300 and A310
aircraft and delivered 12 A300 and A310 aircraft.

Medium to ultra-long-range twin aisle aircraft: the A330 /A340 Family. Airbus developed the twin-engine A330 andlong-range four-engine A340 as a joint programme, using
the same wing design for both aircraft and retaining thefuselage cross section of the existing A300/A310 to offer
comprehensive and economic medium to ultra-long-range
route coverage.

In 1997, Airbus began development of the ultra-long-range
A340-500 and the high capacity A340-600 derivatives. The
A340-500 is intended to offer more point-to-point routings
over extremely long ranges. It is designed to allow nonstop flights such as Los Angeles — Singapore or Chicago— Auckland. The A340-600 made its first flight in April
2001 and deliveries began in July 2002.

The competitors of this family are the Boeing 767, 777 and 747 aircraft.
A330/A340 Technical Features
Entry into
service

Passenger
capacity*

Maximumrange (km)Length(meters)

Wingspan(meters)

A330-200

1998

253

12,50059.0

60.3

A330-300

1994

295

10,50063.7

60.3

A340-200

1993

240

14,80059.4

60.3

A340-300

1992

295

13,70063.7

60.3

A340-500

2002

313

16,70067.8

63.6

A340-600

2002

380

14,60075.3

63.6

Model*(*) Three-class layout.

In 2005, Airbus received 79 orders for A330 and A340
aircraft and delivered 80 A330 and A340 aircraft.

very large aircraft, the A380, to best serve the needs of theconsolidated hub-dominated market.

Very large aircraft: the A380 Family. In 2004, Airbus
estimated worldwide passenger traffic would grow ata sustained average annual rate of 5% during the 20042022 period, leading to two concurrent trends: risingfragmentation of a portion of the marketplace, characterisedby the development of new markets, higher frequency on
thinner routes and hub by-passing; and consolidation of therest of the market, resulting in the concentration of the hubto-hub traffic and hub-dominated traffic, typical of alliancenetworks. See “— Market”. Following five years of intensive
pre-development with airlines, airports and regulatory
authorities throughout the world, Airbus has defined a2005 was a significant year from an industrial andprogramme point of view with the ‘reveal’ of the A380, andthe first flight on 27th April 2005.
At year-end 2005, Airbus had received a total of 159 firm
orders for the A380 from leading world airlines.
The cost of developing the A380 programme, initiallyprojected at U.S.$10.7 billion, covers both R&D expenses
and tooling for various versions of the A380. This estimate
does not include certain infrastructure elements or generaland administrative expenses.

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Management presently intends to finance the programme by:• Maximising contributions from risk-sharing partners,
who have been found for up to U.S.$3.1 billion of nonrecurring costs; and• Applying reimbursable launch investments fromgovernments in compliance with the 1992 U.S.-Europe
bilateral agreement and all other applicable regulations,estimated by Management at about U.S.$2.5 billion undercurrent assumptions; France, Great Britain and Spain havealready committed, and Germany has agreed in principle,
to such investments. See “— Market — Cyclicality andMarket Drivers — Governmental Funding”.
When deciding to launch the programme, Management set
itself a 20% pre-tax internal rate of return target, together
with a project break-even point of approximately 250
aircraft. It is satisfied that the terms and conditions presently
agreed with its customers corroborate the business case.
Final assembly of the A380 takes place in Toulouse, whileinterior furnishing and customisation will be performed in
Hamburg. The fuselage sections are being produced at thesame sites in France and Germany as current Airbus aircraft.
The wings are being produced at facilities in the U.K., while
the horizontal stabiliser and other parts are being producedin Spain.

New Product Development: A400M
Airbus’ Military Programme Directorate, headed by Mr. Juan
Carlos Martinez Saiz, performs research and development
related to the A400M project as an outsource provider
to Airbus Military S.L. The Military Transport Aircraft
A400M is described in “— 1.1.3 Military Transport Aircraft— Products — Military Transport Aircraft / Special Mission
Aircraft on Transport Aircraft Platforms — Airbus A400M”.

Asset Management
The Airbus Asset Management Division was set up in
1994 to manage and re-market used aircraft acquired by
Airbus, originally as a result of customer bankruptcies,
and subsequently in the context of certain buy-backcommitments. The Division operates with a dedicated staff
and manages a fleet comprised of Airbus aircraft acrossthe range of models. Through its activities, the AssetManagement Division helps Airbus respond more efficiently

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to the medium and long-term fleet requirements of its
customers.
Its key roles comprise the commercial and risk managementof the Airbus portfolio of used aircraft. Most of the aircraft
are available to customers for cash sale, while some can only
be offered on operating lease, depending on the financing
attached to such aircraft. At the end of 2005 the Airbus
Asset Management portfolio contained 31 aircraft, a net
reduction of 16 aircraft compared to the end of 2004. The
Asset Management Division also provides a full range of
support services, including assistance with entry into service,interior reconfiguration and maintenance checks.

Sales Finance
Airbus favors cash sales, and does not envisage sales
financing as an area of business development. However,Airbus recognizes the commercial need for manufacturers
to assist customers in arranging financing of new aircraft
purchases, and in certain cases to participate in suchfinancing itself. Extension of credit or assumption of
exposure is subject to corporate oversight and monitoring,and follows stringent standards of discipline and caution.
Airbus’ dedicated Sales Finance team has accumulated
decades of expertise in aircraft finance. When Airbus
finances a customer, the financed aircraft generally serve as
collateral, with the engine manufacture participating in thefinancing. These elements assist in reducing the risk borne
by Airbus. Airbus’ sales financing transactions are designed
to facilitate subsequent sell-down of the exposure to thefinancial markets, third party lenders or lessors. Airbus’
financing exposure is counter-cyclical and currently Airbus
is able to conclude significant sell-down of its exposure.
Management believes, in light of its experience, that thelevel of provisioning protecting Airbus from default costs
is adequate and consistent with standards and practice inthe aircraft financing industry. See “Part 1 / 1.1.7.4 Sales
Financing”.

Customer Service
Airbus is dedicated to assisting customers with the operationof their Airbus fleets as efficiently as possible. With
respect to aircraft operation, the Airbus Customer Services
directorate heads an engineering and technical support group,a technical documentation organisation, a network of training

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centres, spare parts stores and teams based at customer
airlines. Through this single interface, Airbus aims to satisfy
all of its customers’ pre-delivery and in-service support
requirements, including (1) engineering and technicalsupport, (2) training and flight operations support and(3) material support.
Engineering and technical support provides Airbus operatorswith technical assistance on a 24-hour basis to ensure safeand reliable operations of their Airbus fleet. Customised cost
reduction programmes are designed to reduce customers’maintenance costs to optimised levels.
The training and flight operations support service includes
a permanent staff of over 200 instructors around the world
to provide accessible and up-to-date training for Airbus
flight and ground crews. Airbus has four training centres,
one in Toulouse, France, one in Hamburg, Germany, one
in Miami, U.S. and one in Beijing, China. A co-operationagreement with Canadian Aviation Electronics Ltd (“CAE”)
has enlarged this network by 13 additional training locations
world-wide. As part of its training services, Airbus offers
Cross Crew Qualification programmes enabling pilots totake advantage of the high degree of commonality between
Airbus aircraft families, representing considerable savings toairlines.
Airbus’ spares support centres stock over 120,000 different
part numbers, serving a worldwide distribution networkfrom Hamburg, Frankfurt, Washington, D.C., Singapore
and China. The 24-hour aircraft-on-ground service usuallydispatches in-stock items within two hours of receipt ofan order. A range of modular spares services is offered tothe airlines to help them reduce costs by identifying andeliminating deficiencies in the supply chain.

Production
Industrial Organisation
Airbus aircraft are produced using an efficient and flexible
system that has optimised the specialised skills developed
during the last three decades. Each task in the building of
the Airbus aircraft (from design, definition and production
to product or operational support) is allocated to industrialsites according to their specialised expertise. The nurturing
and development of centres of excellence, although a legacyof the past, constitutes an original and competitive feature of
Airbus manufacturing.

Engineering
Airbus engineers work on specific and non-specific aircraft
designs to create solutions that ensure the company remains
a market leader. Using an innovative working practice,known as Airbus Concurrent Engineering (“ACE”), teams
are able to work together effectively in real time, regardlessof geographical location.
Engineering innovation at Airbus is driven by five Centresof Competence (“CoCs”), which develop general aircraft
technologies and provide functional design leadershipfor specific aircraft components. The CoCs operate transnationally with engineers from each CoC present at all
Airbus sites.
Airbus engineers have also developed “Colleges of Experts”— teams of the most experienced specialists in eachdiscipline that provide guidance and advice at senior levels.
This approach not only delivers design solutions to meet thehighest standards of technical quality and performance, butalso ensures that both individual and collective knowledge isnurtured throughout the CoCs.
The engineering teams are supported by system tests andintegration laboratories, structural test centres and theAirbus flight test centre.
This approach has enabled Airbus to open engineering
centres in Wichita (Kansas), U.S., in Moscow, Russia, andin Beijing, China, through which it has gained access to alarge pool of experienced aerospace engineers. The Wichita
engineering centre began operations in early 2001 and has
already made a significant contribution to Airbus wing
design. The engineering centre in Russia, organised as a joint
venture with Kaskol, was inaugurated at the end of 2002
and the engineering centre in China was inaugurated in late2005. A fourth engineering centre is expected to open in
Mobile (Alabama), U.S. in 2006.

Manufacturing Facilities and Production Flow
Airbus has established highly specialised centres of
excellence (“CoE”) based on the core competencies of eachsite within its field of expertise. The CoEs are responsible

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for the design, procurement and manufacturing of fully
equipped and tested deliverables, ranging from specific parts
to major aircraft components.
The eight CoEs are (1) CoE Nose and Centre Fuselage atToulouse, St. Nazaire, Nantes and Meaulte (France);(2) CoE Forward and Aft Fuselage at Hamburg, Nordenham,
Bremen and Varel (Germany); (3) CoE Pylon and Nacelle at
Toulouse-St. Eloi (France); (4) CoE Vertical Tailplane (VTP)at Stade (Germany); (5) CoE Cabin and Cargo Customisation
at Hamburg, Bremen, Buxtehude and Laupheim (Germany)
and Toulouse (France); (6) CoE Horizontal Tailplane andBelly Fairing (and certain sections of the A380) in Getafe,
Illescas and Puerto Real (Spain); (7) CoE Electrics in Filton(U.K.), Hamburg (Germany) and Toulouse (France); and(8) CoE Wing in Broughton and Filton (U.K.), with a satellite
design office in Wichita, Kansas (U.S.).
The CoEs deliver their specific components to one of the
two Airbus final assembly line sites. Toulouse is responsible
for the final assembly of the A300/A310 Family, A320,
A330/A340 Family and A380 Family, while Hamburg is
responsible for the final assembly of the A318, A319 andA321, as well as for the major component assembly andinterior furnishing for the A380 customization.
Aircraft components are transferred between the networkof CoE sites and the final assembly lines using Airbus’ fivecustom built A300-600 “Beluga” Super Transporters. To
support the A380 production flow, Airbus has integrated
road, river and sea transport, including the speciallycommissioned “Ville de Bordeaux” ship. Typical production
lead times for single-aisle aircraft are 8-9 months, and12-15 months for long-range twin-aisle aircraft.

Adaptability to Changes in Demand
Airbus delivered 378 aircraft in 2005 (compared to 320 in2004) and expects to deliver more than 400 aircraft in 2006.
Any major market disruption or economic downturn could
lead to revision of these figures.
To meet its 2006 delivery target, Airbus has set various
elements of its adaptable manufacturing process inmotion; these include enhanced integrated intelligence ofcustomer and market situation to provide early anticipation,
repatriation of an array of outsourced tasks and adaptationof make or buy criteria. Additionally, Airbus is exploiting
flexibility features of its labour structure by applying
flexible time and overtime contractual provisions, and by
optimising temporary and time-defined workforce. This
allows Airbus to increase adaptability without paring theexperienced and trained workforce which Management
considers a most valuable Airbus asset to sustain long-term
growth.
Airbus’ unique manufacturing flexibility is imbedded
within the organisation, implementing lessons learned fromprevious downturn.

1.1.3 Military Transport Aircraft
Introduction and Overview
The Military Transport Aircraft Division (the “MTA
Division”) develops, manufactures and sells light andmedium military transport aircraft and is responsible for
the European heavy military transport A400M project.
Additionally, the MTA Division produces and sells special
mission aircraft, which are derived from existing aircraft

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platforms and are dedicated to specialised military tasks suchas maritime surveillance, antisubmarine warfare and in-flightrefuelling capabilities. The MTA Division also designs andmanufactures aerostructure elements.
The MTA Division earned consolidated revenues of€763 million, accounting for 2% of EADS’ total consolidated
revenues for 2005.

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Strategy
The MTA Division’s strategic goals are to develop its corebusinesses, to leverage the EADS pool of technologies togain share within its markets and to enhance profitability. To
achieve these goals, the MTA Division has implemented afocused, two-pronged strategy to:Consolidate its leadership position and address
the growing demand for modern tacticalmilitary transport aircraft
EADS is the global leader in the market segments for lightand medium-sized military transport aircraft. Through theaddition of the A400M heavy transport aircraft, EADS
expects to broaden its range of tactical military transport
aircraft and to capture a market with high replacement
potential that Lockheed Martin has historically dominated.

Optimise EADS’ capabilities to become a major
supplier of military derivatives
The MTA Division relies on its own specialised technologies
as well as those of the DS Division and on EADS’ wide
range of platforms to promote aircraft satisfying customers’
mission-specific requirements.

MarketMilitary Transport Aircraft
Governments and multinational organisations constitutethe MTA Division’s principal customers in the market fortactical military transport aircraft. This market consists ofthree segments: (1) light transport aircraft, with a payloadof one to four tons, (2) medium transport aircraft with apayload of five to 14 tons; and (3) heavy transport aircraftwith a payload of 15 tons or more. According to a study
by the Teal Group, an independent aerospace and defence
industry consulting firm, the global market for militarytransport aircraft for the next ten years will amount to an
estimated U.S. $46 billion.

Light Military Transport - This is a mature market that has
diminished in size as countries develop economically and areable to afford medium military transport aircraft. The CASA
C-212 has historically led this market segment, with anaverage market share of 15% over the last ten years.
The C-212’s main competitors are manufactured by Polskie
Zaklady Lotnice, Mielec, Socata and HAL.

Medium Military Transport - Management believes that thismarket will continue to experience moderate growth. EADS
models are prominent in this market segment, with theCN-235 and C-295 models having an average market shareof 45% over the last ten years, followed by their competitors,
the C-27J produced by Lockheed Martin Alenia Tactical
Transport System (“LMATTS”), a joint venture of Alenia
and Lockheed, and the An-32 produced by Antonov.
Heavy Military Transport - This market segment hashistorically been driven by U.S. policy and budget decisions
and hence has been dominated by U.S. manufacturers andin particular, Lockheed Martin’s C-130 Hercules. While theU.S. is reducing and upgrading its existing fleet, European
transport fleet replacement and growth needs represent
an opportunity for the new A400M aircraft to effectively
compete in this market.
EADS has chosen thus far not to compete in the separate
market segment for super-heavy, strategic airlift aircraft, towhich the Boeing C-17 belongs.

Special Mission AircraftSpecial mission aircraft are derived from existing platforms
and adapted to particular missions, generally for militarycustomers. According to a study by Forecast International,
the market for military derivatives for the next ten years
will amount to an estimated U.S. $42 billion. It is a market
of advanced technology and high added value solutions
where customers are increasingly demanding comprehensive
systems tailored to their respective operational requirements.
Modern defence and warfare increasingly require
independent access to complex forms of information invarious theatres of operations. This development andEurope’s unsatisfied defence needs are expected to boost
demand for European-produced mission aircraft in the nearterm. The MTA Division is well-positioned in this market,
as it has access, through Airbus, to efficient platforms thatare already well-established in the civil market. However,
U.S. companies currently dominate this market.
Because of the limited size of any single European market andthe significant associated development costs, mission aircraft

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programmes in Europe tend to be funded and developed on amultinational basis, with an emphasis on proven technologies.
EADS believes its strong position in Europe will allow it to
exploit opportunities on a worldwide basis.

Products
Military Transport Aircraft/Special Mission
Aircraft on Transport Aircraft Platforms
C-212 - Light Military Transport. The C-212 was conceived
as a simple and reliable unpressurised aircraft able to operatefrom makeshift airstrips and carry out both civilian andmilitary tasks. The first model in the series, the S-100,
entered into service in 1974. With a payload of 2,950 kg,
the new version of the C-212, the Series 400, enteredinto service in 1997. It incorporates improvements suchas new avionics and engines for enhanced performance in
hot climates and high altitudes, as well as improved shorttake-off and landing (“STOL”) performance. The C-212’s
rear cargo door provides direct access for vehicles, cargo andtroops. Its configuration can be changed quickly and easily,
reducing turnaround times. The aircraft can perform airdrops
and other aerial delivery missions.
CN-235 - Medium Military Transport. The first model in
the CN-235 family, the S-10, entered into service in 1987.
The latest model in the CN-235 family, the Series 300,
entered into service in 1998 and is a new-generation, twinturboprop, pressurised aircraft. The CN-235-300 is capableof transporting a payload of up to 6,000 kg, representing(1) 48 paratroopers; (2) 21 stretchers plus four medical
attendants; (3) four of the most widely used type of freightpallet; or (4) oversized loads such as aircraft engines orhelicopter blades. Paratroop operations can be performed
through the two lateral doors in the rear of the aircraft orover the rear ramp. Variants of the CN-235-300 are used forother missions, including maritime patrol, electronic warfare
and photogrammetric (mapping) operations. One CN-235
was delivered (to Ecuador) in 2005.
C-295 - Medium Military Transport. Certified in 1999,
the C-295 has the basic configuration of the CN-235, witha stretched cabin to airlift a 50% heavier payload at greater
speed over similar distances. The C-295 is equipped withintegrated avionics incorporating digital cockpit displays
and flight management system, enabling tactical navigation,

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planning and the integration of signals from several
sensors. Both the CN-235 and C-295 have been designed ascomplements to or replacements for ageing C-130 Hercules,
accomplishing most of their missions at a lower operating
cost; specialising the C-130 for heavier cargo transport only
extends its service life.
Ten C-295s were delivered (six to Algeria, three to Poland
and one to Spain) during 2005. On 29th April 2005, theMTA Division announced a €258 million contract with
Brazil for the delivery of 12 C-295 aircraft to replace theageing C-115 Buffalo. These aircraft are intended to enable
the Brazilian Air Force to support activities related with the
Amazon Protection System (SIVAM) and the Calha Norte
Project, fundamentally social activities, to support people inremote areas of the Amazon with difficult access to othermeans of transportation. In addition, a contract for thedelivery of one C-295 aircraft was signed in 2005 with the
Spanish Ministy of Defence (“MoD”).

Future Cargo Aircraft (“FCA”). During 2005, EADS CASANorth America and Raytheon established a partnership tobid for the U.S. Army’s FCA programme. Under the FCA
programme, the U.S. Army plans to procure more than
100 FCA, with an initial phase of 33 aircraft. The contract
is expected to be awarded in 2007.
As of 31st December 2004, 774 medium and light militarytransport aircraft had been ordered by 121 operators in 55
countries.

Maritime Patrol Aircraft. The MTA Division provides
different solutions ranging from Maritime Surveillance toAnti-Submarine Warfare through aircraft based on the C-212,
CN-235, C-295 or P-3 Orion platforms, for which EADS has
already developed a new-generation, open architecture mission
system called FITS (Fully Integrated Tactical System), a proven,reliable and cost efficient solution.
The contract signed in February 2004 with Lockheed Martin in
the Deepwater Programme for the U.S. Coast Guard remains
on schedule and the first delivery is planned during 2006.
On 29th April 2005, a contract for the modernisation of the
fleet of eight P-3 Orion was also signed between Brazilian
Government and EADS-CASA. Brazil has purchased themission system FITS (Fully Integrated Tactical System) forthe modernisation of its P3-Orion that would be performed

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by EADS-CASA in collaboration with local Brazilian
partners.
After the initial agreement in December 2004, a formal
contract with SASEMAR, a parapublic agency, was officiallysigned in April 2005 for the purchase of three CN-235
maritime patrol aircraft for sea rescue and pollution control
missions. Delivery of the first aircraft is planned for 2007.
During 2005, the MTA Division delivered two C-212
aircraft with mission systems to Mexico and one CN-235
maritime patrol aircraft to Ecuador.

Airbus A400M. The A400M is designed to meet the
Future Large Aircraft requirements set out by seven
European nations to replace their ageing C-130 Hercules
and C-160 Transall fleets. In addition to fast and flexible
intercontinental force projection, the new aircraft is intended
to respond to changing geopolitical requirements (including
increased humanitarian and peacekeeping missions).
The A400M will integrate a number of features fromexisting Airbus aircraft, including a two-person cockpit, flyby-wire controls and advanced avionics. Additionally, theA400M will benefit from Airbus’ maintenance procedures
and worldwide customer support network.
Airbus Military is a Spanish sociedad limitada dedicated tothe development, manufacture and delivery of the A400M
aircraft. Shares in Airbus Military are currently held byAirbus S.A.S (69.44%), EADS CASA (20.56%), Tusas
Aerospace Industries Incorporated of Turkey (5.56%) and
Flabel Corporation NVSA of Belgium (4.44%). The Executive
Vice President in charge of the MTA Division also acts as
Chief Executive Officer of Airbus Military, bringing the
MTA Division’s experience in the management of militarytransport aircraft programmes and its extensive client
network to the A400M programme.
Airbus Military has subcontracted to Airbus the overallmanagement of the A400M development, to be exercisedthrough a central programme management office (“CPMO”)
headquartered in Toulouse with additional offices in Madrid.
For the production phase of the A400M programme, tobe managed by the MTA Division, the CPMO will beheadquartered in Spain.
In May 2003, the Organisation Conjointe en Matièred’Armement (“OCCAR”) signed a contract with Airbus

Military to order 180 A400M aircraft, mandated by sevennations: Belgium committed to eight aircraft (including one
on behalf of Luxembourg), France to 50, Germany to 60,
Spain to 27, Turkey to ten, and the U.K. to 25.
Management believes that the A400M programme will allow
EADS to leverage its state-of-the-art commercial aircraft
technology to access a new and attractive market, while
mitigating the impact of civil aircraft market commercial
cycles.
During 2005, an important internal milestone was passed
successfully. The overall programme’s development remains
on schedule and the completion of the final assembly line
for the A400M in Seville is expected to be reached in thefirst half of 2007.
Efforts to win export contracts for the A400M yielded
several successes during 2005. After the signature of adeclaration of intent with the South African government
in December 2004, the contract was officially signed in
April 2005. The total maximum value of the contractfor eight aircraft as well as options is €836 million. On
8th December 2005, the Malaysian government signed acontract for the purchase of four A400M.
In addition to the initial 180 aircraft, these export orders
bring the total order book for the A400M aircraft to 192.

Special Mission Aircraft on Airbus Platforms
The MTA Division offers special mission aircraft derived
from existing Airbus platforms and adapted to particularmissions, generally for military customers. Adaptations
to the platform require thorough knowledge of the basic
airframe, which generally only the aircraft manufacturer
possesses. The skills necessary for overall systems integration
into such aircraft are extensive and the number ofparticipants on the world market is very limited.

Strategic Tanker Aircraft. EADS seeks to provide acompetitive alternative to the near-monopoly currently
enjoyed by Boeing products in the market for strategic tanker
aircraft. This should help to ensure Europe’s ability to set up
projects independently. In light of the estimated worldwide
market of approximately 550 tanker aircraft, Management
believes that strategic tanker aircraft offer an attractive
opportunity for EADS.

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The MTA Division leads a technological programme
developing a new “air-to-air” refuelling boom system(“ARBS”) that is designed to ensure a refuelling
performance two to four times faster than that of thecompetition - a considerable advantage as aircraft are very
vulnerable during the refuelling procedure. The refuellingboom was installed on the test rig in November 2004 and on
23rd December 2005, the roll-out of an A310 demo boom
took place at the Getafe facilities. Flight tests with this A310
demo boom were to be realised during the first quarter 2006.

A330 MRTT (Royal Australian Air Force) – The contract
signed on 20th December 2004, with the Royal Australian
Air Force for the delivery of five A330 multi-role tanker
transports (“MRTT”) equipped with ARBS to replace its
existing Boeing 707 fleet remains on schedule. Deliveryof the first A330 MRTT to Australia - based on the A330
derivative, a low-risk and cost-effective platform that offersa greater supply capacity than other competing solutions- isscheduled for 2008, with entry into service planned for 2009.
A330 Future Strategic Tanker Aircraft (FSTA)(United Kingdom Royal Air Force) – EADS, Rolls
Royce, Cobham, VT and Thales are cooperating throughthe AirTanker consortium as the single bidder for the
U.K. MoD’s Future Strategic Tanker Aircraft (“FSTA”)
programme. Likely to be structured as a Private FinanceInitiative, this programme would replace ageing VC10 and
Tristar tankers, currently operated by the Royal Air Force,with a system based on the long-range family of Airbus
aircraft. The programme will provide for the delivery of
14 aircraft to render the air refuelling service for 27 years.
The MTA Division’s participation in the programme willamount to approximately €2 billion.

aircraft. EADS has joined with Northrop Grumman (asprime contractor) on the KC-30 advance tanker bid.

A310 MRTT (German Air Force / Canadian Air Force)– In its entirety, the programme involves four aircraft for
the German Air Force and two aircraft for the Canadian Air
Force In 2005 two A310 MRTT were delivered, the second
one to the German and also the second one to the Canadian
Air Force.
Alliance Ground Surveillance (“AGS”). Within theframework of NATO, several countries have expressedinterest in the development of an Airborne Surveillance
System. MTA’s role in this programme is to performthe “militarization” of the A-321 platform, with the DS
Division acting as the prime contractor.

Aerostructures
EADS-CASA has longstanding tradition of expertise in
the utilisation of composite materials for aerostructure
manufacturing and advanced automation processes.
Based on its expertise, the MTA Division is actively involvedin the design, manufacture and certification of complex
aeronautical structures. During 2005, the MTA Divisiondelivered, among other structures, fan cowls for the A340
and the first fan cowls for the A380.

Production
The C-212, CN-235 and the C-295 are manufactured in
the factory located within the San Pablo Airport in Seville.
Aerostructures are produced in Cádiz and at the Tablada
facilities as well as San Pablo plant; both in Seville.

KC-30 Tanker Programme (U.S. Air Force) –Management views the KC-30 programme for the
replacement of the ageing U.S. fleet of strategic tanker
aircraft as a market opportunity. A capture team has been
established to act on the KC-30 advance tanker campaign
for the U.S. Air Force next generation air-to-air refuelling

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1.1.4 Eurocopter
Introduction and Overview
Through Eurocopter, EADS is one of the global leadersin the worldwide civil and military helicopter market.
Management expects Eurocopter sales in the military market
to increase substantially due to the start of delivery of the
Tiger attack helicopter, the strong backlog for the NH90
military transport helicopter with a number of European
governments and the increasing demand in international
military and para-military export markets. In 2005,
Eurocopter maintained its leadership by capturing morethan 50% of the civil market in terms of deliveries and byachieving a strong growth in its military order book.
For 2005, the Eurocopter Division earned consolidated
revenues of €3.2 billion, representing 9% of EADS’ total
revenues.

Strategy
The Eurocopter Division aims to further develop businesses
and markets identified by Management as having thepotential for continued growth. To this end, Eurocopter isactively:

Fostering internal growth and international
expansion
Management intends to further develop Eurocopter’spresence in emerging markets such as China, India andEastern Europe and to bolster its position in traditionallyinaccessible markets such as the South Korean, U.S. andU.K. military markets. To do so, Eurocopter will continue tocapitalize on its proven experience of cooperation with local
industries for program development and joint production
projects. This approach has enabled Eurocopter to build solid
foundations in rapidly growing markets. Eurocopter will
also continue to pursue its industrial deployment strategy inthe United States, where it already has two industrial andservices facilities. In support of Eurocopter’s international
expansion, more than 20% of its employees work outside of
the Division’s home countries of France, Germany and Spain.

Implementing an intensive product andservices policy designed to maintain its market
leadership and technological superiority
The continuous renewal of Eurocopter’s comprehensive
product line of civil and military helicopters is essential
in maintaining the Division’s market leadership andtechnological superiority. Management intends to continue
this process by (i) strengthening the market position ofcertain key products such as the Écureuil, the Dauphin, theEC 135 and the EC 145, (ii) emphasising Eurocopter’s mostrecent products (e.g., entry into service and customizationfor export of the Tiger and NH90) and (iii) enhancing
its product line (e.g., co-development of the medium lift
EC175 with China; partnership with Korean industry todevelop the military utility Korean Helicopter Industry(“KHP”)). Eurocopter’s comprehensive product line allows it
to leverage core technological solutions with its high-value
customization capabilities, in order to respond to the costdriven mission needs of a wide array of civil and militarycustomers throughout the segmented helicopter market.
One of Eurocopter’s key competitive advantages is its
technological excellence. To maintain its position as atechnological leader, Eurocopter promotes technology
initiatives, such as the Heavy Transport Helicopter anddrones, and research programmes emphasizing technologies
that enhance the operational scope of its aircraft. Eurocopter
is currently focused on innovation in fields such asenvironmental-friendliness, all-weather flying ability andeconomic affordability throughout an aircraft’s lifecycle.
Because customer service is an important componentof customer satisfaction and source of revenue for theDivision, Eurocopter remains committed to strengthening
and expanding its network of marketing, distribution andsupport systems, through its ‘global offer’ proposal. The
network currently serves approximately 9,500 Eurocopter
aircraft with 2,500 operators located in 139 countries.

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MarketIn 2005, the value of helicopters delivered worldwide wasestimated at over €7 billion; a figure Management expects
may grow to €11 billion by 2010. According to market
forecasts by The Teal Group, Honeywell and Rolls Royce,
between 5,200 to 5,800 civil helicopters and 5,500 to 6,000
military helicopters are expected to be built globally from2006 to 2015. This forecast, particularly with respect to themilitary segment, depends to a large extent on the future oflarge U.S. development programmes.
Military demand for new helicopters is principally driven
by budgetary and strategic considerations, and the need toreplace ageing fleets. Management believes that the advanced
age of current fleets, the emergence of a new generationof helicopters equipped with integrated systems and theongoing introduction of combat helicopters into manynational armed forces will contribute to increased militaryhelicopter procurement over the next several years. Recent
large-scale military programmes, such as those conducted byAustralia, Brazil, Spain and the Nordics Standard Helicopter
Project have confirmed this trend. Demand from the military
segment has historically been subject to large year-to-year
variations, due to evolving strategic considerations.
Military helicopters, which are usually larger and have moresophisticated systems than commercial helicopters, accounted
for 43% of the total value of Eurocopter deliveries in 2005.
The military segment is highly competitive and ischaracterised by competitive restrictions on foreign
manufacturers’ access to the domestic defence bidding
process, sometimes to the virtual exclusion of imports.
Consequently, Eurocopter’s past share of the global market
for military helicopters has been comparatively small.
EADS aims to increase this share in the future with the

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introduction of the Tiger and NH90 and with a moreaggressive approach to international industrial cooperation.
In the military segment, Eurocopter’s main competitors are
AgustaWestland in Europe, and Bell Helicopter, Boeing and
Sikorsky in the United States. Additionally, the Russian
manufacturers and a number of U.S. and European domestic
manufacturers compete in these markets.
The helicopters sold in the civil sector provide transport
for corporate executives, offshore oil operations, diverse
commercial applications and state agencies, including
coast guard, police, medical and fire-fighting services.
Management expects that the value of global civil deliveries
will grow at an average rate of 3% in the next ten years.
Market data indicates that in 2005, worldwide deliveries ofcivil turbine helicopters stood at approximately 580 units.
Eurocopter’s main worldwide civil competitor is Bell
Helicopter, a division of Textron Inc. of the United States.
The civil helicopter market is relatively concentrated, with
Eurocopter and Bell Helicopter accounting for approximately
75% of total civil helicopter sales in 2004.

Products and Services
Existing Products. Management believes that Eurocopter
currently offers the most complete and modern range ofhelicopters, covering more than 85% of the overall civil
and military market spectrum. Eurocopter’s product range
includes light single-engine, light twin-engine, medium
and medium-heavy helicopters, and is based on a seriesof new-generation platforms designed to be adaptable toboth military and civil applications. The product line iscontinuously updated with leading-edge technologies,
assuring its modernity. The following table illustrates
Eurocopter’s existing product line:29

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Helicopter Type

Typical Uses

Entry into Service

Corporate / Private

1998

AS350

Utility, Law Enforcement, Corporate / Private

1975

EC130

Shuttle, Tourism, Offshore, Corporate / Private

2001

Light Single Engine
EC120
Single Engine

Light Twin Engine
AS355N

Parapublic*, Utility, Corporate / Private

1988

Emergency Medical, Parapublic*

1996/2003

Emergency Medical, Parapublic*, Shuttle

2002

Offshore, Parapublic*

1977

Corporate / Private, Offshore, Parapublic*, Shuttle

1999

Super Puma / Cougar

Offshore, Shuttle

1980

MK II

Offshore, Shuttle

1993

EC225

Offshore, VIP

2004

EC135 / EC635
EC145
MediumDauphin
EC155
Medium Heavy(*) Parapublic includes law enforcement, fire fighting, border patrol, coast guard and public agency emergency medical services.

The Tiger. The Tiger combat attack helicopter programme
development is nearing completion. It includes four variants
based on the same airframe: the 40 HAP (turreted gun,rockets and air-to-air missile) for France; the 80 UHT(antitank missile, air-to-air missile, axial gun and rockets)
for Germany; the 22 ARH (antitank missile, turreted gun
and rockets) for Australia; and the 24 HAD for Spain and
40 HAD for France (antitank missile, air-to-air missile,turreted gun, rockets and upgraded avionics and engines).
The manufacturing ramp-up of the programme is reflectedby the delivery of 13 Tigers as of February 2006 (five to
the German Army, four to the French Army and four toAustralia). The new Spanish Tiger version HAD programme,
boasting a fully multi-mission version of the Tiger, wasinitiated after the signing of a contract in November 2005
for 24 aircraft.
Civil range. In recent years Eurocopter has invested in the
renewal of its civil product line to enhance its competitive
position in the civil segment, with the result that its share of
the world market currently stands above 50%. Eurocopter has
successfully introduced into the international market suchnew products as the light single-engine EC120 and the lighttwin-engine EC135, and such major product upgrades as theEC155, the latest evolution of the medium-class Dauphin,and the EC145, a derivative of the BK117. Deliveries of
the EC130, the latest single-engine member of the Écureuilfamily, started in 2001.

EC225. The latest edition to the heavy-class family is theEC225. It is designed for passenger transport, in particularoffshore and VIP, but also for public service missions,such as search and rescue (SAR). More than 30 orders for
the EC225 and its military variant, the EC725, have been
booked to date. In September 2005, European Aviation
Safety Agency (EASA) awarded the EC225 helicopter anairworthiness certificate for unrestricted operations in icy
conditions.
Products in Development. Current product development
projects in the military segment include (1) the NH90, a
military transport helicopter with different versions fortactical, naval and combat-search and rescue applications,and (2) the HAD version of the Tiger helicopter.
Moreover, Management intends to commence new productdevelopment programmes in the near future in cooperation
with Asian partners.
NH90. The NH90 was developed as a multi-role helicopter
for both tactical transport and naval applications. The
project, principally financed by the governments of France,
Germany, Italy and the Netherlands, was jointly developed

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4by Eurocopter, AgustaWestland of Italy and Fokker Servicesof the Netherlands as joint partners in Nato Helicopter
Industries (“NHI”) in direct proportion to their countries’
expressed procurement commitments. Eurocopter’sshare of NHI is 62.5%. Production of the first lot of
243 helicopters and 55 optional helicopters to be delivered
to the four partner countries started in 2000, with firstdeliveries expected in 2006. The NH90 high cabin version
manufactured for the Swedish armed forces performed its
maiden flight in 2005.
Designed for modern multi-mission capabilities and costeffectiveness throughout its lifecycle, the NH90 has rapidly
become the reference military tactical helicopter for armed
forces worldwide, selected by 18 services in 14 countries.
In 2001, Portugal booked 10 NH90 helicopters; Finland,
Sweden and Norway jointly ordered the NH90 (52 firm
orders and 17 options); Greece ordered 20 aircraft in 2003,
plus 14 options; in 2004, Oman ordered 20 NH90 TTH’s
and Australia ordered 12 NH90’s (AIR 9000). Additionally,in the last twelve months, Spain, New Zealand and Belgium
also selected the NH90 as their preferred helicopter for their
upcoming acquisition programs The NH90 has been selectedby 11 countries and its backlog totals 357 firm orders and120 options. The announced selections add 73 helicopters to
the existing backlog.

Tiger HAD (Hélicoptère Appui Destruction). The HAD
version of the Tiger is a multi-role combat helicopter. It isbased on the Tiger HAP and incorporates a more powerfulengine, an IFF interrogation function, a new ballistic
protection and an air-to-ground missile (AGM) capability.
The HAD is expected to be qualified in 2010, withdeliveries between 2010 and 2014.
EC175. Eurocopter and Chinese AVIC II Corporation
launched the joint development and production of theEC175, a civil helicopter in the 6-ton category, which
will broaden both partner’s product ranges. The 5-year
development phase will begin in early 2006. The newcivil helicopter is due to make its first flight in 2009, with
European and Chinese certification set for 2011, the year inwhich production is due to begin. Production will be sharedon a 50/50 basis and each country will have its own assembly
line. Sales forecasts for this latest-generation helicopter callfor 800 units to be sold worldwide over the next 20 years.

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KHP. The Korean government chose Eurocopter as theprimary partner of Korea Aerospace Industries (“KAI”) in
the new KHP programme for the development of Korea’s
first military transport helicopter in the 8 metric tonclass. The 6-year KHP development phase will run from2006 to 2011. In the following 10-year production phase,
245 helicopters are to be manufactured. As the primarypartner of KAI, Eurocopter has a stake of 30% in thedevelopment phase and 20% in the production phase. This
programme is groundbreaking for Eurocopter in a previously
American-dominated Korean market. Eurocopter and KAI
have agreed to establish a 50/50 subsidiary to market
the export version of the KHP, which has a forecasted
worldwide demand of 250 helicopters over 20 years.

Customer Support
As of 31st December 2005, Eurocopter products constituted
the world’s second largest manufacturer fleet, with 9,460
helicopters in service worldwide. As a result, customer
support activities to service this large fleet generated
31% of Eurocopter’s revenues for 2005. Eurocopter’scustomer support activities consist primarily of training,
maintenance, repairs and spare parts supply. To provide
efficient worldwide service, Eurocopter has established aninternational network of subsidiaries, authorised distributors
and service centres. Furthermore, in order to meetglobalizing customer demand, Eurocopter is dynamicallyextending the range of services it provides to its customers.
For example, Eurocopter and Thales established HELISIM, ahelicopter-training centre, which opened in 2002. In 2004,
a consortium consisting of Eurocopter, CAE, Rheinmetall
Defence Electronics and Thales was awarded the contract
for the Helicopter Flight Training Services (HFTS), thefirst Private Finance Initiative (PFI) project to design, buildand operate three NH90 training centres in Germany. The
Eurocopter Training Academy will be officially establishedin 2006.

Customers and Marketing
Eurocopter’s principal military clients are European MoDs,
as well as MoDs in Asia and the Middle East. Eurocopter’s
penetration of the civil and parapublic market is globallywell-distributed, and its penetration of the civil and31

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parapublic market in Europe, the United States and Canada
places it first among manufacturers in these markets.
Eurocopter’s global strategy is reflected in the scale of its
large international network. Eurocopter’s network currently
encompasses 16 foreign subsidiaries, complemented by a
network of authorised distributors and service centres aimed
at a large number of existing and potential clients.
Additionally, Eurocopter has developed expertise inproduction licensing, joint production and subcontracting
agreements, and has been developing links with industrial
partners and suppliers in more than 35 countries.

support. In the Emergency Medical Service market segment,
Eurocopter helicopters dominate the fleets of large operatorssuch as Air Methods in the U.S. and ADAC in Germany.
Agencies with high serviceability requirements, including
police and armed forces, rely on Eurocopter products.

Production

Approximately 2,500 operators worldwide currently operate
Eurocopter helicopters, forming a broad established base forEurocopter’s customer support activities. Eighty-five percent
of Eurocopter’s customers have fleets of between one andfour helicopters.

Eurocopter’s manufacturing and development activities arecarried out primarily in four locations, two in France andtwo in Germany. The French sites are located in Marignane,in southern France, and La Courneuve, near Paris. The
German sites are located in Donauwörth and Ottobrunn,near Munich. With the ramping up of the Spanish HAD
helicopter assembly line in Eurocopter’s new Albacete
plant, Spain is becoming the third industrial pillar of theEurocopter Group.

The versatility and reliability of Eurocopter products havemade them the preferred choice of the most prominentcustomers. The U.S. Coast Guard operates 95 Dolphin(Dauphin) helicopters and the world’s largest offshore
operators (Bristow, CHC, Era and PHI) use Eurocopter
helicopters for passenger transport and offshore oil industry

The opening of an AS350 final assembly plant in Mississippi(targeting the U.S. parapublic sector) and of a Tiger final
assembly line in Australia (relating to a specific Australianversion under the AIR 87 programme) are further indicationsof Eurocopter’s truly global presence and strategy of being
close to its customers.

1.1.5 Defence & Security Systems
Introduction and Overview
The Defence & Security Systems Division (“DS” or the “DS
Division”) was created in 2003 to serve as the main pillarof EADS’ defence and security activities. By combining
EADS’ Missile Systems (EADS’ share in MBDA), Defence
and Communications Systems (DCS), Defence Electronics(DE), Military Air Systems (MAS) (and EADS’ share of
the Eurofighter programme), as well as services activities
within one division, EADS has focused its defence businessto better meet the needs of customers requiring integrated
defence and security solutions.
In its second full year of operation, the DS Division
succeeded in expanding its cash flow and maintaining its
EBIT* level over €200 million, mostly due to higher revenues
driven by Eurofighter deliveries and MBDA programmes

while investing significantly further in UAV programmes,
further streamlining businesses and improving capabilities
in Large Systems Integration (“LSI”). An additional external
growth potential will be achieved through acquisitions in
the naval and professional mobile radio businesses. DS’
portfolio of innovative products and integrated solutions thatcover electronics, missiles, platforms, systems and services,
is designed to meet growing and changing requirements
for all military and security needs. DS intends to continue
the process of strengthening its LSI role in EADS’ Systems
and Solutions provider concept by increasing its focus
on core businesses and fostering further efficiencies andadaptations. Through these measures, the DS Division
expects to contribute to EADS’ overall objective of raising thepercentage of revenues derived from defence from 25%
to 30% over the next five years.

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System Design Centre (SDC)
The System Design Centre supports defence and security
customers in Concept Development and Experimentation(CD&E) with Modelling and Simulation (M&S) in asynthetic environment, providing system architecture
design framework and relevant competencies to the
DS BUs and the overall EADS Group. The SDC isinstalled in France, Germany and the U.K. and provides
a transnational networked experimentation and test
environment through its Network Centric Operations
Simulations Centres (NetCOS). By applying standardised
methods and tools, the DS Division’s LSI strategy is put
on a solid and interoperable basis.
On a consolidated basis, the DS Division generated revenuesof €5.6 billion for 2005, representing 16% of EADS’ total
revenues.

2005 Highlights for the DS Division
Several factors contributed to DS’ progress in 2005.
Transatlantic programmes such as MEADS and NATOAGS received contracts, while the Eurofighter programme
continued delivery of Tranche 1 to partner nations. Successesin Missiles Systems include MBDA’s contract awards for
Exocet and Aster, as well as deliveries of Storm Shadow,
and the commencement of series delivery for LFK of the
Taurus missile systems to the German Bundeswehr. Taurus
also received its first export contract from Spain. In the U.K.,
the Atlas consortium, which includes the DS Division asa tier one member, won the contract for the U.K. MoD’s
defence information infrastructure (DII). The DS Division
expanded its presence in the areas of naval business with theacquisition (subject to closing) of Atlas Elektronik - together
with ThyssenKrupp Technologies - and the professional
mobile radio (PMR) business with the purchase of Nokia’s
PMR business. In Missile Systems, the DS Division took
decisive steps in integrating LFK into MBDA.

StrategyWith its new, integrated structure, the DS Division presents
a more harmonised approach to its customers in answeringto the trend towards capabilities-based procurement, whileat the same time creating internal synergies and savings.

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The DS Division is also moving beyond defence to security
and has recognised that its customers increasingly require
full-service packages and integrated solutions to support thistransformation process. Another aim for the DS Division is tosustain growth by focusing on further cooperation with homemarket customers while fostering and developing transatlantic
partnerships. A clear goal remains to increase global reach indeveloping markets, including Central and Eastern Europe,
India, Asia and the South Pacific, and South Africa.

Streamlining and focusing the DS Division
The organisational structures of Defence andCommunications Systems and Defence Electronics havebeen streamlined and Military Air Systems (which has been
operating under the new name since January 2006) has
considerably expanded its portfolio in 2005 while receiving
an optimised structure to reap the growing demand for
UAVs. Centralisation of marketing and sales activities will
create one face to the customer and harmonize DS Divisionofferings, while at the same time creating a footprint
and global communities in key export markets, thereby
enhancing its focus on customer needs. Moving the System
Design Centre to DS Division level makes it more visible
and accessible to BUs and the EADS Group. Focusingon people development, improvement of project risk
management and streamlining its processes will ensure thatthe new organisation runs efficiently. Additionally, each BU
will lead operative parts of the Services business, which will
strengthen the capacities for future cooperative models withthe customers.

Supporting the transformation process
Through already existing programmes with the NATO
Supreme Allied Command Transformation, the French
Defence Ministry, the U.K.’s NITEworks and Germany’s
national integrated test bed (NITB), DS is actively promoting
European and NATO transformation. DS is supporting its
customers in assessing and evolving their security needs
by supplying simulation systems such as NetCOS in threeout of the four home countries and with plans to expand
to the U.S. DS also participates in the Network CentricOperations Industry Consortium (NCOIC), an industrybased collaborative forum, formed in order to recommend anarchitectural approach that system and platform developers

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may follow to facilitate their participation in a global
network environment. The focus for the future will be
to continue to work closely with industry and customer
working groups to help define, influence and, mostimportantly, deliver system solutions geared towards anintensified transformation process.

current U.S. industrial presence in defence electronics andtest & services. EADS North America Defence Company(“NA DefCo”) is part of the overall strategy to increasebusiness with the U.S. Department of Defence and the U.S.
industrial primes. NA DefCo is, however, an independent
entity and remains outside of the DS organisation. Methods
for expanding into the United States include:

Moving beyond defence into security• pursuing specific market segments where the DS Division
can offer superior products and technologies, such as the
Hellas obstacle avoidance system for helicopters and the
TRS-3D radar for the U.S. Coastguard;

As an enabler for the organisations countering asymmetricalthreats, DS’ Large Systems Integration approach is theparadigm for the realisation of global security solutions.
Seeking to maximise efficiencies through the optimal useof data and information together and across the relevant
security organisations, DS is adapting its expertise in defence
to the fast-growing markets of global security (estimatedat €35 billion globally per year), multiplying the numberof revenue and profit opportunities. Best practice examples
include border surveillance in Romania and a contract
to provide a nationwide Trans European Trunk Radio(“TETRA”) radio network for Hungarian authorities.

Strengthening the DS Division’s position inhome markets and the U.S.
DS is continuing to focus on its customer orientation in the
U.K., France, Spain, and Germany. Within these respective
markets, further efforts in the core businesses will remain
a strategic goal towards profitable growth in defence. In
particular, EADS seeks to raise its visibility in the U.K.
and capitalise on the opportunities that the U.K. market
provides. The DS Division aims to become a market leader
through projects emphasising LSI solutions such as U.K.’s
defence information infrastructure (DII) programme, andground based air defence (Land Environment Air Picture
Provision - LEAPP). DS recently established a NetCOS
centre in the U.K. with others already existing in France andGermany. In France, further inroads have also been made in
the area of UAV technology partnerships and command &control systems. As an important partner in the Eurofighter
consortium through EADS CASA, Spain continues tobe a significant market for profitable growth, which DS
is focused on developing. Involvement in the NEURON
demonstrator is also coordinated through MAS Spain.
Penetration of the U.S. defence market remains a key
objective for the DS Division, which seeks to expand its• building strong transatlantic industrial partnerships with
U.S. prime contractors, including Northrop Grumman(U.S. Tanker programme, NATO AGS, Ballistic Missile
Defence, EuroHawk®), Lockheed Martin (MEADS,
Deepwater, Littoral Combat Ship, COBRA, Ballistic
Missile Defence) and Raytheon (Ballistic Missile
Defence) to explore new opportunities driven by militarytransformation; and• seeking acquisitions and new partnerships to enhance the
DS Division’s U.S. operational footprint across several
market sectors, including platform systems, operational
support and defence electronics.

Defence and Communications Systems(DCS)
Defence and Communications Systems (“DCS”) is the
EADS “Systems House”. The mission of DCS is to create
complete communication and information system solutions
and the means to implement them. DCS offers to its
customers comprehensive and tailored solutions, combining
the know-how to design, develop and implement LSI (Large
Systems Integrations), and link the widest possible range ofindividual platforms and subsystems into a single effective
network.
Information and secured communication system solutionsin global security as well as systems enabling for effective
border control and coastal surveillance constitute anothermajor focus for DCS. System integration is becoming
increasingly important in these areas.
Through the acquisition (subject to closing) of Atlas
Elektronik in Bremen together with ThyssenKrupp
Technologies, DCS will pool its competencies in naval

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sensors, electronics and combat management systems, thus
creating a strong maritime electronics and systems company.
In 2005, DCS generated 19% of DS’s total revenues.

Markets
DCS faces competition from large U.S. and European
companies that also specialise in DCS markets. Major
competitors are Lockheed Martin, Thales, Motorola andSAIC. Key customers for DCS’ business include mainly
governmental customers, such as MoDs, ministries ofinterior in the home markets France, Germany and the U.K.
with an increasing focus on other European countries andAsia.

Products
Mission Systems & Solutions (“MSS”). DCS offers
comprehensive military mission capabilities in the areaof airspace dominance, battlespace systems, intelligencesolutions and naval systems as well as an overall systems
support. It acts as a prime for full systems design architectureand systems integration responsibility for military land-,sea-, air- and space-based systems. MSS delivers airspacedominance systems for defensive, offensive and support
operations in a combined, joint environment, thus realizing
flexible, network enabled capabilities.
In the area of battle management solutions for army andjoint forces, MSS provides complete solutions offering acontinuous chain of command from the highest level ofcommand to the forces on the ground. The portfolio allows
to take mutual advantage from a variety of interdependent
elements: multi data source fusion systems, multi mission
ground stations, command control (C3I) systems for the
strategic, operative and tactical level, military communication
networks and intelligence systems. MSS is a major designerand supplier of C3I systems to the armed forces in Franceand Germany, and the Joint Staffs in France, Germany andNATO.
MSS systems support enables customers to maintain andoperate their EADS provided systems over the service life ofthese systems.
Major contracts signed include the installation of a landbased maritime traffic surveillance and coastal protection
system in Portugal and a contract for the development of

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the French C3I system SIR. In the Asia Pacific a contract
with the Vietnamese Ministry of Natural Resources and theEnvironment for an integrated surveillance system for theVietnamese Centre for Remote Sensing was signed.

Information Infrastructure Solutions (IIS). DCS provides
solutions, interfaces and gateways necessary to use
Open Architectures that improve interconnection andinteroperability. Key competencies are information
infrastructure security, network infrastructureinteroperability, information management, satellite based
broad band solutions, information infrastructure integration,
integrated logistics support, interoperability and spectrum
dominance.
IIS is focusing on the information infrastructure throughsystems and services by integrating relevant C4I-Systems
on all types of platforms in order to network all players
in the battle space. IIS is responsible for designing andimplementing infrastructure including all the services
needed to support the Mission Systems & Solutions projects.
The Atlas consortium (in which Fujitsu is the prime
contractor and EADS is a key member) won the contract for
U.K.’s MoD defence information infrastructure (DII) projectin 2005. The 10-year programme will provide 300,000 users
with a single information network delivering a coherent
integration of sensors, decision makers, weapon systems
and support capabilities. IIS also won a contract award from
NATO procurement agency to supply an Interim Forces
Tracking System (IFTS), a secure system for locating Allied
Forces in Kosovo and the Balkans.

Global Security. DCS provides fully integrated solutions andservices in order to mitigate risk exposure in the areas of:border and maritime security, crisis management, large event
protection and critical infrastructure. Taking into account theincreased interconnection between different areas of threat
and particularly in view of the growing interdependencies
of internal and external security, the seamless collaborationof different security organisations is increasingly important.
EADS seeks to maximise efficiencies through the optimized
use of data and information together and across the relevant
security organisations.
The contract between Romania and EADS, confirmed in
2005, provides for the delivery of an integrated system forsurveillance and securing of the Romanian border. This will
enable Romania to meet its increased security requirements

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4after its planned E.U. entry. The first phase of the projectwill be completed by the end of 2006, shortly before
Romania officially joins the E.U., and completion of theoverall project is targeted for December 2009.

Secure Networks (“SN”). DCS provides integrated security
solutions for public safety, civil defence entities, transport
and industries, using TETRAPOL, TETRA and P25
standard secure communication networks. SN has taken overNokia’s PMR business in 2005 and is now a global leader
in providing high level communications systems for law
enforcement and civil safety organisations.
Major contracts recently signed are the delivery of theinfrastructure for the Hungarian nationwide TETRA
radio network (EDR), the TETRA solution to securecommunications during 15th Asian Games in December
2006 in Qatar, the procurement contract to supply theGerman Armed Forces (Bundeswehr) with TETRAPOL
technology and the contract with the French National
Gendarmerie on modernisation of its “RUBIS” secure
TETRAPOL radio communications network. Within thescope of the competitive tendering for the nationwide digital
voice and data transmission network for German security
authorities and organisations (“BOS”), EADS has submitted
the most cost-effective bid according to the results of thefirst evaluation.

Defence Electronics (DE)As the Electronic Warfare, Avionics and Sensors House
of EADS, DE provides mission-critical elements for data
gathering, data processing and distribution, and self-defence.
Its business is based on sensors and subsystems as a secondtier supplier and addresses the market for surveillance andreconnaissance, military mission management, platform selfprotection, network-enabled capabilities and military forces
support.
In 2005, the DE business generated 11% of DS’s total
revenues.

Markets
EADS’ main competitors in defence electronics are large
and medium-sized U.S. and European companies (i.e.,
Raytheon, Northrop-Grumman, Thales, BAE Systems,
Galileo Avionica, Indra and Saab) as well as competitors from

Israel. Following this year’s integration of Ewation GmbH
into DE, growth in Electronic Warfare (EW) systems is a key
strategic goal for DE. DE’s key customers include MoDs,
interior ministries, military services, security forces, the inhouse EADS systems suppliers and other LSI’s worldwide.
Through various joint ventures, participations andcooperations, DE has access to MoDs of all NATO countries,
particularly in Germany, France, the U.K., Spain and Italy.
Export markets, especially in the Middle East andthe Asia-Pacific region, also offer growth opportunities.

Products
Electronic Warfare and Self Defence. DE supplies electronic
self-protection systems for aircraft, ships and armoured
vehicles, such as laser warning, missile warning and active
electronic countermeasure units, including directed infrared
countermeasures, self-protection jammers and towed
decoys. In this field DE delivers core components to the“EuroDASS” defensive aids subsystem on Germany’s 180
Eurofighters and supplies additional avionics components
to the wider Eurofighter programme. It has subsystem
responsibility for the A400M’s self-protection system,
also supplying core EW equipment such as the Infrared
missile warning system MIRAS contracted in 2005. For
military mission aircraft, helicopters (NH90, Tiger) and VIP
aircraft, DE is particularly developing solutions to counterthreats from infrared-guided missiles. To date, DE has soldapproximately 5,000 units of its missile warning sensor(MILDS), which is deployed on a variety of helicoptersand transport aircraft. Based on MILDS, DE has developed
the version MILDS F to meet specific requirements for theRoyal Danish Navy’s F-16 fighter aircraft. DE also offers
self-defence equipment for ships and armoured vehicles.
Avionics. As a major partner in the field of military mission
avionics for the A400M, DE assumes the subsystem
responsibility for mission management and defensive aids.
The DE portfolio also comprises avionics equipment, suchas digital map units (EuroGrid), flight data recording units
and obstacle warning systems for helicopters. Additionally,
DE is developing multi-sensor integration and data fusion
technology, which is a key future technology for networkenabled capabilities. For example, DE is in charge of sensor
fusion software on the NATO AWACS E3A and theAustralian “Wedgetail” programmes and was awarded acontract in 2004 to develop a Multi-Sensor Tracking system

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for the Finnish Air Force. Additional products offered by
DE in the field of communication and identification includewide-band modular data links and MIDS (multi-function
information distribution system), both core elements of
network-centric operations.

Sensors. DE is a principal partner for airborne multimode radars such as the Captor radar in the Eurofighter
programme, combined with integrated logistics support,
maintenance and upgrades. DE is also heavily involvedin the technology development and application of nextgeneration active phased array radars for air, naval andground applications, such as Eurofighter, the Tactical Radarfor Ground Surveillance (TRGS) and MEADS. In the areaof air defence, EADS produces mid-range radars forship (TRS-3D) and land (TRML-3D) applications. As
subcontractor for the K-130 corvettes of the German
Navy and the Finnish Squadron-2000 programme, EADS
is responsible for major shipboard sensor subsystems. A
success in the U.S. market was a bilateral agreement signedin October 2004 for a long-term partnership with Lockheed
Martin to evaluate opportunities for joint development,
marketing and production of the TRS-3D in othershipbuilding programmes worldwide, which has led to tworadar contracts to date.
DE also takes a lead role in developing and manufacturing
synthetic aperture radars (SAR), which are consideredessential for future reconnaissance and surveillance
operations. In this field, EADS has developed MiniSAR, theEuropean stand-off SAR sensor for wide-area surveillance(SOSTAR-X) as well as for use in the TCAR AGS Radarfor the NATO AGS programme. DE’s radar competence
is underscored by the Microwave Factory, an automatedassembly line for the manufacturing of miniaturized highfrequency components forming an integral part of futureradar sensors and electronic warfare applications. EADS
holds a 50% stake in United Monolithic Semiconductors(UMS), a joint venture with Thales. UMS provides EADS
with access to essential gallium arsenide technology for nextgeneration radars.

Military Air Systems
The DS Division’s Military Air Systems unit focuses on thedevelopment and manufacturing of the Eurofighter combat
aircraft, maintenance, repair and overhaul (MRO), logistics

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support, upgrade of existing combat air systems, provision oftraining services and construction and manufacturing of Airbus
aerostructures. Additionally, Military Air Systems designs lightcombat / training aircraft and unmanned aerial vehicles (UAV/ UCAV). Military Air Systems has launched the MACH4ichange project to optimize its organisation, streamline its
internal processes and improve its corporate culture.
In 2005, the Military Air Systems business generated 32%
of DS’s total revenues.

Products and Services
Eurofighter. Eurofighter, known as “Typhoon” for export
outside of Europe, is a network-enabled, extremely agile,high-performance multi-role combat aircraft optimised
for swing-role operations in complex air to air and air tosurface combat scenarios. It is fully compatible with stateof-the-art NATO weapons systems. Known as Europe’s
largest collaborative programme, Eurofighter is designed
to enhance fleet efficiency through a single flying weapon
system capable of fulfilling supersonic, beyond-visual-range
combat, subsonic close-in air combat, air interdiction, airdefence suppression and maritime and littoral attack roles.
The tactical requirements of the aircraft include all-weather
capability, short take-off and landing capability, highsurvivability and operational readiness. The Eurofighter was
designed to be adapted and improved over the long-term, as
new avionics and weapons evolve, to provide for an extended
service life.
The Eurofighter programme is organised through theNATO Eurofighter and TORNADO Management Agency(“NETMA”) via participating nations. NETMA contracts
with Eurofighter Jagdflugzeug GmbH (Eurofighter GmbH),
the programme management company for the Eurofighter
programme. The Eurofighter GmbH shareholders andsubcontractors are EADS (46% share), BAE Systems(33% share) and Alenia Aerospazio, a division ofFinmeccanica (21% share). With regard to series production,
the respective production workshares of the participating
partners within the Eurofighter consortium stand at 43%
for EADS, 37.5% for BAE Systems and 19.5% for Alenia,
reflecting the relative number of aircraft ordered by eachcountry’s programme participant. EADS is responsible
for the centre fuselage, the flight control systems, themanufacturing of the right wing and leading edge slats, and37

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the final assembly of the 180 aircraft for the German Air
Force and 87 aircraft ordered by the Spanish Air Force. The
final assembly of the Eurofighter takes place in the relevant
contracting country: Manching in Germany, Getafe in Spain,
Warton in the U.K. and Torino in Italy.
In January 1998, NETMA signed an umbrella Eurofighter
contract for 620 aircraft: U.K. 232 (with 65 options);
Germany 180; Italy 121 (with 9 options); and Spain 87 (with
16 options). The umbrella contract, while fixing a maximum
price for the overall programme, also stipulates that
production agreements are to be awarded in three tranches.
The programme includes the development, production
investment and series production of the aircraft. Currently,
402 aircraft are firmly on order.
Eurofighter’s first tranche of 148 aircraft is being delivered
between 2003 and 2007, with additional production expected
to continue until 2015. Seventy-four Tranche 1 aircraft havebeen delivered as of the end of 2005, and the rest are in final
assembly or advanced production. Eurofighter has alreadysold 18 aircraft to Austria, and further export opportunities
are believed to exist in Europe, the Middle East and theFar East. A government-to-government agreement has beenreached between the U.K. and the Kingdom of Saudi Arabia
on the purchase of Eurofighter aircraft, marking the firstexport success of the aircraft outside Europe.

Intelligence, Surveillance and Reconnaissance Systems(ISR). ISR focuses on the development of complete air-based
systems with integrated sensors for strategic, operational
and tactical missions primarily for information procurement(i.e., surveillance and reconnaissance). The ISR productportfolio comprises the complete spectrum of manned
mission aircrafts and Unmanned Air Vehicles (“UAVs”)
and Unmanned Combat Aerial Vehicles (“UCAV”). In June
2004, the French MoD launched an initiative to close the gap
in European defence capacity in the area of MALE drones
with a system designed and manufactured by European
industry. The Minister subsequently appointed EADS for
the EuroMALE drone demonstrator programme. EADS’
main partners in the project are Dassault and Thales. EADSis also working on a technology demonstrator project toacquire new experiences and technologies for future UAVs.
The transatlantic EuroHawk® project was initiated by EADS
and Northrop Grumman in July 2000. The two companies
signed an agreement to develop an unmanned aerial wide-

area surveillance and reconnaissance system by bringing
together their respective expertise and company-funded
developments in UAV and mission system ISR technology.
This cooperation initiated a bilateral project agreement
between the U.S. Air Force and the German MoD, which
was signed in October 2001. The first phase of the project
includes the proof of operation of the high altitude long
endurance (HALE) UAV concept, the integration of the
Defence Electronics (DE) signal intelligence (SIGINT)
sensor and a flight demonstration programme in Germany
successfully concluded in 2003 to the customer’s continuingsatisfaction. Additional milestones include the German
Procurement Agency proposal request delivered in
September 2004 and the expected Design and Development
Contract award in 2006.
The Transatlantic Industry Proposed Solution (“TIPS”)
Consortium, made up of EADS, Galileo Avionica, General
Dynamics Canada, Indra, Northrop Grumman and Thales,
was selected by NATO in April 2004 to provide a NATOowned common ground picture for battlefield planningwith a mixed fleet of manned wide body -jets (A321)
and high -altitude long -endurance UAVs (Global Hawk).
The Transatlantic Cooperative AGS radar (“TCAR”) will
equip both manned and unmanned platforms. The TCAR
consortium under the lead of DE is composed of Dutch
Space, EADS, Galileo Avionica - FIAR, Indra, Northrop
Grumman, Raytheon and Thales. The TCAR programme
will be integrated into the NATO AGS bid, acting as a
subcontractor within TIPS. In 2005, TIPS successfullycompleted a risk reduction study which was anotherimportant milestone that confirms this programme is both
affordable and executable. The Design and Development
Contract award from NATO is expected in 2006.

Pilot Training and Training Aircraft. The training and lightcombat aircraft market is competitive, with offerings fromBAE Systems (Hawk 128), KAI/Lockheed Martin (T-50),
Aermacchi (AM-346) and others. EADS’ entry in this fieldis the Mako High Energy Aircraft Trainer (HEAT). The
Mako HEAT is intended to close the growing gap between
the demands made on pilots by modern fighter aircraft andthe training opportunities provided by ageing in-service
trainers. While EADS will not launch a full-scale designphase for the time being, efforts to win customers andindustrial partners will continue.

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Military Air Systems Upgrades and Support Services. In
addition to providing profitable after-market services toexisting customers, aircraft modernisation operations provide
access to new export markets for future sales of all typesof aircraft, both military and commercial. The upgradingof military airframes is particularly attractive for countries
with limited national defence budgets, such as those inCentral and Eastern Europe, Latin America, North Africa
and some Asian regions. For these nations, the purchaseof new multi-role aircraft is either politically or economicallyunaffordable, making upgrading of existing airframes
the most cost-effective solution. EADS has developed
expertise in the field of Military Air Systems upgrades
through programmes for such aircraft as the Tornado,
F-4 Phantom, F-18, F-5, MiG-29, Mirage F-1, C101
Aviojet, Harrier AV-8B, E-3A AWACS, P-3A Orion,
C-160 Transall and Breguet Atlantic 1. These capabilities
will be particularly valuable in capturing new markets, suchas further upgrades of central European air force aircraft
and future support contracts for Eurofighter.

Missile Systems
The Missile Systems group within the DS Division(consolidating 50% of MBDA and 100% of EADS / LFK)
offers superior and unique capabilities in missile systems
and covers the whole range of solutions for air superiority,
land control and sea power missions, while also providing
the most evolved technological solutions in strike weaponsand missile defence for all three services. The further
development of access to export markets access and theconsolidation of the business will remain principal goals
for 2005. Enhancing the missile technology and productportfolio to provide customers with a broader range of costeffective missile solutions should enable MBDA to continue
to offer an unrivalled range of products and services. The
integration of EADS / LFK into MBDA is under way,following receipt of final approvals from the European
Commission and the German competition authority in
February 2006.

Markets
Missile Systems has a geographically diverse customer
portfolio. Through a multinational network of subsidiaries,
this unit has direct access to the major European domestic
markets in France, Germany, Italy, Spain and the U.K. It
also has a stable foothold in growing export markets such
as Asia and the Gulf region, and benefits from transatlantic
cooperation on programmes such as MEADS and Patriot.
Four principal defence contractors are active in theworldwide market for tactical missiles and missile systems.
As measured by revenues in U.S. Dollars, MBDA ranked
first in 2005 sales figures for the second time and ahead ofRaytheon, Lockheed Martin and Boeing missile activities.
The current worldwide market for missile systems is
estimated to exceed €10 billion. This market is expected toincrease due to:• the demand for development of new products (such as
ground -based air defence systems and precision stand-off
guided missile systems);• new missile carrying platforms entering into service(Mirage 2000-5/9, Rafale, Eurofighter/Typhoon, Gripen,
Tiger helicopter, new frigates and aircraft carriers); and• different requirements for future weapon systems derived
from new operational tasks and lessons learned fromrecent conflicts.

Products
The EADS Missile Systems group, with its broad range of
MBDA and LFK products, is active in all of the six principal
missile system categories: air-to-air, air-to-surface, groundto-air, surface-to-air, anti-ship and surface-to-surface. The
following table lists the programmes in which EADS
participates as prime or major contractor either directly or
through joint ventures:

In 2005, the Missiles Systems business generated 35% ofDS’s total revenues.

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Type of Missile

Purposes

Key Products or Projects

Short-range

ASRAAM

Beyond visual range

MICA

Air-to-Air

Air-to-Ground

Ground-to-Air
Ground-to-Air/ATBM

Ground-to-GroundLong-range

MeteorStand-off guided

Taurus KEPD 350, AFDS, DWS (for fighter aircraft)Long-range

LR TRIGAT (for TIGER helicopter)

Short-range

Diamond Back – Bang

Stand-off with sub-munitions

ApacheStand-off unitary warhead

Scalp EG / Storm Shadow

Prestrategic stand-off

ASMP – ASMP A/VESTA

Anti-radar

ALARM

Tactical air defence

Stinger, LFK NG, Roland, Gepard, Patriot / PAC 3, MEADS

Very short-range

Mistral – Stinger (under license)

Short-range

VL Mica – Roland – Rapier – Spada

Medium-range

Aster SAMP / T – MEADS – Patriot/PAC 3

Medium-range

Milan / Milan ADT, HOT

Subsystems

Warheads (TDW)
Propulsion Systems (Bayern Chemie) (e.g., Meteor / ramjet)

Surface–to-Air/Naval

Very short-range

MistralShort-range

VL Mica – VL Seawolf

Short-range

Albatros – RAM

Medium-range

Aster/PAAMS – Aster / SAAM – ESSM

Light

Sea Skua – AS 15 TT – NSM – Marte

Heavy

Exocet family - TESEO

Anti-submarine

Milas

Anti-ship

Anti-tank

Surface-to-Surface, Deep Attack

Short-range

Eryx

Medium-range

MilanLong-range

HOT – LR Trigat - Brimstone

Ground-to-ground

G-MLRS

Sea-to-land

Scalp Naval

The most significant programmes currently underdevelopment and production are Aster, Storm Shadow /Scalp EG, Taurus and Meteor, with the bulk of deliveriesscheduled between 2003 and 2007.

Aster Family. The FSAF (famille de missiles sol-air futurs)
Phase 3 contract signed with OCCAR (Organisation
Conjointe de Coopération en matière d’Armement) in
November 2003 is worth €3 billion (thereof €2.3 billion
MBDA). This contract covers the series production of
approximately 1400 Aster missiles and associated missile
systems, and it represents Europe’s first advanced naval andground-based air defence missile system with Anti-Tactical
Ballistic Missiles (ATBM).

Storm Shadow / Scalp EG. Already in service in the U.K.
and France, and entering service in Italy in 2006, theStorm Shadow / Scalp EG was also selected by Greece inJanuary 2004. The Hellenic Air Force has ordered 34 Storm
Shadow / Scalp EG (SS / EG) missile systems. Having
reached full production in 2004, the SS / EG has delivered
about 600 missiles to customers in 2005. In the UAE, where
the missile is known as “Black Shaheen”, deliveries are under
way to the air force.
Taurus KEPD 350. EADS / LFK and SAAB Bofors areworking together under the roof of Taurus Systems GmbHto create and deliver the Taurus KEPD 350, a precise
stand-off guided missile system for Tornado, Gripen and

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Eurofighter aircraft. Taurus KEPD 350 is starting series
production for the German Air Force and a first batch of
65 have been delivered. In 2005, Spain has also decided its
intention to procure 43 Taurus KEPD 350 for its F/A-18 andEurofighter aircraft.

METEOR. For its first live air-launched demonstration in
2006, METEOR will be fired from a Gripen combat aircraftat the Vidsel range in Sweden. This test flight, using a
missile equipped with a full telemetry capability (not witha warhead or a seeker), will confirm METEOR releaseproperties, manoeuvrability and the effectiveness of the
motor technology as it goes through its boost and sustain
phasesMEADS. The MEADS Medium Extended Air Defence
System, a ground-based tactical air defence system, isa good example of dynamic and successful cooperation ona transatlantic level. MEADS will protect troops during
out-of-area missions and objectives within the scope ofhomeland defence. The financial share of the programme is
58% American, 25% German and 17% Italian. The technicalworkshare of the companies involved – EADS / LFK(Germany), MBDA-IT (Italy) and Lockheed Martin(United States) – is in line with the respective cost
contribution percentages. The European companies
coordinate their activities through the joint venturecompany euroMeads GmbH, which, like Lockheed Martin,
has a 50% share in MEADS International Inc. (“MI”). On
1st June 2005, MI formally signed a contract to designand develop MEADS. The contract value is approximately$2 billion plus €1.4 billion for the program’s design anddevelopment (“D&D”) phase. The D&D contract extends
the period of performance of a previous letter contract that
was awarded to MI by the NATO MEADS Management
Agency (NAMEADSMA) in September 2004. Award of
the contract followed the German government’s approval on
20th April 2005 of entry into the MEADS D&D phase, a
step taken earlier by the governments of Italy and the UnitedStates.
Ballistic Missile Defence. EADS is the only company inEurope with the full range of skills and technologies needed
to develop, deploy and support Ballistic Missile Defence(“BMD”) systems, whether for the protection of armed
forces or entire countries and their populations. As part of
the U.S. effort to develop a defence against missile attack,
NATO has selected EADS as a member of a transatlantic

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consortium to conduct a Theatre Missile Defence feasibility
study. In September 2004, EADS and Raytheon signed a cooperative agreement to begin collaborating on ballistic missile
defence interceptor programmes in Europe, the U.S. andaround the world. EADS has signed further Memorandumsof Understanding in the field of BMD with Lockheed
Martin and Northrop Grumman.

Services Activities
The DS Division’s Services activities were organized in 2005
around outsourced services, test and related services, andsystem engineering services. Each BU leads operative partsof the services business, further developing the activities in
the area. Additionally, a centre of competence for services
activities is being created. Capacities for future cooperativemodels with the customer will be strengthened. The growing
complexity of modern systems and engineering tools andthe requirement for cost-effectiveness has led customers to
demand turnkey solutions instead of stand-alone equipment.
Because of its technical and organisational capabilities,
EADS can pool the resources and products of its various
subsidiaries and external suppliers to offer such solutions.
For armed forces, outsourcing is an effective solution to the
problems of tight public budgets and reductions of military
personnel. To maintain its position as prime contractor withmilitary customers and to generate profitable growth instable defence markets, EADS aims to play a key role in suchoutsourcing of defence activities.
In 2005, Services activities generated 4 % of DS’s total
revenues.

Outsourced Services
This provides for training services to the German and Frenchnavies and air forces for air defence, in addition to otherservices in Europe. EADS was selected by the German
MoD for a 5-year flight operations contract (€95 million)
from 2004 until 2008 (target towing, ELOKA training).
Altogether, Services units operate 26 aircraft.
Services also participates in various outsourcing projects for
French, German, Spanish and U.K. military customers in thefield of logistics, training, telecommunications and flight
operations.

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Services units will participate in the Atlas consortium, which
was shortlisted against on competitor in the DII (Defence
Information Initiative in military communications) project.

Test & Services
The increasingly complex electronics used in civil andmilitary air systems and weapon systems require continuous
equipment maintenance testing solutions.
Through its Test & Services unit, the DS division confirmed
its leading worldwide market share position for multipurpose civil aviation test systems and related services, aswell as its leading position in Europe as supplier of multipurpose defence test equipment. In 2005, Test & Services
sustained its level of orders from airlines worldwide.
This is consistent with Test & Services’ strategy to developa scalable technical standard that provides airlines with
continuous solutions.
The acquisition of Racal Instruments resulted in the group’s
Test & Services unit becoming the leader in the market
for testing equipment, solutions and services in Europe.
Future plans include implementing and developing synergies
between Racal Instruments and the former Test & Services
unit and generating new customers in different countries
through partnerships or industrial presence.

System Engineering and Consulting Services
In 2005, Apsys continued to build on its position as the
French leader in risk management on advanced technology
projects. This operating unit offers different types ofservices (e.g., consulting; studies; training; software; andaudit) along all phases of a project life-cycle and utilises
various technical approaches (e.g., reliability, availability,
maintainability and safety studies; human factor analysis;
industrial, environmental and nuclear risk assessment;
and software and system quality). Major markets include
aeronautics, defence, the petroleum industry andtransportation systems. Apsys plans to continue its long-term
partnerships with EADS customers (Airbus, Eurocopter andSpace Launchers), representing the majority of its revenues,
while also diversifying and enhancing its business with othercustomers.

Dornier Consulting GmbH
Dornier Consulting continued its direction of profitable
growth in 2005 as a company for Future-oriented
transportation and technology consulting with focus
on traffic, transportation and logistic concepts, system
specification and integration, modern technologies for the
management of natural resources as well as professional
full-service project management. It is an independent
consulting and engineering company with clients in the
public and private sector in Germany, Central and Eastern
Europe, Central Asia as well as in the Near and Middle East.
Major clients are national and international institutions(World Bank, United Nations Development Programme,
European Union, Kreditanstalt für Wiederaufbau (KfW),
Gesellschaft für Tecnische Zusammenarbeit (GTZ)),
governments, authorities, German Railroad (Deutsche
Bundesbahn), DaimlerChrysler and EADS as well as a wide
spectrum of private companies. Dornier Consulting intends
to further develop its position within EADS and to act as adoor opener for other EADS Units.

1.1.6 Space
Introduction and Overview
EADS is the third-largest space systems manufacturing
company in the world after Boeing and Lockheed Martin
and the leading European supplier of satellites, orbital
infrastructures, launchers and associated services. In 2005,
the Space Division’s consolidated revenues were €2.7 billion,
representing 8% of EADS’ total revenues.

The Space Division (“EADS SPACE”) designs, develops
and manufactures satellites, orbital infrastructures andlauncher systems and provides space services. EADS SPACE
is composed of three main entities: EADS Astrium, EADSSPACE Transportation (“EADS-ST”) and EADS SPACE
Services. EADS SPACE also provides launch services,
through its shareholdings in Arianespace (Ariane 5 launcher),Starsem (Soyuz launcher) and Eurockot (Rockot launcher),

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as well as services related to telecommunications andearth observation satellites, through dedicated companies
such as wholly-owned subsidiaries Paradigm Secure
Communications and Paradigm Services (“Paradigm”),
Infoterra and joint ventures such as Spot Image.
The return to profitability of EADS SPACE in 2004,
following two years of major industrial re-engineering, wasmaintained in 2005 with a positive EBIT* of €58 million(2.2% of revenues). All three BUs of EADS SPACE,(EADS Astrium, EADS-ST and EADS SPACE Services)
have posted positive 2005 results.

Strategy
As part of EADS, with an established presence in four
European space powers (France, Germany, Spain and theUnited Kingdom), and a future presence in the Netherlands
due to the on-going acquisition of Dutch Space, EADSSPACE is the only European company to benefit from thefull range of competencies in all fields of the space industry(satellites, launchers, orbital infrastructure and services).
EADS SPACE’s strategy is to build on these key strategic
assets and to strengthen its position in the market.

Secure EADS’ position in the commercial launchservices market
As the main industrial shareholder and prime supplierof Arianespace, and with the backing of European
governments (illustrated by the implementation of theEuropean Guaranteed Access to Space (EGAS) initiative),
EADS leads the restructuring of the European spacetransportation industry in response to increased competitionin the launch vehicle field and a weak commercial
telecommunications satellite launch market. EADS SPACE
is the prime contractor for Ariane development andproduction, and is therefore in a position to streamline
the Ariane manufacturing process in order to reduce costs
and to increase launcher performance and reliability. The
qualification of the Ariane ECA launcher, obtained after asecond successful launch in November 2005 (the first one
having occurred in February 2005), reflect the results ofthese efforts. The decisions of the December 2005 Space
Ministerial Conference further illustrate the determinationof the European governments to support Ariane. Reinforced

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links with the Russian space industry (Starsem and Eurockot
joint ventures) further buttress EADS’ position in thecommercial launch services market.

Extend EADS’ leadership in European military
space programmes
Management views national and European space
programmes, such as the Paradigm and Satcom BW
programmes, as important future growth segments for
the Company. EADS SPACE operates the Skynet system
for the U.K. government and is developing Paradigm toserve the U.K. government’s needs in the coming years. In
addition, because spare capacity is available on Paradigm,
EADS SPACE has made available its services in military
telecommunications, and has signed contracts with NATO,
Portugal and other governments for their secure satellite
communications requirements. EADS SPACE is also
well-positioned in military reconnaissance systems(Helios II and Pleiades) and other military-specific capabilities(e.g., Spirale, Lola, Essaim and Elint). An agreement to
supply and operate for Germany secured communications
satellites has been reached, which is currently subject tothe customary German parliamentary approval process.
Management believes that European governments realise theincreasing importance of space systems following the Iraq,
Afghan and Kosovo military campaigns and can be expected
to commit greater resources to independent use of space-based
systems, triggering potential export opportunities for EADS.

Become the European leader in navigation
systems and services
Management believes that the Galileo satellite-basednavigation system offers numerous development
opportunities to EADS in the civilian (e.g., air traffic
control) and security (e.g., precision positioning) markets.
EADS SPACE is the largest member of Galileo Industries,
the hardware provider for the Galileo project. In order tooperate the Galileo concession, the two competing consortia,
iNavSat (EADS, Inmarsat and Thales) and EUrely (AlcatelAlenia Space, Finmeccanica, Hispasat and Aeropuertos
Españoles y Navegacion Aérea (AENA)), together with athird entity (TeleOp), merged. The merged consortia expect
to be awarded a concession contract by the Galileo Joint
Undertaking (ESA and the European Commission) in 2006.

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Satellites – EADS Astrium
Overview
EADS Astrium is the leading European company in thedesign and manufacture of satellite systems, spanning all
major segments of the satellite market, including platforms,
payloads and equipment. It provides (1) telecommunications
satellites to leading telecommunications service providers,(2) earth observation, navigation and science satellites systems
to major national and international agencies, and (3) military
applications satellite systems to European MoDs. EADS
Astrium also designs and manufactures payload equipment
and subsystems for the global space industry market.
EADS Astrium’s business covers the four categories ofsatellite systems described below:

Telecommunications satellites have multiple applications,such as long-distance and mobile telephone links, televisionand radio broadcasting, data transmission, multimedia andInternet trunking. They may be used for civil or military
applications.
Observation satellites allow the gathering of informationfor various fields, such as cartography, weather forecasting,climate monitoring, agricultural and forestry management,
mineral, energy and water resource management and military
surveillance applications.
Scientific satellites are tailor-made products adapted to thespecific requirements of the mission assigned to them. They
have applications such as astronomical observation of thesources of radiation of the universe, planetary explorationand earth sciences.
Navigation satellite systems deliver signals that enable
users to determine their geographic position with highaccuracy, and are increasingly significant in many sectorsof commercial activity, such as airlines, transport operatorson land, sea and air, emergency services, agriculture andfisheries, tourism and telecommunications networks.

Market
The commercial telecommunications satellite manufacturingmarket is highly competitive, with customer decisions
based principally on price, technical expertise and trackrecord. EADS Astrium has approximately 15-20% of thisworldwide market, and its main competitors are Boeing,

Lockheed Martin and Loral of the United States and AlcatelAlenia Space of France and Italy. Management views thetelecommunications satellite segment as slowly recoveringfrom the effects of a market consolidation, because ofsuch factors as (1) increased telecommunications demand,
including Internet, multimedia and military needs, and(2) greater demand to replace aging fleets. But, the segment
remains a highly competitive market, due in part to theincreasing concentration of satellite operators. EADS intends
to strengthen its position in this field and to participate in
the market recovery.
EADS benefits from its long-term and close relationships
with institutional customers in France, Germany, Spain andthe United Kingdom that have access to their respective
national budgets.
In Europe, the market for observation, scientific andnavigation satellites is organised either on a national or on amultinational (European Space Agency (“ESA”), Eumetsat)
basis and in accordance with the fair return policy, underwhich contracts are awarded to domestic suppliers inproportion to the respective contributions of the suppliers’countries.
There is emerging export demand for earth observation
systems, for which EADS is currently the sole significant
European provider. Furthermore, civil state agencies,
including ESA, are likely to display increased needs forearth observation satellites in the framework of European
environmental programmes, identified as a key focus of the
E.U./ESA framework agreement on European Space Policy
in 2003, and further emphasized in the Space Ministerial
Conference held in December 2005. EADS expects thescientific satellite market to remain stable over the medium
term.
The agreements reached in 2003 at the E.U. level andamong ESA member states regarding the development andimplementation of Galileo, the new European global satellite
navigation system, led to the establishment of the Galileo
Joint Undertaking (the legal entity that will have the taskof coordinating ESA and E.U. involvement in Galileo).
The Galileo programme comprises 30 navigation satellites
and a potential equipment contract valued at more than
€3 billion. Full deployment of the system is expected around2010. For the space industry and its customers, the Galileo
programme’s economic, industrial and strategic importance

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is paramount. This programme is likely to be a driver ofinnovative user and customer-oriented solutions, creating
new markets for navigation-related services.
In the market for military satellites, EADS expects increased
demand for telecommunications and observation satellites.
In recent conflicts, the shortcomings of European militarycapabilities in that field have become increasingly visible, while
the need for preparedness in the face of elusive threats has
promoted such means to a higher level of priority. The Skynet 5
contract in the United Kingdom, the Helios 2, Spirale, Lolaand Essaim contracts in France and the German BW contract inGermany illustrate the growth trend in this market.

Products
EADS is able to offer turnkey satellite systems to its
customers. EADS Astrium manufactures satellite systems,
platforms, payloads, major subsystems and a wide rangeof equipment. EADS Astrium Spain, a wholly-owned
subsidiary of EADS Astrium, supplies platforms, spaceborne antennas, deployment mechanisms and harness
subsystems for telecommunication satellites. Tesat, anotherwholly-owned subsidiary of EADS Astrium, is in charge oftelecommunication electronic equipment and subsystems.
EADS Astrium Spain and EADS Sodern also contribute to
EADS’ work on earth observation satellites.

Telecommunications Satellites. EADS Astrium produces
telecommunication satellites for fixed and mobile
applications and direct-to-home broadcast services. EADS’
geostationary telecommunications satellites are based on the
EUROSTAR family platforms (40 ordered to date), the latest
version of which is EUROSTAR 3000. Three commercial
service satellites based on the new E3000 platform wereplaced into orbit in 2005: Inmarsat IV F1, Inmarsat F2 andAnik F1R.
In 2005, EADS Astrium signed a contract for the
Astra 1M Telecommunication satellite for the company
SES Astra, based in Luxemburg.
In the field of military telecommunications satellites, EADS
Astrium is responsible for the new-generation Skynet 5
system as part of the Paradigm project awarded to EADSSPACE Services in 2003. Development of the projectprogressed in 2005, with major milestones being met andadditional hardware being requested. The finalisation of theSatcom BW contract is expected mid-2006.
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Observation Satellites. EADS Astrium is the leading
European supplier of earth observation satellite systems,
for both civil and military applications. In this field, EADS
Astrium derives significant benefits from the common
elements of its civil and military programmes.
EADS Astrium designs and manufactures a wide range ofhighly versatile platforms, optical and radar instruments
and ground segment equipment for the complete scope of
remote-sensing applications, operations and services. EADS
Astrium is one of the global market leaders in the fieldof earth observation satellites, and the prime contractor
for many of ESA’s and CNES’ principal observation
programmes. Specifically, it is the prime contractor for:(1) the Spot multi-mission platform series, in use in 15
European earth observation satellites and recognised as
an industry standard (the latest generation, Spot 5, withenhanced coverage capability was launched in May 2002);(2) Envisat, a European environmental monitoring satellite
launched in March 2002; (3) Metop, a next-generation polarorbiting meteorological satellite system to be operationalin 2006; (4) Pleiades, two small and highly agile earth
observation satellites for civil and military applications,
expected to be launched in 2008 and 2009; and (5) Swarm, aclimatology satellite monitoring the evolution of the earth’s
magnetic fields.
2005 witnessed the launch of Cryosat, a radar satellite
designed to monitor the thickness of polar ice caps, which
unfortunately failed due to a launcher malfunction.
In the export market, EADS Astrium signed a contract
in May 2005 with the Korean authorities to provide thecommunication and earth observation satellite Coms, together
with the associated ground segment, for delivery in 2009.

Science Satellites. EADS Astrium is the prime contractor forthe spacecraft in ESA major scientific programmes, including
the four Cluster II spacecraft, the vast XMM-Newton spacetelescope, Mars Express, (the first European mission to Mars)and Venus Express.
Venus Express was successfully launched from Baikonour inNovember 2005, and MSG 2 from Kourou in December 2005.

Navigation Satellites. EADS Astrium, together with
Alcatel, Alenia Space and GSS has established a dedicatedcompany to build and implement the European navigation
system Galileo. EADS Astrium holds a 38% stake in Galileo
Industries S.A. (“Galileo Industries”), which was awarded
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a contract for the first of two test satellites for the European
navigation system in July 2003. The system’s launch date isscheduled for the beginning of 2006. For the four satellites
required for the validation phase, EADS Astrium is prime
contractor for the space segment, and through Astrium
Germany, supplies the avionics and part of the solar arrays.
EADS Astrium U.K. is responsible for payload development
and ground segment lead.

Military Satellites. In addition to military earth observation
activity, EADS Astrium is active in the market for airborne
laser optical links demonstrators (LOLA), early warning
satellite demonstrators (Spirale) (together with AlcatelAlenia Space) and electromagnetic intelligence satellites(Elint). These systems demonstrate EADS SPACE’s leadingrole in complex systems offers, reflecting the efficient use ofsynergies between EADS’ space and defence activities.

Orbital Infrastructure / Launchersand Launch Services – EADS-ST
EADS-ST is the European space infrastructure and spacetransportation specialist. It designs, develops and produces
Ariane launchers, the Columbus laboratory and the ATV
cargo carrier for the International Space Station (“ISS”),
ballistic missiles for France’s deterrent forces, propulsion
systems and space equipment.

Orbital Infrastructure
In the field of orbital infrastructures, EADS-ST is theprime contractor under an ESA contract relating to two
key elements of the ISS: the Columbus Orbital Facility
laboratory (“COF”) and the Automated Transfer Vehicle(“ATV”).
The orbital infrastructure segment in which EADS-ST
operates comprises manned and unmanned space systems.
The ISS, together with related vehicle and equipment
development programmes and services, constitutes the
predominant field of activity in this segment. The Columbia
shuttle accident in 2002 led to the postponement of thelaunch of the European Columbus module, which is now
planned for late 2007 or early 2008.

Market. The demand for orbital infrastructure systems
originates solely from publicly funded space agencies,
and in particular from ESA, NASA, Roscosmos (Russia)

and NASDA (Japan). Such systems are usually built incooperation among international partners. In addition to
the COF and ATV projects, ESA is also responsible for
additional ISS components for the station’s construction andoperational phases. Additionally, national space agencies,
such as Deutsches Zentrum für Luft und Raumfahrt(“DLR”) and Centre National d’Etudes Spatiales (“CNES”),
are involved in the field of experiment facilities to be usedon the ISS.

Products. EADS-ST is the prime contractor for thedevelopment and integration of the COF. The COF isa pressurised module with an independent life-support
system. It will provide a full-scale research environment inmicrogravity conditions (material science, medicine, humanphysiology, biology, earth observation, fluid physics andastronomy) and will serve as a test-bed for new technologies.
In December 2005, the ESA awarded a contract to EADS-ST
for the operation and exploitation of the European elementsof the International Space Station. The contract affirms
EADS-ST’s position as the sole European prime contractor
on this significant international space programme.
In addition to the COF, including all facilities required
for energy supply, communications and interfaces to otherstation elements, EADS-ST is responsible for the Columbus
onboard Data Management System. It also participatesin the construction of the ISS robotic system European
Robotic Arm to be used by astronauts in the assemblyand maintenance of exterior station elements during theconstruction and operational phases.
EADS-ST is also the prime contractor for the development
and manufacture of the ATV, designed to carry fueland supplies to the ISS and to provide reboost capability
and a waste disposal solution. The ATV will be the first
European vehicle to carry out a rendezvous in space and dockautomatically with an orbital station. The first ATV, called
Jules Verne, will be launched by the Ariane 5 rocket in
mid-2007, with additional ATV missions scheduled through2013.
Under contract with ESA and DLR, EADS-ST supplies
experiment facilities to be used in various station modules
for research in microgravity conditions (MSL laboratory,
MCS system, RFR refrigerator, CFR rack, MSG glove box,
PCDF and Cardiolab laboratories). It also supplies CNES

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with a Declic experiment facility for experiments in the fieldof fluid physics.

Launchers & Launch Services
Space systems (including satellites, orbital infrastructureelements and interplanetary probes) depend on rocket
propelled multi-stage launchers, which are consumed
during the launch process, to place them into orbit.
EADS-ST is active in two distinct businesses: (1) designingand manufacturing launchers for both civil and military
purposes; and (2) providing launch services through its
interests in Arianespace, Starsem and Eurockot.
EADS-ST is the sole prime contractor for the Ariane 5
system, with responsibility for the delivery to Arianespaceof a complete and fully tested vehicle. EADS also supplies
all Ariane 5 stages, the equipment bay, the flight software,
as well as numerous sub-assemblies. Additionally,
EADS-ST is the prime contractor for ballistic missile systems
to the French State. It is responsible for the development andmanufacturing of the M45 and M51 submarine-launchedmissiles and related operating systems.

Market. Management estimates that the average opencommercial market for launch services will likely remain
low, at approximately 20 payloads per year, mostly made up
of geostationary telecommunications satellites. However,
due to various factors (e.g., technology advances andconsolidation of customers), this figure is highly volatile.
This market does not include institutional launch services
for the American, Russian and Chinese military andgovernmental agencies.
The consolidation of the satellite operators sector in recent
years has changed the market of launch services. Joint
ventures (e.g., International Launch Services, Sea-Launch,Starsem and Eurockot) have been organised, combining accessto low-cost rockets from former Soviet Union companies
with the marketing capabilities of western manufacturers,
and have created strong competition on the commercial
launches market.
In national defence, France follows an independent policy
to have its own deterrent force, which is currently based onsubmarine-launched ballistic missile systems and airborne
tactical missiles. In 1998, the French State decided todevelop a new generation of ballistic missiles. In addition

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to production and state-financed development work, theballistic missile segment entails substantial maintenancework to ensure system readiness over the life span of theequipment, which may stretch over several decades. EADSSPACE’s ballistic missile segment activities are conducted
through EADS-ST, which is the exclusive supplier ofballistic missiles to the French State, its sole customer in thisarea.

Products and Services / Launch Services. EADS-ST is activein the field of launch services through its shareholdings in
Arianespace (for heavy-lift launchers), Starsem (for mediumlift launchers) and Eurockot (for small-lift launchers).
Arianespace — EADS-ST, with a 28.7% stake in Arianespace(direct and indirect), is Arianespace’s second-largest
shareholder (after CNES) and its largest industrial
shareholder. Arianespace is the world’s largest commercial
launch service provider in terms of total order book. At theend of 2005, Ariane had launched 232 satellites. Arianespacemarkets and sells the Ariane launcher worldwide andcarries out launches from the Kourou space centre in French
Guyana.
In 2005, Arianespace won five new commercial contracts,
representing 30% of the accessible market. It also won
two governmental launch contracts in 2005. Five Ariane 5
launches were carried out in 2005, placing into orbit eightsatellites (six commercial and two institutional).
Two versions of Ariane 5 are currently in service: theAriane 5G, which is able to launch one or more payloads
with a total mass of up to 6.9 tons into geostationary transfer
orbit, and the Ariane 5 ECA, which will progressively
replace the Ariane 5G. The Ariane 5 ECA is now fully
qualified after two successful launches in February andNovember 2005 and has an increased launch capacity of
10 tons in geostationary transfer orbit. Since 1999, when
the first Ariane 5 commercial launch occurred, 20 Ariane 5
rockets have been successfully launched.
In May 2004, a contract valued at €3 billion was signed
between Arianespace and EADS-ST for the delivery of
30 increased lift versions of Ariane 5. EADS-ST’s prime
position has been confirmed with the award by ESA of theso-called slice 10 development contract in October 2005.
In parallel, Europe’s commitment to support a European
launcher was demonstrated by the signature between ESA
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Space” (EGAS) in March 2004 and by the December 2005
“buy European” recommendation of the Space Ministerial
Conference in respect of institutional satellite launchservices.

Starsem — EADS-ST directly owns 35% of Starsem, aFrench corporation, along with Arianespace (15%), theRussian space agency (25%) and the Russian state-owned
Central Specialised Design Bureau “Progress” (25%). ThroughArianespace, Starsem markets launch services by Soyuz
launchers for medium-weight spacecrafts into low or sunsynchronous orbits as well as for interplanetary missions.
In 2005, two additional contracts have been signed and two
institutional launches have been performed from Baikonur,
as well as a commercial launch under a subcontract from
Arianespace. Following the ESA Ministerial Conference in
May 2003, which approved the offering of Soyuz launchesfrom Kourou, work began on the launch pad, and the firstlaunch, which will be operated by Arianespace, is scheduled
for 2008.
Eurockot — EADS-ST (51%) and Khrunichev (49%) jointly
control Eurockot Launch Services, which procures launchservices for small, low-earth orbit satellites with Rockot
launchers derived from the SS-19 ballistic missiles. In 2005,
Eurockot signed the Theos contract with Thailand and theProba 2 contract for ESA. One launch has occurred (Cryosat
for ESA), but was unsuccessful. The root cause of the failure
has been identified and corrected.
Products and Services / Commercial Launchers. EADSST manufactures launchers and performs research anddevelopment for the Ariane programmes. Member states,
through ESA, fund the development cost for Ariane
launchers and associated technology. Arianespace markets
and sells launch services worldwide.
In 2005, efforts were focused on the qualification of the
10-ton version of Ariane and the implementation of theorganisation of Ariane production under a single prime
contract, in accordance with the decisions of the ESA
ministerial conferences in November 2001 and May 2003.
Following the successful flights in February and November
2005, the 10-ton version of Ariane 5 (Ariane 5 ECA)
is now fully qualified. Regarding the streamlining andrationalisation of the Ariane organisation, the leadership of
EADS-ST has been confirmed and the company is poised fordevelopment (signature of the so-called slice 10 development

contract with ESA in 2005) and production (signature of the
PA batch for 30 Ariane 5 rockets in 2004).
EADS-ST management remains committed to reducing
production costs and to optimising, together with
Arianespace, the Ariane system.

Products and Services / Ballistic Missiles. EADS-ST is the
only company in Europe that designs, manufactures, tests
and maintains ballistic missiles. Under its contracts with
the French State, EADS-ST has produced the submarine
launched MSBS family (M1, M2, M20, M4 and M45) andlaunch facilities at the Brest naval base. The M45 is deployedonboard France’s new-generation nuclear-powered ballistic
missile submarine. The Company manages the operational
maintenance of the M45 missile system, assisting the
French armed forces during test firing and with missile
integration until the end of its operational service. EADS-ST
is under contract to develop the M51, a new submarinebased strategic missile system with increased technical andoperational capabilities. At the end of 2004, the French
MoD awarded EADS-ST a contract for the M51 production
phase and test range facilities with a frame-contract inexcess of €3 billion. A contract for an enhanced upper-stage
demonstrator was awarded by the French MoD at the endof 2005, contributing to the technical capabilities of theCompany in this field.
Management believes that the development and productionof the M51 will provide EADS-ST with high quality workover the long term. In addition, the relative predictabilityof demand provides some stability to the otherwise volatile
launcher market.

Space Services – EADS SPACE Services
Overview
EADS SPACE Services, which includes Paradigm, is a
dedicated entity of EADS SPACE for the development
and operation of satellite services, with a focus on secured
telecommunication and navigation services. The firstcommercial provider of secure military communications
services with the Skynet 5 programme for the U.K. MoD,
Paradigm currently owns and operates the Skynet 4 system.
Paradigm enlarged its customer base through contracts with
NATO, Portugal and several other governments. In thenavigation sector, the iNavSat consortium (EADS SPACE

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Services, Inmarsat and Thales) has merged with the Eurely
consortium (Alcatel-Alenia Space, Finmeccanica, Hispasat
and AENA), together with a third entity (TeleOp), merged,
in order to propose to the Galileo Joint Undertaking (ESAand European Commission) a unified solution for theconcession phase. The Galileo Joint Undertaking is expected
to finalise the concession contract in 2006.
EADS SPACE Services also manages holdings in satellite
telecommunication service and operation companies:
Nahuelsat in Argentina, Globalstar in Brazil and Hispasatand Hisdesat in Spain.

Products and Services
Military Communications. The U.K. MoD selected Paradigm
in 2003 to deliver global secure satellite communications
service over a 15-year period for its next-generation Skynet 5
programme under a Private Finance Initiative contract. In
addition, Paradigm took over the U.K’s existing Skynet 4
fleet. This groundbreaking contract, under which Paradigm
now owns and operates the U.K. military communication
satellite infrastructure, allows the U.K. MoD to place orders
and to pay for services as required. Offering a catalogue
of services, Paradigm delivers tailored in-theatre and backto-base communication solutions for voice, data and video
services, ranging from a single voice channel to a complete
turnkey system incorporating terminals and network
management. Paradigm also provides welfare services,
ensuring that deployed troops can call home and can use
the Internet. Following discussions in 2005, the concession
period should be extended to 20 years and the number of
new satellites should be increased to 3 instead of 2. Fulloperational service is scheduled for the end of 2008 or the
beginning of 2009.

consortium with ND SatCom and Astrium. This consortium
was selected in May 2005, and it is expected that thecontract will be awarded beginning 2006, following German
parliamentary approval.

Navigation. The iNavSat consortium (EADS SPACE
Services, Inmarsat and Thales) and the EUrely consortium(Alcatel-Alenia Space, Finmeccanica, Hispasat and AENA),
together with a third entity (TeleOp), merged, in order topropose to the Galileo Joint Undertaking (ESA and European
Commission) a unified solution for the concession phase. The
Galileo Joint Undertaking is expected to award the concession
contract in 2006. Under this concession contract, the Galileo
operating company will deploy and operate the satellite systemover a 20-year period. The Galileo project is a major step
forward for Europe, representing the first major Europeanlevel infrastructure procurement programme with a global
dimension that will bring numerous benefits to the continentand the rest of the world. The market potential is promising,as global demand for satellite navigation services andderivative products is growing at approximately 25% a year.

Production and Suppliers
EADS SPACE currently operates production facilities
located in France (Vélizy, Les Mureaux, Bordeaux,Toulouse), Germany (Backnang, Bremen, Friedrichshafen,
Lampoldshausen, Ottobrunn, Rostock, Trauen), Spain(Madrid), the United Kingdom (Portsmouth, Stevenage) and
French Guyana (Kourou).

In 2004, the German Bundeswehr issued a proposal request
for secure satellite communication capacity, comprising acomplete military satellite communication infrastructure,including a fleet of satellites, a number of tactical andstrategic ground stations and a network control in thesystem, to be operated on their behalf for a 10-year period.
The system is expected to be fully operational in the
beginning of 2009. In response to this proposal request,
EADS SPACE Services has set up a satellite provider

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1.1.7 Other Businesses
Regional Aircraft — ATR
ATR is a world leader in the market for regional turboprop
aircraft of 40 to 70 seats. ATR Integrated is a consortium
composed of EADS and Alenia, in which they each hold a
50% stake. The BU EADS ATR, that represents EADS’ 50%
share of ATR Integrated and that was formerly part of the
Aeronautics Division, is now under the direct responsibilityof EADS’ CFO and co-COO.

Market and Outlook
The regional aircraft industry has experienced concentrationin recent years. During the 1990s, a number ofmanufacturers merged, closed or ceased production ofregional aircraft, leading to the withdrawal from the market
of BAE Jetstream, Beechcraft, Fokker, Saab and Shorts. As of
31st December 2005, the worldwide market for turboprop
aircraft of 40-70 seats in production was dominated by
two manufacturers: ATR and Bombardier. After a numberof years of relatively low activity, the regional turboprop
market grew dramatically in 2005, due in large part to theadvantages of turboprop aircraft over jet aircraft in terms offuel efficiency and CO2 emissions. In 2005, ATR delivered
15 new aircraft and registered orders for 90 new aircraft (inaddition to a very active second-hand market). ATR’s 2005
orders largely surpassed the number of orders received byits direct competitor, and represented six times ATR’s 2004
order level. ATR has been particularly successful in rapidly
growing markets, such as India. Furthermore, the relativefuel efficiency and reduced CO2 emissions of turboprop
engines are expected to sustain this market tendency and theevolution of ATR’s market share over the coming years.

Products and Services
ATR 42 and ATR 72 Series Aircraft. Commencing with
the ATR 42, which entered service in 1985, ATR has
developed a family of high-wing, twin turboprop aircraftin the 40-70 passenger market that are designed for optimal
efficiency, operational flexibility and comfort. In 1996,
in order to respond to operators’ increasing demands for
comfort and performance, ATR launched a new generationof aircraft designated the ATR 72-500 and ATR 42-500.
Like Airbus, the ATR range is based on the family concept,
which provides for savings in training, maintenance
operations, spare parts supply and CCQ.

Customer Service. ATR has established a worldwide
customer support organisation committed to supporting theaircraft over its service life. Service centres and spare parts
stocks are located at Toulouse, in the vicinity of Washington
D.C. and in Singapore. An e-market place designed toenhance support services developed with Embraer was madeavailable to customers.
ATR Asset Management. Consistent with industry
practice, a significant portion of orders received by ATR isconditional on its assistance in financing the purchase either
through leasing or loan guarantee arrangements. The ATR
Asset Management manages the resulting risk and responds
to the growing market for second-hand aircraft. By assistingin the placement and financing of used and end-of-leaseaircraft, ATR Asset Management has helped broaden ATR’scustomer base, notably in emerging markets, by providing
quality reconditioned aircraft at attractive prices and hashelped maintain residual values of used aircraft. In the past,clients for such used aircraft have subsequently purchased
new aircraft as they have gained experience in the operationof ATR turboprops. Returned aircraft generally remainout of service for approximately five months awaitingreconditioning and resale or leasing, subject to market
conditions. ATR has been successful in implementing its
strategy of consistent reduction of sales financing exposure.

Production
The ATR production facilities are located near Naples, Italy
and at Merignac and Saint-Martin near the Toulouse airport
in France. Final assembly, flight-testing, certification anddelivery occurs at the Toulouse site. ATR outsources certain
areas of responsibility to the Airbus Division, including
wing design and manufacture, flight-testing and information
technology.

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General Aviation
EADS Socata
EADS Socata manufactures a range of light aircraft for
both the private civil aircraft market and governmental
fleet, and is also engaged in aerostructure subcontracting,and producing materials and subassemblies for majorinternational aviation programmes, including, but not limited
to, EADS’ programmes.
In the general aviation field, EADS Socata has developed
over the past 20 years a range of piston engine aircraft, theTB family, and the monoturboprop pressurised TBM 700.
Continuous development and use of innovative technologies
keep these products well-positioned on their market. These
new-generation aircraft compete with products based onmodels that date back to the 1950s. Many aircraft in thegeneral aviation market are nearing the end of their service
life. To improve its penetration of the U.S. market, which
represents 60% of its general aviation sales, EADS Socata isdeveloping an U.S. distributor network.
Since launching its aerostructures activity in the early
1960s, EADS Socata has positioned itself as a first-line
global subcontractor for complete assemblies. Its engineering
department carries out development and design for key
components for major aviation programmes, including
Airbus (A400M, A380...), Dassault (F7X), Eurocopter andEmbraer. EADS Socata is experienced in the use of sheet
metal forming and stretching, composite materials and semimanual structural assembly for aeronautic programs. EADS
Socata is also experienced in the use of composite materials
for aircraft structural elements; in particular for the Airbus
A330 / A340, as well as metal-composite combination
technology and forming of large-dimension metal panels.
Additionally, EADS Socata carries out design work for anumber of European aviation programmes, including Airbus,
Eurocopter, Mirage and Falcon aircraft.

Global Support Solutions
EADS Sogerma
With 25% of its employees located outside of Europe, and11 locations worldwide, EADS Sogerma is internationallypresent. It focuses primarily on two business lines: (1)global support and maintenance, and (2) aircraft and cabincustomisation and aerostructures, primarily for Airbus.
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Global Support and Maintenance. EADS Sogerma
provides global support solutions such as engineering, fleet
management and airframe and components maintenanceservices. These services are carried out in facilities in
Bordeaux, France; Lake Charles, U.S.; and Monastir,
Tunisia. EADS Sogerma also provides maintenance services
for military transport aircraft, including C-130 checks in
Casablanca, Morocco.
EADS Sogerma also specialises in small engines (SECA in
Le Bourget, France), landing gear, auxiliary power units(“APU”) (in Rouen, France) and avionics maintenance, repair
and overhaul (“MRO”) (Bordeaux, France; Miami, Florida;and Hong Kong).

Aircraft & Cabin Customisation and Aerostructures. EADS
Sogerma is an approved outfitter for Airbus’ corporate
jets, with services currently performed in Toulouse and in
Bordeaux. Additionally, Bordeaux has dedicated hangar bays
for large aircraft VIP completion. EADS Sogerma designs
and manufactures high-end cabin interior components
and first and business class passenger seats. Aircraft
customisation also includes military transport and mission
aircraft (e.g., C-130 life extension).
In the aerostructures field, EADS Sogerma is involved in thedesign and manufacture of fuselage panels and sections for
Airbus aircraft and in composite components for aeronauticaland general industrial applications. Metal work is conductedin Rochefort, France, while composites activities are
conducted in France and Canada.

Aircraft Conversion and Floor Panels
EADS is a major provider of aircraft conversion and technicalservices for airlines.
In the fields of aircraft conversion and technical services,
EADS combines the operations of EADS Sogerma Services
and Elbe Flugzeugwerke GmbH (“EFW”). Management
believes that the concentration of expertise in a stable poolof highly skilled workers enables EADS’ aircraft conversion
and technical services group to perform services on a wide
range of aircraft, including all of the aircraft produced
by EADS. Additionally, the exchange of skilled workers
in response to cyclical variations in the market occurs
increasingly within the aircraft conversion and technicalservices group, generating synergies. Moreover, EADS can

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use knowledge gained through maintaining Airbus aircraft toimprove initial product quality and reduce maintenance costs.
In the field of commercial aircraft technical services,knowledge exchange within EADS will benefit maintenanceof early-generation Airbus aircraft and facilitate maintenanceactivities for newer aircraft such as the A320 or A330 / A340.
Management believes that integrated packages, designed tomeet customers’ full range of service requirements, will be
particularly attractive to small and medium-sized airlines.
Management believes that joint marketing of maintenanceand conversion work has been beneficial, since EADS has
been retained to perform maintenance for a large number ofconverted aircraft.

Commercial Aircraft Conversion — EFW
Conversion of passenger aircraft into freighter aircraft(“P to F”), is the modification most proposed to commercial
aircraft owners. Conversion kits comprise original parts,
known as Original Equipment Manufacturer or ‘OEM’ parts
from the corresponding Airbus serial freighter versions, andresult in a converted aircraft that is very similar to a freighter
from the series production.

conversion is the most efficient way to obtain a relatively
modern freighter; second, it maintains residual values of
the aircraft at relatively high levels by extending revenuegenerating service life.
According to Airbus 2004 estimates, airfreight is expected to
grow faster than passenger traffic in the next 20 years. Given
the retirement of older aircraft, an estimated 3,100 dedicatedcargo aircraft should meet this demand, of which roughly
75% would come from the conversion of passenger aircraft.
EADS’ main competitor in the freighter conversion businessis Boeing, which now offers P to F conversions for its
complete range of aircraft except B777 and ex-MD aircraft.
With BAE Services’ discontinuation of its A300 B4 andA300-600 conversion programmes, EFW has a strong market
position for Airbus P to F conversions.

Products. In the field of P to F conversions, EADS
specialises in the conversion of Airbus A300 and A310
passenger aircraft to cargo usage. EADS is building on thisspecialisation by adding versions such as, in 2001,
the A310-300, and in 2002, the A300-600, to position itself
for future upcoming conversion programmes. In addition to
Airbus freighter conversions, EFW is also the supplier of
Airbus passenger cabin floor panels for all Airbus models.

Market. The market for civil aircraft freighter conversion
encompasses freight service airlines such as UPS or Federal
Express, airlines with small aircraft fleets and finance groups.
Two considerations drive the aircraft operators’ decision
to convert existing passenger aircraft to freighters: first,

1.1.8 Investments
Dassault Aviation
EADS holds a 46.3% stake in Dassault Aviation – listed on
the Marché Eurolist of Euronext Paris – along with Groupe
Industriel Marcel Dassault (“GIMD”) 50.2% and free float 3.5%.
Dassault Aviation is a major player in the world market
for military jet aircraft and business jets. Founded in 1945,
Dassault Aviation has delivered more than 7,500 militaryand civil aircraft to purchasers in more than 75 countries. On
the basis of its experience as designer and industrial architectof complex systems, Dassault Aviation designs, develops
and produces a range of military aircraft and businessjets. In order to avoid any potential conflict between the
military products of Dassault Aviation and EADS (Rafaleand Eurofighter) and to facilitate a “Chinese wall” approach,
EADS’ Dassault Aviation shareholding is managed by
Strategic Coordination, whereas the Eurofighter program ismanaged by EADS’ Defence & Security Division.

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Military Aircraft

Business Aircraft

Dassault Aviation offers a wide expertise in the design andmanufacture of latest generation military combat aircraft.

Dassault Aviation offers a wide range of products at the top
end of the business jet sector. Over 1,650 Falcon business
jets have been delivered since the first Falcon 20 delivery
in 1965. In-service Falcons currently operate in over 65
countries worldwide, filling corporate, VIP and governmenttransportation roles. The family of Falcon jets currently
includes four tri-jets: the Falcon 50EX, 900C, 900EX and
7X; the twin-engine Falcon 2000 and the Falcon 2000EX
EASy.

Rafale. The Rafale is a twin-engine, omni-role combat
aircraft developed for both Air Force and Navy applications.
According to government budgetary documents, France
is considering the acquisition of 294 Rafale, 234 for the
Air Force and 60 for the Navy, for a total program cost of€32.3 billion. 120 aircraft have already been ordered; ofthese, 82 are destined to the Air Force, and 38 to the Navy.
Mirage 2000. The Mirage 2000 family has reached in 2005
the end of its production phase. More than 600 Mirage 2000
aircraft have already been ordered, nearly half of them byforeign countries.
nEUROn. Dassault Aviation is the prime contractor for thedevelopment of Europe’s UCAV (Unmanned Combat Air
Vehicle) demonstrator, nEUROn. The program was open
to European cooperation and five countries have decided
to join it and share the skills of their aerospace industries.
Agreements have been signed in 2005 with Sweden, Greece,
Switzerland, Spain and Italy at Government levels and MoUs
have been agreed upon on Saab, HAI, RUAG, EADS andAlenia at the industrial level.

The year 2005 was the best ever for the Falcon business jetswith a total of 123 firm orders and a total backlog of morethan 200 aircraft at year-end. Several significant milestones
were also achieved: May saw the first flights of Falcon 7X
and 900DX, and in 2005 the new 2000DX was launched.

Dasa-Dornier Luftfahrt
DADC, which is 75% held by EADS, holds a 93.6% stakein Dornier GmbH, which in turn holds a 1.58% stake in thecapital of Fairchild Dornier Luftfahrt Beteiligungs GmbH,
which is the sole shareholder of Dornier Luftfahrt GmbH.
Through this minority interest, EADS is not involved in any
business decision regarding Dornier Luftfahrt.

The nEUROn demonstrator is scheduled to fly in 2011.

1.1.9 Insurance
EADS Insurance Risk Management (“IRM”), centralised at
EADS headquarters, is responsible for all corporate insurance
activities and related protection for the Group. It includes
identification, evaluation, prevention and protection of
insurable risks. Insurance techniques are used to protect theassets and liabilities of EADS against financial consequences
due to unexpected events. Harmonized insurance policies andstandards are in place for all insurance risks underwritten by
the Group.
An information and reporting system is in place to enable
IRM, in close conjunction with insurance managers namedby the EADS business Divisions and BUs, to respond toinsurance related risks of the Group. EADS pursues aninsurance risk management strategy that includes operating

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procedures as well as policies regarding procurement andsales agreements. A systematic review and monitoringprocedure of protections systems applicable to all EADS sites
is in place, fostering comprehensive and timely identificationof risks and related adjustments of insurance coverage.
EADS’ insurance programs cover high risk (Core) and low
risk (Non-Core) exposures.
Core Insurance Policies underwritten by IRM for theGroup cover risks such as:• Property Damage and Business Interruption;• Aviation Third Party Liabilities including Product
Liabilities;

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4• Manufacturer’s Aviation Hull Insurance up to thereplacement value of each aircraft;• Space Third Party Liabilities including Product Liabilities;• Commercial General Liabilities including non-aviationand non-space Product Liabilities and risks related toenvironmental accidents; and• Directors & Officers Liability.
Claims related to Property Damage are covered up to a limitof €2 billion per loss and €2 billion as an annual aggregate.
Aviation Liability Coverage is provided up to a limit of€2 billion per loss, with an annual aggregate cap of €2 billion
for product liability claims. Certain sub limits are applicablefor Core Insurance Policies as outlined above.
Non Core Insurance Policies cover risks such as:• Personal Accidents;• Company Automobiles;• Personal and property exposures during business trips; and• Life insurance.
Insurance amounts for Non Core Insurance Lines are covered
up to respective sums and replacement values.

EADS follows a policy of obtaining external insurance
coverage for all main and individual risks that can be insured
at reasonable rates, on sufficient terms and limits provided
by the international insurance markets. All insurance policies
are required to satisfy EADS’ mandatory standards of
insurance protection.
However, to be more independent from volatilities of theinsurance markets, EADS uses the capabilities of a corporateowned reinsurance captive with respect to the Property
Damage, Business Interruption Programme and Aviation
Insurance Programme. The captive is sufficiently capitalised
and protected so as to ensure its ability to reimburse claims
without limiting the scope of coverage of the original
insurance policies and not additionally exposing financial
assets of EADS.
The insurance industry is still undertaking efforts to
reduce its overall exposure. These efforts include increasing
premiums, raising deductible amounts and limiting thescope of coverage. Furthermore, the number of insurers
underwriting industrial risks is still shrinking. No assurance
can be given that EADS will be able to maintain its current
levels of coverage on similar financial terms in the future.

1.1.10 Legal and Arbitration Proceedings
EADS is involved in a number of claims and arbitrations
that have arisen in the ordinary course of business. EADS
believes that it has made adequate provisions to cover current
or contemplated general and specific litigation risks.
At the end of 2002, a request for arbitration was filed
against a subsidiary of EADS involved in the supply ofequipment under a commercial contract that was completed
several years ago. EADS believes it has strong defences, bothprocedural and of substance, to oppose the claim. At thisstage of the procedure the financial risk cannot be assessedsince, in June 2003, EADS was notified that the arbitration
procedure was suspended at the request of the claimant. At
the date of this document, such arbitration procedure is stillsuspended.
Following its unilateral withdrawal from the 1992
E.U.-U.S. Agreement on Trade in Large Civil Aircraft,the U.S. lodged a request on 6th October 2004 to initiate
settlement proceedings before the World Trade Organisation(“WTO”). In response, the E.U. launched a parallel WTO caseagainst the U.S. in relation to its subsidization of Boeing. On
11th January 2005, the E.U. and the U.S. agreed to suspend
their respective WTO cases for three months, with a view
towards reaching a new agreement relating to public fundingof large civil aircraft. However as of 11th April 2005, theparties had not been able to reach a satisfactory agreement.
On 31st May 2005, the U.S. requested the establishmentof a panel. At its meeting on 20th July 2005, the Dispute
Settlement Body established the panels. On 17th October
2005, the panels were finally composed. On 22nd December
2005, the parties completed the formal fact finding process
for the two proceedings (so-called ASCM Annex V). The E.U.
filed a new panel request in its case on 20th January 2006.
Then on 31st January 2006, the U.S. filed a new consultation

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request on its case. Theses latest developments mean that theformal litigation process which was originally set to begin
in March 2006 will now be set back to two to four months.
Exact timing of the WTO litigation process is still to beagreed through negotiations between the U.S. and the E.U.
EADS is not aware of any other exceptional items or pendingor threatened governmental, legal or arbitration proceedings
during the last twelve months, that may have, or may have
had in a recent period, a significant effect on the financial
position, the activities or the results of EADS or the Grouptaken as a whole, except as stated above.

EADS recognises provisions for litigation and claims when (i)it has a present obligation from legal actions, governmental
investigations, proceedings and other claims resulting
from past events that are pending or may be instituted or
asserted in the future against the Group, (ii) it is probablethat an outflow of resources embodying economic benefits
will be required to settle such obligation and (iii) a reliable
estimate of the amount of such obligation can be made. For
the amount provided for risk due to litigations and claims,
see Part 1 “Notes to the Consolidated Financial Statements(IFRS)— Note 21(d): Other provisions”.

1.1.11 Incorporation by Reference
The following documents shall be deemed to be incorporated
in and form part of this Registration Document:• “Part 2/1.1 Presentation of the EADS Group” of theDocument de Référence filed in French with the Autoritédes marchés financiers on 1st April 2004 and filed in
English with the Chamber of Commerce of Amsterdam;
andCopies of the Document de Référence for the financial years
ended 31st December 2003 and 31st December 2004 areavailable free of charge upon request in English, French,
Spanish and German languages at the registered office of
the Company and on www.eads.com. Copies of the financial
statements referred to above are also available in English
on www.eads.com and for inspection at the Chamber ofCommerce of Amsterdam.

• “Part 2/1.1 Presentation of the Group” of the Document deRéférence filed in French with the Autorité des marchés
financiers on 19th April 2005 and filed in English with
the Chamber of Commerce of Amsterdam.

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1.2 Recent Developments
DaimlerChrysler and Lagardère
have reduced their respective
stakes in EADS by 7.5%
On 4th April 2006, DaimlerChrysler and Lagardère
announced the entry into simultaneous transactions aimed
at reducing by 7.5% each their respective shareholdings in
EADS.
DaimlerChrysler entered into a forward sale agreement ofapproximately 61 million EADS shares with a group ofinvestment banks. The DaimlerChrysler Group indicatedthat it lent these shares to the banks in anticipation of thesettlement of the forward sale.
Lagardère issued mandatory exchangeable bonds subscribed
by IXIS Corporate & Investment Bank. In turn, IXIS
Corporate & Investment Bank sold a large majority of
the underlying shares to a group of French institutional
investors. The EADS shares deliverable at the maturityof the bonds will represent a maximum of 7.5% of theshare capital of EADS, or approximately 61 million EADS
shares. These transactions have not impacted the balance ofcontrol between the core shareholders in EADS’ corporate
governance as set forth in the shareholder agreements
described in Section 3.3.2.

EADS and BAE Systems enter into
early stages of a discussion on thepotential disposal of BAE Systems’
20 percent share in Airbus
On 7th April 2006, EADS confirmed that is was entering
into the very early stages of a discussion on the potential
disposal of BAE Systems’ 20 percent stake in Airbus.
EADS believes that increasing its stake in Airbus holds thepotential of simplifying Airbus governance. EADS is fully
prepared to move ahead constructively.
The initiation of discussions with BAE Systems does not
represent an exercise of the put option held by BAE Systems
in relation to its 20% stake in Airbus. EADS intends to work

diligently together with BAE Systems towards establishinga value for this 20% stake that is fair to both parties. The
schedule of the discussions cannot be anticipated and there
can be no certainty as to their outcome.

Spanish Ministry of Interior Selects
the EC135 for its Police Forces
On 17th March 2006, the Spanish Government
announced the launch of an acquisition programme for themodernisation of its security forces. Under this programme,
the Spanish Ministry of Interior intends to acquire 51 EC135
helicopters from Eurocopter in order to modernize theGuardia Civil’s and the Cuerpo Nacional de Policía’s existing
helicopter fleets within the next eight years. Eurocopter
España will carry out the EC135’s final assembly activities,
develop and install the highly innovative mission-specificequipment, and execute the concluding ground and flighttests. To this end, an assembly line for the EC135 will beestablished in Albacete at the local Eurocopter España site.

Successful Integration of LFK
into MBDA Completed
On 28th February 2006, the integration of LFK GmbH
into the European missile systems group MBDA received
clearance from the European Commission and the German
Ministry of Economics and Technology. The legal formalities
in connection with this operation were also successfullycompleted. MBDA’s new German component will retain
LFK GmbH’s legal name and MBDA’s brand. It will operate
under principles of operation and processes mirroring thoseof MBDA while servicing Germany, Europe’s third largest
missile market.

A300 / A310 Final Assembly
to be Phased Out by July 2007
On 7th March 2006 Airbus announced that the A300/
A310’s final assembly will progressively be phased out. This

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4announcement follows more than 35 years of successful
marketing and production of Airbus’ original aircraft
programme. The A300/A310 programme has achieved a
total of 821 orders, and 802 aircraft had been deliveredby the end of January 2006. The order backlog comprises
A300 freighter aircraft to be delivered to FedEx, UPS andGalaxy Airlines. The last A300-600 aircraft on order will bedelivered in July 2007. Airbus plans to offer new freighter
versions of current aircraft once the A300/A310 programme
has ended.

The Department of Homeland Security Customs andBorder Protection is to receive its first EC120 in June for
deployment on America’s southwest border with Mexico.
In order to meet this challenging schedule, three EC120s
already are in production. The remaining aircraft will bedelivered at the rate of one helicopter every 30 days.

During the last two years, approximately 150 Airbus
employees produced roughly one aircraft per month on the
A300/A310’s final assembly line. All employees involved in
the A300/A310 production will be offered new positions inother current or future programmes.

On 20th February, 2006, Indian Airlines Ltd, India’s leading
airline, signed a contract for 43 Airbus A320 family aircraft.
Indian Airlines Ltd. has ordered 43 Airbus A320 Family
aircraft, comprising twenty A319s, four A320s and nineteen
A321s. The contract represents the fist commitment froman Indian carrier for the Airbus A321 aircraft, marking asignificant breakthrough for EADS.

U.S. Government Orders Helicopters
to Support Homeland Security Missions

Indian Airlines Signs Contract
For 43 Airbus A320 Family Aircraft

On 26th February 2006, EADS North America announced
that the U.S. Department of Homeland Security Customs
and Border Protection had ordered 10 Light Sign Cutter
EC120 helicopters from American Eurocopter, an EADS
North America BU. This represents the first such orderpursuant to a contract entered into with the Departmentof Homeland Security, and it could involve as manyas 55 helicopters, with a potential total value of up to
U.S.$75 million. American Eurocopter will produce theDepartment of Homeland Security Customs and Border
Protection’s EC120s at American Eurocopter’s new
Columbus, Mississippi facility.

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p. 63

2.1.1

Proper Business Practices

p. 63

2.1.2

Compliance with Law Regarding
all EADS’ Activities

p. 65

Corporate Governance Standards

p. 67

2.4 Human Resources: Employer –Employee Relationship
2.4.1

p. 82

2.4.2

Human Resources Organisation

p. 83

2.4.3

Human Resources Policies and performances

p. 84

p. 69

2.2.1

Product Quality and Customer Satisfaction

p. 69

2.5 Corporate Citizenship2.2.2

Sustaining and Protecting Innovation

p. 71

2.5.1

2.2.3

Supplier Management: Fosteringa Mutually Beneficial Relationshipwith EADS’ Suppliers

p. 74

2.5.2

2.3 Environmental Care

p. 78

2.3.1

Policy

p. 78

2.3.2

Organisation

p. 78

2.3.3

Performance and Best Practices

p. 79

EADS Business, Legal and Corporate Responsibility

p. 82

Workforce Information
and Organisation of Work

2.2 Sustainable Growth

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p. 92

Maintaining an Open Dialogue
with EADS’ Stakeholders

p. 92

Encompassing Community Interests
in EADS’ Global Strategy

p. 93

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EADS is a global aerospace and defence company driven
by the ambition to set the standard for its industry. Setting
the benchmark in the sector implies long-term value
creation and recognition of the Group’s corporate social andethical responsibility. As such, Group strategy envisages
a sustainable balance between economic performance,
consideration of stakeholders’ interests and respect for theenvironment.
EADS’ corporate social responsibility (“CSR”) approachis based on the Group’s nature, strategy and activities.
For example, its long-term vision is driven by productspecificities, such as their average lifecycle of over 30 years.
Furthermore, the EADS Group has been created from theintegration of existing businesses. The Corporate functions
are there to determine guidelines and to give support to the
BUs that are responsible for the day to day business. They
also ensure dialogue with their direct stakeholders.
As a defence company, EADS Group specificallyacknowledges its responsibility in selling defence products
and providing services to nations that contribute to theirsecurity during peace time. EADS delivers products andintegrated solutions pursuant to customer specification.
These products have to comply with the applicable laws
put in place by the responsible government (arms export
laws, embargo rules and Ottawa agreements, anticorruption
policy).
In 2004, EADS undertook to work towards demonstrating
its corporate social responsibility in the conduct of its dayto-day business. In order to achieve this vision, EADS has
established a CSR policy that identifies areas in which thewhole Group aims continually to improve.
EADS’ vision is in line with internationally recognizedframeworks such as the Universal Declaration of Human
Rights, International Labour Organization’s Declaration
and OECD Convention. EADS, as a signatory of theUnited Nations Global Compact, is committed topromoting, within its sphere of influence, the applicationof fundamental values regarding Human Rights, Labour,
Environment and Anticorruption. EADS is willing to reporton the Group’s success in implementing its sustainable
development strategy.

The EADS CSR policy embraces its way forward on key
CSR items which are common for the entire Group. These
relate as far as possible to existing best practices, as well as
to the EADS code of ethics (the “Code of Ethics”) which
is designed to give guidance for operational managers andemployees.
EADS realises that in addition to the implementation ofgood practices regarding CSR within its businesses, reportingon these practices is becoming more and more importantfor its stakeholders. EADS therefore started to report on its
activities in the field of CSR in the Annual Report 2002. In
the 2002 and 2003 reports mainly qualitative information
was included, due to the fact that CSR practices are mostly
carried out within the BUs and their respective sites and up
to this point no centralized reporting procedure had been
implemented. The 2002 report sets out the existing practices
at Group level, whereas the 2003 report already contained
a first qualitative analysis of the existing best practices
amongst EADS’ BUs.
In early 2004, EADS’ top management decided to launchan extensive project in order gradually to provide moredetailed and quantitative reporting on CSR at Group level,
and to ensure that existing best practices in certain BUs werecommunicated within the Group.
In its annual report 2004, EADS published its firstdetailed CSR reporting, including EADS CSR policies andorganisations. A number of quantitative and qualitative Key
Performance Indicators (“KPI”), based upon the Global
Reporting Initiative (“GRI”), the Global Compact principles
and the French Nouvelles Régulations Économiques andtailored to EADS’ business were defined for the 2004 report.
These KPIs were not included in full in the 2004 report,
as EADS chose an incremental approach, which envisaged
adding KPIs every year to EADS’ publications, as data
became available and its quality could be controlled. This
2005 report thus incorporates additional KPIs.

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EADS CSR policies
EADS policies have been designed to support and implement
EADS’ long-term vision and strategy in terms of CSR and
are supported by an internal control system in areas suchas compliance with OECD rules, export restrictions, IP
protection, research and development etc. (See “Part 1 / 2.1.5
Internal Control and Risk Management Systems”). They give
guidance for day-to-day business and are in accordance with
EADS’ underlying values.

CSR Policies on Domains Identified as Most Relevant for EADSCSR Domains

Specific Policy Items

Business Ethics

Proper business practices
Compliance with the laws regulating all EADS’ activities
Corporate Governance standards
Product quality and customer satisfaction
Sustaining and protecting innovation
Fostering a mutually beneficial relationship with EADS’ suppliers
Minimizing environmental impacts of EADS’ activities
Taking into account environmental impacts of EADS’ products throughout their lifecycle
Providing a safe workplace for EADS’ employees and subcontractors
Caring for EADS employees and know-how
Ensuring equal opportunity for all EADS employees
Ensuring efficient management of skills and know-how
Promoting a proactive dialogue with EADS’ employees
Maintaining an open dialogue with EADS’ stakeholders
Encompassing community interests in EADS’ global strategy

Sustainable Growth

Environmental Care
Employer-Employee
Relationship

Corporate CitizenshipThe policies and related practices are set out in more detail below.

EADS Code of Ethics
At the time of the creation of EADS, the Code of Ethics
was established and communicated to the employees of theGroup. This Code of Ethics aimed at emphasizing values thatwere key success factors for achieving an efficient integrationof different companies into one group. In 2005, morethan four years after the creation of EADS, in light of its
establishment as a market leader in many of its businesses,
and considering the evolving legal environment relating tobusiness ethics, EADS updated the Code of Ethics in orderto reflect practices recommended by various codes and laws
and to align with best practice.
The enhanced EADS Code of Ethics sets out in one single,
comprehensive document the EADS Group businessguidelines related to the ethical standards that the Groupadheres to.
The Code of Ethics serves as a core EADS business guidelinein an architecture of documents in which the code also refers
to pre-existing, detailed policies as laid out in the EADS
Corporate Handbook as well as division or BU specific
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policies and processes. It is based on EADS’ underlying
values and fully in line with international recognised
standards as laid out in charters, declarations or guidelines,
such as the Universal declaration of Human Rights.
The Code of Ethics covers the full scope of EADS’ CSR
policies, addressing in the five chapters the principal lines of
ethical behaviour:• “Creating a positive working climate” describes EADS’
principles in terms of, e.g. dialogue and representation,equal opportunities policy, and management of HR
development;• “Doing business ethically” discusses issues such asconflicts of interest, export control and contracting withgovernments, as well as the hiring of government officials;• “Fostering sustainable growth” deals with proper use of
information and intellectual property rights, as well as
relationships with suppliers;• “Respecting the environment” covers developing
environmentally sound processes and products;

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4• “Living in our communities” describes the ways inwhich EADS contributes to the life and development ofcommunities where it operates.
The Code of Ethics, therefore, gives guidance to all
employees about appropriate conduct in their professional
environment.
These principles will be monitored, in particular throughentrusting an EADS Ethics Committee with complianceresponsibility in ethics matters.
The Code of Ethics describes the missions of the Ethics
Committee set up by the EADS Board of Directors. In
particular, the Ethics Committee will offer guidance
to the EADS Chairmen, the Board of Directors and its
Committees, the CEOs, COOs and Executive Committee, as

well as management at large regarding all ethical questions.
The Committee will submit at least annually a report to
the EADS Board of Directors with respect to each year’s
activities. It will also implement appropriate coordination
with the compliance functions of EADS and its divisions.
In 2006, all employees will be sensitised througha systematic information campaign, aimed at raising
the awareness of the importance of ethical businessconduct and emphasizing underlying values. The textof the enhanced EADS Code of Ethics is available
on the Internet at www.eads.com.

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2.1 Business Ethics
2.1.1 Proper Business Practices
Doing international business requires being especiallyvigilant so as to ensure that all companies belonging to the
EADS Group always comply with all applicable laws andregulations relating to international sales, as well as withvery high business ethics and integrity standards. EADS
aims at setting standards to govern its business ethics andintegrity policies which often go beyond applicable laws andregulations.
To achieve this aim, EADS International has been
implementing a comprehensive set of rules and processes
since 2000 aiming at ensuring compliance with such laws,
regulations and business ethics and integrity standards.

2.1.1.2 Organisation
EADS has implemented a detailed corporate policy, theForeign Trade Rules, which applies to all international
operations of the Group entities, and which is intended todetect and prevent bribery and unfair dealing in internationalsales. This policy has been published in EADS’ Corporate
Handbook, which is available to all employees through thecompany intranet.

2.1.1.1 Policy

The policy entails effective control of international
operations, through the conduct of appropriate due diligenceof business partners, regular audit and reporting mechanisms
and enhanced training sessions within all BUs. It also setsout appropriate guidelines regarding the acceptance of gifts
and hospitality.

is active in sectors which are strictly ruled“– EADSby national and international regulations. EADSThe main pillars of the Foreign Trade Rules are thefollowing:is committed to absolute compliance with applicableregulations wherever its entities operate.
– Fighting against corruption and economic crime in foreign
trade has become a major challenge for all international
companies. In order to meet this challenge, EADS is fullycommitted to complying with applicable national andinternational legislation, including the OECD Conventionof November 1997, as incorporated into the legislation of
35 countries. EADS’ International Compliance Program(also known as the “Foreign Trade Rules”) is a corporate
policy, applicable to all international operations of
EADS and its affiliated companies, intended todetect and prevent bribery and unfair dealing.
– EADS is often involved in proposals, bid preparations orcontract negotiations with governmental authorities becauseof the nature of its products and services. The Group’s
policy is to compete fairly and legally for all business
opportunities as well as to conduct negotiations and perform
contracts when awarded in compliance with all applicablerequirements, specifications and contractual obligations.

• Transparency in the selection of all business partners.
All business partners engaged by an EADS company
have undergone a strict engagement procedure, based on(i) a due diligence aimed at confirming that the prospective
business partner is reputable and qualified to work for
EADS, (ii) internationally recognized standards (location,
credentials, ethical track record, etc.) and (iii) a commitment
to abide by the Group policies prohibiting corruption andpayment of bribes;• “Appropriate remuneration for legitimate services”. EADS
is very keen to ensure that all payments due and payable
to any business partner are justified by legitimate services
rendered and do not exceed sound market practices; and• Monitoring of the contractual relationships with suchbusiness partners (and the related payments) until
satisfaction of all contractual duties.
Those policies and procedures normally apply to all
operations directly or indirectly relating to foreign trade.

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The Group’s business partners must respect these policies
and procedures, and any failure to do so may lead to earlytermination of the contract in place.
Furthermore, EADS conducts regular audits ofimplementation of all related agreements entered into
by BUs to verify that Group policies and procedures areproperly implemented and the BUs are instructed to reporton a yearly basis on the implementation of such policies
and procedures. This is especially the case concerning thepayments made to the business partners, which must at all
times be fully justifiable.
Since October 2002, EADS has set up a network ofInternational Compliance Officers (“ICOs”) representing each
BU. ICOs are responsible for ensuring the correct applicationof the policies and procedures within the Group. They are alsoin charge of nominating appropriate correspondents in foreignsubsidiaries with a view to properly cascading the complianceduties in all operating countries.
EADS has also developed regular contacts with international
bodies such as the OECD, the International Chamber ofCommerce (“ICC”) and the European Union (“GRECO”)
and peer companies with a view to setting and promoting
integrity standards in the aerospace and defence sector. In
this respect, EADS is pursuing a business dialogue with
the European Aerospace & Defence Industries Associationof Europe (“ASD”) and its members, (such as CIDEF
and Groupement des Industries Françaises Aéronautiqueset Spatiales (“GIFAS”) in France, BDI in Germany,
AFARMADE in Spain or Society of British Aerospace
Companies (“SBAC”) in the U.K.), and also with major
European aerospace and defence companies, in order tolaunch a platform of principles aiming at setting highstandards, exchanging best practices, promoting training
and compliance programmes, and more generally generating
common European industry positions on ethics and anticorruption issues.
This platform would be open to all international aerospaceand defence companies and associations, especially thosebelonging to OECD countries (e.g., United States), but also
non-OECD countries at a later stage. As a matter of fact,
EADS views such an international initiative as a perfectopportunity to enhance the level playing field which theOECD convention, and thereafter the UN Convention signed
in Merida in December 2003, have started to establish.

EADS is also maintaining a relationship with the ICC
anti-corruption Commission and the French Corruption
Monitoring Council (Service central de prévention de lacorruption), which signed a convention with EADS in 2003.

2.1.1.3 Performance and Best Practices
In December 2005, EADS amended the Foreign Trade
Rules. The Foreign Trade Rules amendments resulted inparticular from advice received from reputable international
experts in business ethics and anticorruption laws andpractices. The main objective of these amendments was toadapt the Foreign Trade Rules to the evolution of the Group,and to disseminate the identified best practices across theGroup as a whole.
EADS conducts regular investigations and audits to detectand spread Group best practices in international businessethics.
In addition, the Group has developed a comprehensive
training policy so as to disseminate an “awareness’ culture
within all BUs. All employees dealing with international
business attend such training sessions. In 2005, around 42
training sessions took place across EADS, sometimes withthe attendance of third parties (prosecutors, representativesof international bodies, lawyers, etc.), in order tocommunicate and explain the Group’s corporate values andpolicies to all concerned. This represents a very significant
increase compared to 2004, which tends to demonstrate thatthe dissemination of a compliance culture is a key element of
EADS’ management system.
The Group issued a leaflet “EADS International Business
Ethics Policy For Consultant Agreements: Transparency& Substantiation” in January 2004, which is given to
all prospective international marketing consultants.
This leaflet summarises Group policies and procedures
regarding selection of international business partners. Suchinternational business partners are also invited to attend
specific training sessions when deemed appropriate.
The Group’s ICOs meet periodically to share concerns
and best practices. An annual ICO Conference has beenorganised since 2003 involving more than 100 people
involved in foreign trade business and operations. The ICO
Conference of December 2005 was held in Paris with 114

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participants from 22 BUs. Senior Executives presented anddiscussed issues focusing on business ethics at large.
EADS also releases Group-wide internal bulletins on aregular basis named ICO information letters. These focus
on the evolution of the regulatory environment for foreign
trade and highlight information reported by international
media regarding the fight against corruption and economic
crime worldwide. These bulletins are intended to complete
and update the information given to EADS employees
during the training sessions.
In relation with its international businesses, EADS uses
third parties, such as consultants and international business
partners in order to provide appropriate assistance andConsultant files audited

expertise to BUs on current or potential business for EADS
and/or promote EADS products or services in various
countries. The contractual arrangements for such services
are governed by internal rules and policies that describe
the entire contractual process, from the selection of thepartner to the implementation and execution of the agreed
service. In order to ensure that the rules are understood andstrictly applied, consultant and service providers agreement
are audited. The purpose of these audits is to check thesubstantiation of the contractual duties delivered by thethird party in exchange of its remuneration. The table below
presents information concerning the percentage of consultant
files audited in each of the past three years. None of theaudits have revealed any material deficiencies.
2005

2004

2003

96%

93.10%

Not available

Number of ICO information letters issued

3

3

2

Number of training sessions held by ICO

52

20

12

Scope: EADS

2.1.2 Compliance with Law Regarding all EADS’ Activities
Compliance and verification of compliance with all thelaws and regulations of the countries where the Group does
business is a must at EADS. Rapid changes in the industry
and the overall global environment constantly present
new legal or regulatory requirements and ethical standards
which call for robust internal controls in the field of legal
compliance.
Against this background, the Group monitors overall
compliance with all laws relating to its business activities in
addition to having a special focus on compliance with export
control regulations.

2.1.2.1 Policy (law and export control)
is committed to complying with antitrust and“– EADS
competition as well as humanitarian law, when applicable,
in all of its activities and throughout the Group.
– EADS is also committed to complying with all applicablelegislation relating to foreign trade. EADS GroupEADS Business, Legal and Corporate Responsibility

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companies comply with all import and export control
regulations that govern the exports and imports ofcommodities, technical data and technical support.
– EADS always obtains export licenses and othergovernment approvals prior to exporting products andtechnology controlled by governments or the EU.
– EADS screens new customers and suppliers toensure that they do not do banned business.

”

The overall compliancewith the Law programme
Amongst the various areas of the law which require constantmonitoring, it is worth mentioning a few examples that areof particular importance to EADS although the list is only
indicative. Examples of this permanent monitoring process
are: compliance with the laws and regulations governingcompetition, protection of the environment, public sector
procurement and accounting and financial reporting.

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34Compliance with Corporate Governance standards is
another area of focus. Governance practices are developed
and monitored to fulfil the Board’s responsibility towards
customers, shareholders and employees to oversee thework of the management in the conduct of the Company’sbusiness, and to serve the long-term interest of stakeholders.

and procedures. Training is also provided to export control
staff as well as to other relevant functions as marketingand procurement, creating awareness for the importance ofexport control issues. The EADS’ national export officers
decided in January 2006 to go further in strengthening theGroup compliance processes by proposing a detailed EADSGroup export control policy.

Compliance with Export Control
Laws and Regulations

The same applies to import regulations as EADS is a major
importer as well and has a continued globalization approach.

Because of the particular nature of the industries that it isactive in, EADS has put a special focus on the overall areaof compliance with export controls regulations both in its
commercial aviation businesses and as a company dealing
with defence and dual-use products as well. Being a hightechnology company both in the civil and in the defence
environment means, for example, that EADS’ know-how
in the form of products or services and all relating technicaldata is subject to a wide range of export controls laws andregulations. Keeping the Company’s status of “reliable
importer/exporter” is the constant ambition of Company’s
export control specialists and employees; thus EADS strictly
follows highly regulated processes to control the finaldestination of its products and technologies.

In parallel to import/export aspects, there are also specificrequirements dealing with access to and dissemination of
restricted or classified information whether it is for national
security reasons or other customer driven requirements
especially in the field of defence, which are strictly followed
by EADS, based on Group specific policies.

As each of the countries from which EADS exports
defence products has specific laws and regulations on arms
export control, the organisation of compliance is tailoredto the related countries within EADS. BUs have appointed
Export control officers and allowed dedicated resources toimplement export control compliance procedures as close as
possible to people working with export controlled products(commodities, software, technical data…).
National Export control officers were appointed at EADSGroup level. Depending on the country from which exports
take place, either the country Export control officer islegally responsible for compliance and thus has a strong
centralisation and decisional role or the final responsibilitylies in the hand of each of the legal entities and its local
Export control officer. In this later case, the national Export
control officer ensures coordination and provides the
Headquarters and the BUs with expertise and advice.
The national Export control officers organise regularly
within their respective countries meetings and conferenceswith their export control officers’ national network, toshare knowledge and expertise on compliance requirements

Separate policies are enacted in order to protect EADS
data and overall Company proprietary and confidential
information.

2.1.2.2 Organisation
From an organisational standpoint, EADS Legal Affairs, incoordination with the Divisions’ and BUs’ legal departments,
is responsible for designing, implementing and overseeing
the policies and processes aimed at ensuring that EADS’
activities comply with all applicable laws and regulations.
Teamwork amongst all the legal players and export control
professionals in the Company is aimed at ensuring consistentand comprehensive legal processes in compliance withnational requirements. Corporate Legal Affairs is also
responsible for overseeing all litigation affecting the Group,
as well as for the legal safeguarding of the Group’s assets,
including intellectual property.
Extended networks of professionals (export control,
intellectual property…) located close to operational players
drives the export control activities. These professionals
are capable of handling the requirements of the many
jurisdictions that are relevant to EADS, not only in its“home countries” but abroad as well.
The Corporate Secretary with the support of Legal Affairs
departments also play an essential role in the setting up andadministration of (i) EADS Corporate Governance proceduresand (ii) legal documentation underlying delegation of powers

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and responsibilities and defining the EADS management andthe internal control environment.
Finally, all those activities are audited by the Internal
Audit department which consists of a team of dedicatedprofessionals who are familiar with the requirements andchallenges of the Company’s international business.

2.1.2.3 Performance and Best Practices
Although each EADS BU and location faces different
compliance challenges, they are extremely vigilant inmonitoring legal risks. They constantly ensure that
regulations are applied and track any infringement risks
so as to prevent them. This is based on three basic processes:

supported by solid infrastructure for compliance, training
initiatives and general employee awareness actions as well.
• Identification of compliance risks results fromsystematic monitoring of key compliance risks in each of
the BUs.
• Whatever the source of the compliance risk may be,
EADS takes responsibility for finding the facts andanalyzing the applicable laws; measures are then taken to
deal with the situation in a proactive manner.
Sharing of information, especially within the CSR networkand the community of legal professionals is designed tohelp the Company learn from mistakes, if any, thus using
its experience to continue raising the bar in its compliance
processes.

• Preventing compliance risk is key to the overall EADS
approach. Such a preventive approach is based on the
addition of Company policies and deep cultural values

Court decisions regarding cases pertaining
to antitrust and monopoly regulations
Descriptions of policy, procedures/
management systems, and compliancemechanisms for preventing anticompetitive
behaviour

2005

2004

None
i) EADS Code of Ethics including but
not limited to all relevant provisions ofCode of Ethics relating to compliance withcompetition law; and ii) Regular legal risk
analysis as issues come up.

Nonei) EADS Code of Ethics including but
not limited to all relevant provisions ofCode of Ethics relating to compliance withcompetition law; and ii) Regular legal risk
analysis as issues come up.

Scope: EADS.

2.1.3 Corporate Governance Standards
Compliance with Corporate Governance standards is an areaof focus at EADS. Governance practices are developed andmonitored to fulfil the Board responsibility to shareholders
to oversee the work of management in the conduct of theCompany’s business and to seek to serve the long-term
interest of shareholders.
In 2004, the EADS Board of Directors continued to upholdthe driving principle of maximizing shareholder value
and conformity with applicable law and the Corporate

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Governance principles in the countries relevant for theCompany, while also enhancing its focus on Corporate
Governance best practices.
The EADS management structure has proved efficient andwell adapted to fulfilling its commitment to a sustainable
and balanced relationship with stakeholders. Ensuring
development of employee and supplier relationships, as wellas ensuring customer satisfaction, remain a foundation of
EADS’ success, operations and culture.

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2.1.3.1 Policy

2.1.3.2 Organisation

is determined to set the standard of excellence in the“– EADS
field of Corporate Governance. EADS is committed to meet

See “Part 1 / Chapter 2 Corporate Governance”.

and even exceed social, legal and statutory requirements
to ensure transparent management and recording.
– EADS commits to providing the most accurate andreliable information and records in all decisionmaking processes and business relations, both insideand outside EADS. To achieve the highest standard ofreliability, EADS continuously improves its Internal
Control and Risk Management procedures.

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2.2 Sustainable Growth
EADS supplies some of today’s most advanced technology
in the field of aerospace and defence. EADS strives to meetthe customers’ requirements for competitive, cost effective
and innovative technology. The Group’s development

relies on its ability to deliver products and services thatmeet customers’ requirements. Sustaining this development
requires focus on the product quality, continuous innovationand the best supplier management.

2.2.1 Product Quality and Customer Satisfaction
As an industry leader in aerospace and defence, EADS isconstantly striving to build upon its solid reputation for
excellence in its products, processes and people. With afocus on continual improvement and on building customer
confidence by improving On-Time and On-Quality
Delivery (“OTOQD”), EADS demands that every area of
its operational business challenges and improves its levelsof Quality and Operational Excellence, internally andthroughout the supply chain.

network of BU operational level experts to ensure that the
Quality and Operational Excellence Programme (“QOEP”)
is tuned directly to the needs, priorities and maturity of each
BU. He also Represents EADS in relevant Quality, Standards
and Regulatory bodies at both National and International
level commensurate with the status of EADS as a global
aerospace and defence company.

2.2.1.1 Policy

In the second half of 2004, a major initiative was launched
to deliver enhanced customer confidence and satisfaction
through driving operational improvements in thoseindustrial processes which contribute to achieving OTOQD
of products and services to end customers. In 2005, this“Quality and Operational Excellence Programme’ (QOEP)
was deployed through EADS BUs.

is fully committed to achieving the highest“– EADSlevels of customer satisfaction, driving continuous
improvements in the quality of its products,
processes and people and deploying the mostdemanding Quality Management Systems.
– EADS actively seeks key customer feedback through astructured Group-wide process of Customer Reviews.

2.2.1.3 Performance and Best Practices

This Programme acts on five key areas for improvement:”
Customer Confidence

2.2.1.2 Organisation
The Chief Quality Officer (“CQO”) is in charge ofstimulating, coaching and supporting the BUs to implement
continual improvements in operational level OTOQD
performance and to maintain and improve customer
confidence in EADS. In particular, he chairs an EADS
Quality Council with senior level representatives from each
BU to agree actions and priorities and to drive OTOQD
deployment in all BUs and animates supports and drives a

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A common methodology was defined in early 2005, witha view to deploying it consistently throughout the Group.
This Customer review process (“CRp”) methodology isbased on a structured series of interviews targeting the
key decision makers at EADS’ strategic customers. These
interviews are performed by the BUs’ top management.
The goal is to measure the level of customer confidence,
which is more important than satisfaction in determining
its loyalty. EADS aims to measure (and to improve69

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continuously) the relationships between the Group andeach of its customers. Improvement plans result from theseinterviews, and the interviewer is responsible for reporting
the progress of these plans to the interviewee.
In 2005, five reviews were completed (MTA, DS Spain,
Eurocopter, Seca, and Socata), three reviews being in action
planning phase (MTA, DS Spain and Eurocopter). Six BUs
entered the Design and Review phase, mainly for Defence
customers.
More complex CRps for Defence customers were also
prepared in 2005: they are conducted at national level rather
than at BU level, governments’ procurement activities beingby nature cross BUs. The Spanish review was performed in
2005; the French review was launched in 2005 and will last
until mid-2006. The German and British reviews will belaunched in 2006.

methodology defined in 2005, along with the complete
training syllabus (more than 50 training modules and 30
tools). DRIVER is specific to EADS. The corresponding
training can be delivered in the format of “EADS GreenBelt” (one week) or “EADS Black Belt” (four weeks). To berecognised as Qualified Improvers, EADS Black Belts mustcomplete, on top of their training, an improvement projectthat can cover for six months and deliver measured benefits
in terms of On Time On Quality Performance, costs savingsor both.
In 2005, 97 EADS Black Belts were trained at seven sessions
held within MTA, Eurocopter, Defence Electronics, Airbus,
Seca, LFK and Socata. Six employees were qualified, bycompleting the improvement project and sixteen were EADSGreen Belt trained.

Quality Gates
Supply Chain Processes
More than 70% of EADS products are sourced from outside
suppliers. If a supplier fails to deliver On Time and On
Quality, so does EADS. Managing the Supply Chain throughthe traditional contractual relationship is no longer sufficient.
Upstream visibility is needed into the internal processes ofeach supplier to enable a timely reaction to their deficiencies(as well as to EADS’ own deficiencies which could impair
a supplier’s performance). In 2005, EADS deployed Supply
Chain Diagnostics (two to three weeks assessments) in several
BUs, in order to assess what they already identified as their
weakest points in supply chain management, and derive“90 Day Action Plans”.
In 2005, ten Diagnostics were conducted in seven BUs:
Defence Electronics, Military Air Systems, Astrium, Defence
and Communication Systems, LFK, Seca and MTA.
These assessments resulted in action plans at three BUs(one in Defence Electronics and Seca, two at MTA).
Implementation started in 2005 (improvement plans areunder preparation in the other BUs).

All EADS processes are made of steps: from bidding todelivery of demonstrators for a development process; frommachining to final assembly for a manufacturing process.
Each step completion must be carefully checked before
passing the “product” down to the next step. Otherwise
problems may be transferred to a place where they will
be more difficult and costly to solve. Based on this simple
observation, a methodology was already in place in some
BUs, calling for an internal written contract between the twoparties (upstream and downstream) at a “Gate” between two
important steps of a development or a production process.
The quality gate system was further extended in 2005.While
Airbus had already started the implementation of quality
gate before 2005, Eurocopter implemented its quality gate in2005.

High-Level Metrics
In order to measure the results of the improvement actions
at BU level in terms of Customer Confidence and OTOQ
Delivery, a set of high level metrics has been defined in 2005
and begun to be implemented.

DRIVER and EADS Black Belt

The three generic metrics are:

Until 2005, EADS “only” expected that each manager would
improve the operational performance of his / her team; EADS
now equips managers with an “Improvement Methodology
and Toolkit”. This is the purpose of the “DRIVER’• the Customer Confidence index (resulting from theCustomer Review Process described previously);• the On Time On Quality index for Development
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2.2 Sustainable Growth34• the On Time On Quality index for Physical deliverables.
The use of these Metrics is under the custodyof the BU heads.

In 2005, normalised HLM have been defined in five BUs(MTA, Defence Electronics, Astrium, Eurocopter and
Military Air Systems) and are operational in two of them
(MTA and Defence Electronics).

2.2.2 Sustaining and Protecting Innovation
2.2.2.1 Innovation Strategy
Innovation is one of the key areas EADS is focusing on
as growth drivers for the future. EADS has establishedvarious programmes of cooperation with universities andscientific organisations to develop jointly new technologies,
and is continuously evaluating new opportunities to extend
partnerships in this area.

PolicyEADS’ innovation strategy aims at increasing“competitivenessthrough continuously improving qualityof services and products as well as efficiency of processes.
The two main pillars of EADS’ corporate strategy are
the EADS Research & Technology (“R&T”) Networkand the Corporate Research Centre (“CRC”).

”

Organisation
Due to the specific organisation of EADS in BUs, thecompany’s strategy has both decentralised and centralised
components. All R&D and about 80% of the R&T activities
are decentralised. The responsibility of each of the BUs is toensure the development of products and services that meetcustomer needs and to offer competitive solutions in linewith market expectations.
The centralized efforts are represented by both the EADS
R&T Network and the CRC.
The R&T Network coordinates the shared research andtechnology activities, which involve several BUs andthe CRC. The Network is structured around technology
domains, which are of common interest, such as Materials
and Structures, Electronics, Navigation and Control as wellas Image Processing. For each of the domains, a group of
R&T experts is formed by representatives of the entities
interested in shared work in that domain, thereby ensuring
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an effective transversal coordination. The Network sets up
a common R&T programme and facilitates the circulationof information and research results within the Group.
The steering of the EADS R&T Network and the decision
making process are performed in a collective way between allparticipants, inducing useful “bottom-up” and “top-down”
exchanges between the experts and management. Additional
centralised R&T coordination is accomplished by the team of
the Chief technology Officer between the EADS BUs, theCRC and headquarters functions to manage relations withexternal stakeholders, companies, industrial organisations,research laboratories and universities for example, for joint
research projects.
The CRC conducts applied research and supports the
R&T Network by providing a platform for the exchange
of know-how and by highlighting possible synergies
throughout the Group. The CRC has two main sites in
Paris and Munich and employs approximately 600 people
including doctorates and university interns. It maintains
research proximity centres in Toulouse, Nantes (openedin 2005) and Hamburg to support the knowledge transfer
to BUs in these locations. A liaison office is operating in
Moscow, which facilitates relations with Russian scientificinstitutes. EADS is also preparing the creation of a centrein Spain and an extension in other countries (i.e., Singapore,
Qatar), through laboratories or offices to develop cooperationand to take advantage of competencies wherever they are.
The CRC and the EADS R&T community in the BUsmaintains and expands established academic research
partnerships with leading universities and high-techengineering schools by employing thesis students, postgraduate interns and doctorate candidates as well as bycontracting specific research projects.
See also “Part 1 / 1.1 Management’s Discussion and Analysisof Financial Condition and Results of Operations”.

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2.2 Sustainable Growth3
4
Performance and Best Practices
Continuous innovation has been the basis of EADS’ successin the past, and the Group is convinced that this will beeven more important in the future. Innovation cycles
are shortening and new competitors are emerging in all
fields of EADS business. To be leading the markets in the
future, EADS will always need to be ahead with innovative
solutions.
Technological innovation programmes are managed inconjunction with the EADS R&T Network and the EADSCRC as well as through a strong network of top experts
in the BUs. EADS aims to make better use of available
resources by interacting even more with external scientificand applied research organisations. Such cooperation

allows EADS to leverage the resources available in theseorganisations, which in turn benefit from EADS’ systems
knowledge.
In 2005, the Group invested €614 million in R&T alone(€510 million in 2004) to develop technologies for future
products, services and processes. On the one hand, the CRC,
which focuses on applied research and long-term strategic
technologies, spent €93 million of that amount on research
programmes in the areas of Materials and Structures,
Acoustics, Microsystems and Electronics, Systems
Engineering and Information Management Techniques. On
the other hand, synergy between the BUs was developedby the EADS R&T Network through 136 shared projects,
representing €90 million.

In €
bn

2005
In percentageof revenues

2004
In € In percentagebnof revenues

2003
In € In percentagebnof revenues

Self-financed R&D*

2.1

6.1%

2.1

6.6%

2.2

7.3%

R&T expenses

0.61

1.8%

0.51

1.6%

0.45

1.5%

Scope: EADS.
(*) See “Part 1/1.1.3.4 Research and Development Expenses”.

Advanced Technology Initiative

EADS Corporate Foundation for Research

Activities of the Advanced Technology Initiative (“ATI”),
launched in 2004, continued throughout 2005 as a crosscompany drive to increase efficiency in innovation and R&T.
ATI involves benchmarking and forecasting of technologies
and gives answers to the questions: What is the scope oftechnologies inside EADS? How good is EADS at thesetechnologies compared to the competition? What will be key
technologies in the future? External expertise is included
to provide perspective and vision. Based on the findings,
action plans are developed to improve the global technology
strategy by correcting any deficiencies and by optimising theallocation of resources. ATI involves today more than 200
technical managers, many of them being currently active in
the R&T Network and in the CRC. While it is continuing in
2006, ATI has already led to recommendations for managing
the technological risks and for ensuring technologicalleadership.

Activities of the EADS Corporate Foundation for Research(Fondation d’entreprise) in France aim to improve thecompany’s links to public research laboratories anduniversities by promoting multidisciplinary research inaerospace technologies, and establishing exchanges between
researchers in government, private industry and higher
education research institutes.
In 2005, the Foundation financed 17 doctorate and nine
post-doctorate grants as well as 10 research projects.
A number of incentive activities are carried out, such asawarding the “Irène Joliot-Curie Prize for Women in
Research”, which rewards actions encouraging the presenceof women in scientific and technical fields of study, or
promoting the position of women in the research community
in France, and highlighting exemplary professional
contributions to public and private research.
The “AéroJeunes Day” is held every year to promotescience and technology among young people. In 2005,
students from several schools in France were invited to spend
a day at the Paris Air Show. The “Envol Recherche” Day,the major event for the EADS Company Foundation, allows

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the Foundation to showcase its different activities and to sum
up the achievements of the year. The beneficiaries of grants
and funding are invited to present the state of their work.

thermoplastic composites technologies and to develop
specific non-destructive testing methods.

Other initiatives, including foundations, are contemplated
in Germany, Spain, the U.K. and the U.S. to improve links
with public research institutes and universities.

2.2.2.2 Protecting Innovation:
Intellectual Property

Bauhaus Luftfahrt (aviation research centre)
In 2005, EADS and the government of the German state ofBavaria joined forces with three German aerospace companies
to create the aviation research centre, Bauhaus Luftfahrt, acentre for creative and interdisciplinary research activities
in the field of aeronautics. Headquartered in Munich, theregistered association sees itself as a think tank for a new
type of visionary, unconventional aviation research. The
centre will focus on systems and concepts for the future,and on evaluation of integrated systems in comprehensive,interdisciplinary research activities.

Academic partnerships
EADS regards its relationship with the academic world asa priority and is developing this with vigour by reinforcing
its cooperation with academic laboratories through deeper
and more targeted relationships. In 2005, the CRC France
has therefore established a common structure with several
French top-level academic partners. INNO’CAMPUS wasinaugurated at the renowned École Normale Supérieure(ENS) de Cachan, near Paris, to intensify an existing
partnership by co-locating some EADS researchers atlaboratories of the ENS, by students using CRC facilities
and by jointly conducted seminars and workshops in the
structures simulation and structures behaviour domains.
In addition, a professorship in “Advanced Computational
Structural Mechanics” was established at the ENS, withfinancing supplied by the EADS Corporate Foundation for
Research.
The TECHNO’CAMPUS was established together with
Airbus and four high-tech engineering schools in Nantes:
the École Centrale, École des Mines, Polytech & ICAM.
The location was selected, because of the high scientificlevel of public research close to two Airbus production
plants. TECHNO’CAMPUS is actively supported by the
French state, the region of “Pays de la Loire” and the city of
Nantes. It gathers students, researchers and engineers fromthe schools, the CRC and Airbus in joint projects to research

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Intellectual Property (“IP”), such as patents, trademarks andknow-how, plays an important role in the production andprotection of EADS technologies and products. The use of
IP rights enables EADS to remain competitive in the market
and to manufacture and sell its products freely.

Policyof EADS’ most valuable assets is its intellectual“– Oneproperty which includes patents, trade secrets, trademarks,
copyrights and other proprietary information.
It is EADS’ policy to establish, protect, maintainand defend its rights in all commercially significant
IP and to use those rights in responsible ways.
– EADS also respects the valid IP rights of others andwill not reproduce or use software or other technology
licensed from other suppliers except as permitted by
the applicable license agreement or by law.

”

Organisation
The general management of IP in EADS is conducted
through an IP committee led by Headquarters. Executives
responsible for IP at the main subsidiaries upset on thiscommittee.
Every year, a meeting of the network of those responsible
for IP at the entities of the Group is held to explain the
EADS’ IP strategy and policy. EADS also promotes training
about IP matters. For example, there is one day about IP
included in the Corporate Business Academy (“CBA”)
training for the experts.
Each of the subsidiary companies of the Group owns theIP which is specific to its particular business and has been
generated by this subsidiary. Where IP is of common
interest throughout the Group, the subsidiary that generated
it may issue a license allowing its use elsewhere (respecting
the interests of the other shareholders when appropriate).
EADS also owns IP directly or under license agreementswith its subsidiaries. EADS centralises and coordinates the73

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2.2 Sustainable Growth34Group’s IP portfolio, participates with the subsidiaries in its
management and promotes licensing of common IP between
the subsidiaries. EADS controls the protection of its IP madein the strategic countries.
EADS also ensures that procedures are in place to protect theconfidentiality of the Group’s IP and to ensure contractuallythat third party rights are protected (in the case of joint
ventures). In this respect, suppliers’ contract terms andconditions are currently being strengthened and adapted
when dealing with countries with weaker IP laws. The
sourcing strategy is also to integrate a segmentation of partsof the contract in order to minimize the risk of industrial
espionage and counterfeiting.

Performance and Best Practices
To increase the added value of the Group, the team of the
EADS Chief Technology Officer promotes the sharing
within the Group of all the knowledge of the BUs and thesharing of resources, skills and research means and budget
to develop new knowledge, while respecting existing
contractual and legal frameworks.
For example, all the contracts between BUs of the Group
concerning shared R&T must have provisions allowing forthe flow of knowledge (EADS R&T Network rules).
In 2005, the EADS IP portfolio was comprised ofapproximately 4,900 inventions (approximately 4,400 in2004), which are covered by over 15,000 patents throughout
the world.

31st December 2005

New inventions filed (some of which covered by several patents)
EADS patents portfolio

31st December 2004

586

521

15,036

13,515

Scope: EADS.

2.2.3 Supplier Management: Fostering a Mutually Beneficial Relationshipwith EADS’ Suppliers
The EADS Sourcing vision is to deliver competitive
advantage by winning, integrating and developing
relationships with the world’s best suppliers. Its Sourcing
Strategy is designed to support this vision.

– EADS is committed to long term relationships
and partnerships with its suppliers, in particularin the engagement in the developmentof technological know-how.

”

2.2.3.1 Policy

2.2.3.2 Organisation

represent a high proportion of the value of“– Suppliers
EADS’ products, and play an important part in customer

Sourcing Strategy

satisfaction. As such, EADS endeavours to integratethem fully in its ethical way of doing business.
– Fostering a mutually beneficial relationship with
suppliers, EADS’ sourcing principles require all suppliers
to be responsible and to implement its standards andrequirements across all levels of the supply chain.

EADS Corporate Sourcing is the strategic architect ofsourcing functions and provides overall orientation for all
sourcing activities across the Group, in particular regarding
the key elements of the Sourcing Strategy, which are
Procurement Marketing and Global Sourcing, Joint Sourcing,
Supplier Evaluation and Risk and Opportunity Sharing.
• Procurement Marketing and Global Sourcing aims
to identify the best potential suppliers worldwide and

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to evaluate them with regard to their capabilities andtheir certifications. Procurement marketing is becoming
increasingly important as EADS targets new global supply
markets to support Global Industrial Development;• Joint Sourcing activities allow purchasing power to beleveraged across EADS. A group of Lead buyers bundles
procurement volumes of selected material groups forcommon negotiation. The Joint Sourcing also allows all
EADS BUs to use a common EADS contract per supplier;• The EADS Supplier Evaluation and Development
process guarantees that suppliers’ performances are
regularly evaluated. Suppliers can expect that the sameprocess and the same criteria are applied by all BUs:
Commercial, Logistics, Quality, Technical and Customer
Support. Evaluations are shared with suppliers as a basis
to discuss further improvement and development needs
and plans. With regard to the high proportion of sourcing
required for products and the complexity of the procured
systems, equipment and structures, EADS favours longterm, mutually beneficial, reliable and stable relationships
with key suppliers. Consideration for partnerships islimited to suppliers who continuously show excellence intheir performance, who can demonstrate a credible longterm interest and who are able to support their businessinterest with their own developments and investments.
It is a principle for such partnerships that suppliers are
involved and integrated at the early stages of development.
• Both business risks and opportunities should be
adequately shared with suppliers. Procurement Policies
of EADS BUs address all typical business risks andsuggest how they should be dealt with in EADS’contractual agreements. Procurement Policies also set out
the principles and guidelines for conducting businesswith current and prospective suppliers. These guidelines
describe how partnership relations should be handled inan equitable manner in the interest of all parties concernedand how disputes should be dealt with professionallyand as quickly as possible in accordance with the agreed
partnership arrangements.

Sourcing network
Each EADS Division and BU has its own sourcing function.
The five EADS divisions’ Chief Procurement Officers
compose the Chief Procurement Officers Council (“CPOC”)
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which is chaired by the EADS Chief Procurement Officer.
This Council was created in 2005; it is responsible for
implementing the EADS Sourcing Strategy.
The Procurement Directors Board (existing since 2000),
which is composed of the Divisions and BUs Procurement
Directors and of members of the Corporate Sourcing teamremains a platform for exchange of information, experienceand for diffusion of the EADS sourcing strategy.
One of the first decisions taken by the CPOC in early2006 was to create a Sourcing CSR network, led by EADS
Corporate Sourcing with the objective of formalising the
EADS CSR Sourcing Policy, in compliance with the EADS
Code of Ethics. The Sourcing CSR network will organise
flow-down of the CSR Sourcing Policy to suppliers andorganise related-supplier performance measurement.
In addition, the EADS Executive Committee decided
mid 2005 to implement a new structure within the
Sourcing organisation in order to support the Globalisation
Development of the Group. This new structure named
Global Sourcing network includes Country Sourcing Offices(“CSOs”) starting with China, Russia and India. More willbe created where EADS sourcing volume happens to grow.
These CSOs will take an active role in supporting fulfilmentof CSR standards by EADS suppliers based in their regions.

2.2.3.3 Performances and Best Practices
Sourcing context in 2005
With two thirds of its revenues sourced from external
suppliers, efficient and effective supplier relationshipmanagement is a key factor for EADS’ success. For this,EADS concentrates on its major suppliers. EADS’ top 50
suppliers already account for 43% of the sourcing volume
and the top 250 suppliers account for 75%.
Complex systems and equipment account for 45% of EADS
procurement. Structures, material and product-related
services also account for 36%, while non-product relatedmaterial accounts for 21%.
While EADS likes to see itself as an important customer for
its key suppliers, EADS wants them to be independent andat the edge of technological development. On average, EADS
suppliers make no more than 10% of their revenues from
EADS.

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Most of EADS’ sourcing volume is provided by large
companies. The remaining sourcing volume (15%) is spread
across a large number of small and medium sized enterprises,
as per the European Commission definition, i.e. with lessthan 250 employees or less than €50 million turnover.
Sourcing activities focus on the EADS home countries
France, Germany, U.K. and Spain, and on the U.S. Sourcing
outside the E.U. and North America is still limited.
However, EADS sees its global sourcing activities increasing
to better exploit opportunities and to support sales.
Most of EADS’ suppliers are currently located in the E.U.
(approximately 75%) and North America (23%), regionsin which social, economical and environmental practices
are well regulated by applicable norms and laws. EADS
Sourcing contractual terms request that these suppliers shallcomply at any time with laws and regulations on economical,
environmental and social standards and anticipate or at least
make their best endeavour to anticipate forthcoming changes
in these standards.
To reinforce supply chain compliance to EADS CSR related
requirements, EADS tier 1 suppliers are contractually boundto flow-down these requirements to tier 2 suppliers.
Procurement policies also reflect the principles of the UN
Global Compact. As a member of the UN Global Compact,
EADS has accepted responsibility to apply these principles
in its supply chain and requires its suppliers to adhere
to common standards in the areas of human rights, theenvironment and employment.

Influence of the Global Sourcing
As EADS targets to increase global sourcing volumes incountries where existing regulations do not include EADSCSR requirements, procurement contractual terms forthese domains need to be written in a more extensive way.
Therefore, EADS is on one side engaged in a process forembodying additional CSR requirements into procurement
contracts and on the other side EADS is organising supplier
CSR performance measurement.

Sourcing Contractual terms related to CSR
The decision to further develop CSR requirements isclearly taken and EADS has already reasonably pretty welladdressed key elements of CSR in sourcing contracts.
The various CSR aspects are already considered through
EADS Sourcing Risk and Opportunities Management(“ROM”) which recommends appropriate contractual
guidelines for key contractual chapters. These guidelines are
published into the EADS Sourcing Information Tool which
explains the principles for drafting contracts, disclaims the
typical contractual clause and gives practical comments forthe use of the buyer. For each domain, the requirements arecontractually cascaded on to sub-tier suppliers.
For example, regarding environmental responsibility,
principles for drafting contracts state that: “The purchase
contract should provide that the supplier shall comply
with all applicable laws, regulations, etc. as well as allcommitment to which EADS has subscribed (e.g., Global
Compact initiative) and end-customer requirements, inparticular: (1) Suppliers are asked to support a precautionary
approach to environmental challenges; (2) Undertake
initiatives to promote greater environmental responsibility;and (3) Encourage the development and diffusion ofenvironmentally friendly technology.” The recommendation
to the buyer also says that EADS should make sure thatthe supplier complies with international standards such as
ISO 14000 or EMAS (Eco-Management and Audit Scheme).
Moreover, in terms of compliance with EADS Ethicalcommitments, it is recommended that the contract includes
EADS key engagements such as the support, respect
and protection of international human rights within the
supplier’s sphere of influence; the respect of the freedomof association and the effective recognition of the right tocollective bargaining; the elimination of all forms of forced
and compulsory labour; the quality of working conditions
such as but not limited to, appropriate level of remuneration,and protection of health and safety of the employees.

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Key Performance Indicators
All figures below have been calculated using new €-$ exchange rates. Figures for previous years have been recalculated
accordingly (2005: 1.2441; 2004: 1.2438; and 2003: 1.1304).
Sourcing volume: breakdown by country for top 10 countries

2005
In percentage
of totalsourcing
volume2004
In percentage
of totalsourcing
volume2003
In percentage
of totalsourcing
volumeFrance

31%

31%

30%

Germany

22%

23%

25%

U.S.

22%

21%

21%

U.K.

12%

12%

12%

Spain

4%

4%

4%

Italy

1%

2%

2%

Netherlands

1%

1%

2%

Belgium

1%

1%

1%

Canada1%

1%

1%

Switzerland

1%

1%

1%

2005
In percentageof revenues

2004
In percentageof revenues

2003
In percentageof revenues

70%

63%

65%

The Sourcing geographic breakdown is stable and centred on Western countries.

Importance of sourcing outside of EADSThe increase in value of Sourcing is mainly influenced by A380 production ramp-up which started ahead of A380 deliveries,
temporarily increasing sourcing vs. sales volumes.

Purchasing breakdown by Geography

2005
In percentage
of totalpurchase

2004
In percentage
of totalpurchase

2003
In percentage
of totalpurchase

Europe

75%

77%

74%

North America

23%

21%

24%

Rest of the World*

2%

2%

2%

Scope: EADS.
(*) including < 1% in non-OECD countries.

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2.3 Environmental Care34

2.3 Environmental Care
EADS’ environmental policy embraces all phasesof a product life cycle, from conception and design,
manufacturing and product support, including environmental
impact of its sites. It seeks to ensure that each of its BUscomplies with the laws and regulations of each country

in which it operates, EADS being subject to numerous
E.U., national, regional and local environmental laws andregulations concerning emissions into the environment,
discharges to surface and sub-surface water and the disposal
and treatment of waste materials.

2.3.1 Policy
environmental impacts“ofMinimizing
EADS’ activities– EADS is fully conscious of its operations’ impact
on the environment and therefore considers
that monitoring and reducing those impacts isfundamental for its approach to CSR.
– EADS is committed to continuous improvement of its
environmental impact, beyond the simple fulfilment oflegal obligations. It is EADS’ subsidiaries and sites’ roleto ensure compliance with the laws and regulations of thecountries in which they operate. The Group encourages
environmental certification of its manufacturing processes.

Taking into account environmental impacts
of products along their life cycle– Improving environmental performance of
products throughout their lifecycle is of significant
importance for EADS and its customers.
– EADS encourages the active consideration ofenvironmental criteria, through implementationof Eco-Design approaches, in all phases of its
products’ life cycles in order to improve theenvironmental performance of its products.

”

2.3.2 Organisation
The management of environmental aspects of Group
operations is traditionally the responsibility of the BUs andsites. Each of EADS’ businesses is strictly controlled andaudited by authorities, in respect of manufacturing processes
and product certification. Furthermore, customers include
environmental criteria in their specifications.

within the Group. These are based on networks that alreadyexist from the founding companies of EADS. In order toenhance effectiveness of the environmental policy andprovide visibility, EADS plans to further use dedicatednetworks focusing either on process or on products. Thisapproach needs to be overall validated.

The environmental reporting is currently managed by the
CQO. However, an enhanced coordination at corporate levelis needed. Some steps have been undertaken in order toimplement a periodic follow up on the Group’s environment
performance and to facilitate exchanges of best practices anddissemination of relevant European and national information

EADS is participating in environmental working groups
of industry organisations such as the GIFAS in France,
Bundesverband der Deutschen Luft und Raumfahrtindustrie(“BDLI”) in Germany and the SBAC in the U.K.
For example, the Environment Committee of GIFAS ischaired by an Airbus representative. EADS and Eurocopter

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2.3 Environmental Care34also sit in this committee. In 2005, the committee definedand implemented a legal and regulatory watch system to thebenefit of the profession in France.
At European level, the Environmental Committee of ASD(Aeronautic Space and Defence Industries Association ofEurope) is chaired by Airbus.

On a worldwide basis, the environmental committee of
ICCAIA (International Coordination Council for Aerospace
Industries Association), in which ASD is the European
member, is chaired by Airbus since 2004 and up to 2007.

2.3.3 Performance and Best Practices
Sites certification and registration
EADS encourages environmental certification of its
industrial sites. As of 31st December 2005, 29 sites were
either ISO 14001 certified or EMAS registered, representing
42% of the total workforce of EADS.
Airbus has set the goal of achieving the international
environmental standard ISO 14001 certification for its
complete organisation by the end of 2006. As of the endof 2005, only two European sites, Hamburg and Toulouse
remained to be certified to ISO 14001, as scheduled in
Airbus’ implementation plan. These projects should beaccomplished by April 2006, bringing the former ratio
from 42% to 64%. Site compliance is only part of overall
corporate certification. With this continuous improvement
process, Airbus is strengthening its environmental expertisethroughout all sites and functions, expanding its sitededicated environmental network. Environmental experts
are charged with reviewing and improving all environmental
aspects of Airbus’ operations across all functions. Theseexperts play a decisive role in the certification process,including the “environmental analysis” of Airbus products.
Launched in 2006, product certification is the otherfundamental element that will lead to Airbus’ overall
corporate certification.
In December 2005, EADS Space Transportation also decided
to target an ISO 14001 certification of its French site by
the end of 2006, following successful re-certification of its
German sites in 2005.
The same applies to ASTRIUM : re-certification of German
and UK sites in 2005, certification of the French site
(Toulouse) scheduled for April 2006.

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Site and Product Oriented Environmental
Management System (SPOEMS)
While classical ISO 14001 addresses only SITE-related
certification, Airbus has joined forces with several otherorganisations (Chamber of Commerce, National Trade
Associations, EADS Germany…) to set the rules for an
approach to environmental certification of both SITES and
PRODUCTS along their lifecycle (production sites being
only one aspect of this lifecycle). This approach will help
Airbus, among other organisations, to systematically assess
the environmental impact of its products along their entire
life, and to target improvements at the earliest design stage.
SPOEMS was selected by the European Union under its“LIFE” Programme.

Recycling of waste
Powered by the ISO 14001 certifications, many local
initiatives on waste recycling are taken by the BUs, going
beyond the certification requirements (identification,
separation, management of disposal). One example is with
Astrium UK: introduction of two recycling waste streams:
one for glass and one for paper.

Climate Change
EADS operations have a very low impact in terms ofgreenhouse gas emissions. In the main, EADS’ energy use
results from heating and lighting requirements (offices,administration buildings, production facilities etc).
A potential risk from climate change to EADS operations
comes from the ever-increasing pressure on energy costs.

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2.3 Environmental Care3
4
However, both from a cost and an operational efficiency
viewpoint the Group recognises that it has a responsibility to
reduce energy usage where possible and so EADS views thisas an opportunity to make continuous improvements.
In 2005, EADS was a participating Company to the G8Climate Change Panel, led by Tony Blair, for the post
Kyoto Protocol actions. In this perspective, the GMES
(Global Monitoring for Environment and Security) initiative
anticipates the definition of a satellite-based system allowing
the monitoring of global greenhouse gase emissions.
As a further example, ATR also applies a “green policy” inthe conception of its aircraft. ATR aircraft are recognised
as the most fuel-efficient aircraft in their category thanks
to their advanced engine technology and highly efficient
propellers. Low levels of engine emissions are essentially the
result of low fuel consumption. On routes with an operatingradius of 200 nautical miles, ATR 72-500 fuel consumption
per passenger is up to 15% lower than for a typical Europeancar. The associated gaseous emissions per passengers in termsof CO (carbon monoxide) are 15 times lower than from a car
and comparable to those of a train. As far as nitrous oxides
are concerned, the ATR is three times less pollutant than a
car and 40% less than a train. All these factors make the ATR
an environmentally friendly aircraft that contributes less to
the greenhouse effect than most other forms of transport.
The alignment of environmental targets (CO2 emissions
reduction) with economical targets (energy consumption
reduction) drives many local initiatives such as theinstallation of energy efficient motor drives at Astrium UKor the improvement of efficiency of the satellite assembly
clean rooms by Astrium in Germany. Other examples
include the installation of a 98.6 Kwatt-peak of photovoltaic
solar power connected to the public electricity system on theroof of a new office building at Airbus Spain.

Restriction of Hazardous Substances (RoHS)
directive
An important issue addressed in 2005 concerned the productlife cycle with the transition to lead-free electronics foraerospace. This was in particular driven by the European
RoHS directive, which restricts the use of six hazardous

materials (Lead, hewavalent chromium, Mercury, cadmium,
PBB and PBDE) in electric and electronic applications andthus leads to necessary substitutions. These substitutions
are difficult for aerospace activities due to the lengthof the aerospace products life cycle and stringent safety
certifications; the introduction of substitute substances
requiring additional testing and certification. As aconsequence, the European Commission has accepted that“equipment containing such targeted substances specificallydesigned to be installed in airplanes, boats or other means oftransport are out of the scope of the RoHS Directive”. The
defence products are also out of the scope of RoHS.
In 2004, EADS installed a specific network on the
RoHS / Waste Electrical and Electronic Equipment(“WEEE”) issue, managed by CQO. A prior focus of EADS
was on the replacement of lead. A position paper was issuedin July and flowed down to the supply chain and to theengineering community. Standards are under preparation to
set the rules for the global aerospace industry’s transition tolead-free production, taking into account the environmental
need to ban lead soldering and the need to move tosafety / reliability proven lead-free solutions.
EADS and many of its BUs (Airbus, MBDA, DefenceElectronics, Space Transportation) participate to the LEAP
(Lead-free Electronics in Aerospace Project) Consortium
which is preparing these standards. Furthermore, EADS
and Boeing have decided to team up to address this difficulttransition, by jointly defining the technical solutions, thevalidation tests protocols and the configuration management
rules that will be enforced throughout the aerospace
Industry and its supply chain in the coming years.
Dedicated IT tools are starting being implemented (Defencesite of ULM) tot race and manage hazardous substances, suchas lead, from supply to disposal.

Plane dismantling and recycling
The life span of an aircraft is about thirty years; as aconsequence, the first Airbus aircraft models are about
to reach their end of life. Approximately 200 planes are
expected to be withdrawn from the worldwide market eachyear for the next 20 years.

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2.3 Environmental Care

3
4
So far, old planes were stored in hangars or dismantled ina non-environmentally friendly way. Airbus has created aconsortium to dismantle
and recycle old planes, with EADS CRC, Sogerma, Sita(a waste management company) and the Préfecture desHautes-Pyrénées. This €2.4 million project, called PAMELA(Process for Advanced Management of End of Life Aircraft),was approved in 2005. A special centre will be set up at
Tarbes Airport, where procedures for the decommissioning
and recycling of aircraft in safe and environmentally
responsible conditions will be tested. The aim of this projectis to demonstrate that 85 – 95% of aircraft components canbe recycled, reused and recovered. It will also enable EADS
to anticipate further environmental European Regulations
on waste recycling. The first dismantled aircraft will be an
Airbus A300 from a Turkish company. Its dismantling will
last 20 months. Pamela is also expected to create up to 100
jobs over the next few years.
Further reporting: Airbus publishes an environmental
report every two years which is available on its website atwww.airbus.com. Airbus’s fourth environmental report will
be published in June 2006.

2005

ISO 14001 certification/EMAS registration - List of sites covered by a certificate

29

Number of sites covered by EU-ETS
Total CO2 emissions (in ton)

309,000

Total CO2 emissions declared under EU ETS (in ton)

153,000

Direct Energy use segmented by primary source (in MWh)
Volatile Organic Compound Emissions (in ton)3

112,850,000
3,500

Total water use (in m )4,100,000

Total water discharge volumes (in m3)

2,100,000

Total hazardous waste production (in ton)

40,400Total Non-hazardous waste production (in ton)

65,000

Scope: covering 80% of EADS staff, 2005 figures generated on available material, definitions need harmonisation between the various countries
in which EADS operates. Except for the number of sites, all figures are rounded.

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2.4 Human Resources: Employer - Employee Relationship34

2.4 Human Resources:
Employer – Employee RelationshipThe key mission of the Group HR function is to ensurethat EADS, as an integrated Group, attracts, develops andretains a world-class workforce. It also facilitates continuous
integration and internationalisation of the Group and thebuilding of a common spirit across the Group’s organisationaland operational structures. Continuous improvement ofhealth and safety in the workplace is also a major priority of
the EADS Group.

The implementation of HR Group policies is based on
several major principles such as compliance with the equal
opportunity principle, making the workplace as safe as
possible, sustaining significant efforts in the field of training
and maintaining a proactive social dialogue.
The global EADS standards and principles for social, ethicaland legal issues are defined in the Code of Ethics and in theInternational framework agreement (“IFA”) signed with theEuropean Works Council in June 2005.

2.4.1 Workforce Information and Organisation of Work
As of 31st December 2005, the EADS workforce wascomposed of 113,210 employees. It has globally increasedby 2.3% compared to 2004, with higher rates of increase
registered at Airbus and Eurocopter.
In 2005, 98% of the workforce was permanent employees.
Depending on country and hierarchy level, the average
working time is between 35 and 40 hours a week.
In 2005, 7,843 employees worldwide entered employment
with EADS (4,952 in 2004), of which 4,018 were employedby Airbus. At the same time, 5,471 employees left EADS
(4,108 in 2004).

Workforce by Division and by Geography
The tables below set out the number of EADS employees
by business sector and by geographic region. Employees ofcompanies accounted for by the proportionate method (suchas ATR, MBDA, LFK) are included in the tables on the same
proportionate basis.
The figures for 2004 and 2003 have been adjusted in orderto reflect the new organisational structure which occurred in
2005; “Other businesses” includes EADS Sogerma, EADS
Socata and ATR.

In total, 97% of EADS’ total workforce is located in Europe
on more than 80 industrial sites.
EADS Employees by Division

31st December 2005

31st December 2004

31st December 2003

Airbus54,721

51,95949,520

Defence and Security Systems

23,237

24,26824,844

Eurocopter

12,755

11,850

11,543

Military Transport Aircraft

3,976

3,856

3,428

Space

10,985

11,053

11,991

HQ, Research Centre and other businesses

7,536

7,676

7,809

113,210

110,662

109,135

Total EADS

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EADS employees by geographic region

31st December 2005

31st December 2004

31st December 2003

AmountIn percentage

AmountIn percentage

France43,28638.2%

42,80738.7%

42,858

39.3%

Germany

41,43836.6%

40,32536.4%

41,103

37.7%

Spain

8,710

7.7%

8,435

7.6%

8,063

7.4%

U.K.

14,297

12.6%

14,045

12.7%

13,125

12.0%

Italy

729

0.7%

734

0.7%

682

0.6%

U.S.

1,877**

1.7%

2,166

2.0%

1,851***

1.7%

Other Countries*

2,873

2.5%

2,150

1.9%

1,453****

1.3%

113,210100%

110,662100.0%

109,135

100.0%

Total EADS

Amount In percentage(*) The “Other countries” figure includes employees from 13 other countries.
(**) This decrease is mostly due to the disposal of EADS Telecom and EADS Aeroframe services.
(***) The figure previously reported (2,554) corresponded to Americas (U.S., Canada, Mexico, and Brazil).
(****) The figure previously reported (750) did not include Canada, Mexico, and Brazil.

Part Time Contracts

2005

2004

In percentage

In percentage

France4%

3.7%

Germany

3.2%

3.2%

Spain

0.0%

0.02%

U.K.

1.4%

0.82%

U.S.

0.1%

0.0%

Other countries

NA

1.3%

Total EADS

3.2%

2.87%

2.4.2 Human Resources Organisation
EADS has developed an innovative HR management,
defining a European policy while taking into accountnational legislation.
The Corporate HR team operates worldwide as the strategic
leader in HR matters and works in close cooperation withthe divisions and BUs which have the operational HR
responsibility for most of the employees, except for the
top Management of each BU which is under the Corporate
HR operational responsibility.
The HR communities work closely together and coordinate
and share best practises at functional level. Regular meetingsof HR heads are organised at both European and national
levels. A global HR database is now available and is being
continuously developed in order to fulfil the needs of EADS
integration.

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At corporate level, four support departments make up
the global EADS HR management: Planning and Policy,
Compensation and Benefits, Corporate Business Academy(“CBA”) and Management Development. They are
responsible for:• Managing HR Development for the top 200 key positions;• Designing policies, guidelines and tools for all group wide HR
processes, such as appointments, job rotation, international
mobility, compensation and benefits, e-HR projects, etc.
• Organising and delivering executive education for all
executives and potential future executives through the
CBA and coordinating the training activities within theGroup for all employees; and• Improving the sharing of best practises within the EADS
HR community.

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2.4 Human Resources: Employer - Employee Relationship34
2.4.3 Human Resources Policies and performances
2.4.3.1 Health and Safety: Providing
a Safe Workplace for EADS
Employees and Subcontractors
Policy2.4.3.2 Caring for EADS Employees
and EADS Know How Policy
the specific nature of the facilities of the EADS“– GivenGroup which are used for many activities relating
to national defence and sensitive civil markets, theconditions governing access to and movements inside
the plants and facilities are specified in ministerial
orders and are based on two main principles:considers that protection of the health“– EADSand safety of employees in the work-place is
key and a top priority for the Group.
– EADS is committed to maintaining safe and healthy
working conditions for its employees. It is EADS
BUs’ and subsidiaries’ role to implement Health and
Safety policies based on evaluation, anticipation
and risk management and taking into accountall specificities as well as people’s needs.

– Access to a plant is subject to priorauthorisation by the company; and– Entry into restricted and sensitive areas is regulated inaccordance with national and company regulations.

””

Organisation and Performance

Organisation and Performances
The management of Health and Safety is essentiallydealt with at site level accordingly to applicable national
regulations.
However some health and safety indicators have started to be
drawn up at the Division or BU level which mainly address
work related accidents.
As an example of the Group performances, the incidence andseverity rates of reportable accidents (work related accidents
causing an absence of more than 3 days) recorded at Airbus,
noticeably decreased from 2004 to 2005, while aircraft
deliveries increased.
Airbus2005

2004

Incidence rate

12.61

13.18

Severity rate

0.184

0.236

Regarding the risk of avian flu, from the last term of 2005
onwards, the health and safety coordinators by BUs andcountries have been mobilized at the corporate level tofollow the World Health Organisation recommendations andto deliver the necessary advices to expatriates and travelers.

EADS has set up a security policy to improve the securityof its employees and to protect EADS expertise. A Security
Committee has been set up. It is formed of Security leadersin each country who supervise local security officer at BU
and plant level, and deal with national security authorities
and European security organisations.
The network of security managers is there to ensure
information exchange and sharing of best practices. Working
groups are created to facilitate constant adaptation of security
measures to actual threats. Access to EADS facilities issubject to prior authorisation, and entry into restricted andsensitive areas is regulated in accordance with national andcompany regulations.
A global security action initiated in 2005 is being developed
concerning the safety of EADS employees in high risk
countries and the security of EADS offices abroad.
In terms of IT security, appropriate steps were taken to
audit processes and improve the level of awareness of EADS
employees to the security of the information systems. Given
the sensitive nature of the Group’s business, employees
are able to work in compliance with group security policies
wherever and whenever business needs their attention in
implementing, for instance, secured nomad IT solutions
facilitating mobility and business reactivity with confidence.

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2.4 Human Resources: Employer - Employee Relationship34
2.4.3.3 Diversity: Commitment
to Ensure Equal Opportunity
for all EADS Employees
Policy“– EADS commits to offering equal opportunities for all
its employees and to refraining from any discrimination
against its employees based on gender, race, religion,
nationality, political opinion, sexual orientation, social
origins, age and handicap with regard to its personnel.
– EADS commits to developing access for women to all of its
activities and shall ensure fair professional development
as well as equal remuneration for men and women
employees for skill and work of equivalent value.

”

Performance and Best Practices
EADS has always promoted diversity through its existing
culture of cross-border collaboration.

Women at EADSEADS principles regarding respecting and promoting
diversity are listed in the Group Code of Ethics as well as in
the “International Framework Agreement” signed with theEuropean Works Council.
The following examples illustrate the implementation ofthese principles:

Nationalities
EADS counts more than 15 nationalities among its
employees worldwide.

Gender Diversity
The percentage of women employed in 2005 in the Group is
about 15%. It increased slightly in 2005 compared to 2004,
the increase in the percentage of women was registered in
the divisions where the rates were the lowest.
As of 31st December 2005, 12% of EADS executives andsenior managers were women.

31st December 2005

31st December 2004

In percentage

In percentage

Airbus

12.7%

12.4%

Defence and Security Systems

18.7%

18.9%

Eurocopter

12.6%

12.3%

Military Transport Aircraft

12.6%

12.1%

Space

19.2%

19.4%

HQ, Research Centre and other businesses

15.7%

15.4%

Total EADS

15%

14.8%

EADS has committed to a long-term plan for the promotionof women in aerospace and has set two priorities: at least
20% of its annual recruitment will be women, and it will
have active communication within universities and schools inorder to convince female students through lively role models
and concrete examples that the aerospace industry, and more
specifically EADS, is an attractive employer for women.
From 1st January 2004, BUs have been asked every quarterto report on their success in recruiting women. The CBA
has also defined training objectives to be consistent with therecruitment target.
In 2005, the recruitment of women was 20.5% of total
recruitment (18.8% in 2004), and so reached the Group’s

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target. The Defence & Security Systems and Eurocopter
divisions as well as EADS research centre are leading theway in this field.
Since 2004, EADS has been engaged in a partnershipwith the FEMTEC university career center for women
Berlin GmbH in Germany.
Working in cooperation with well-known companies, theaim of this cooperation between FEMTEC and industrial
companies is to promote engineering studies among young
girls and women, and to help high potential and specialized
female students enter the aerospace industry. EADS takes anactive part in career advice workshops designed for FEMTEC
students as well as in conference days.

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In France, EADS sponsored the Irène Joliot-Curie prize
for the second time in 2005 (See “2.2.2 Sustaining andProtecting Innovation – Innovation Chapter”).
Furthermore, EADS is an active member of the WIST
(Women Initiative in Science and technology), a programme
funded by the European Commission and aimed at exploring
the partnerships between private and public research, as wellas the links between diversity and business performance.
Airbus also agreed on a partnership with the Academy ofToulouse to facilitate contacts between female professionals
and students, to provide information to students, teachersand career advisors on technological advances and new skills,
and to participate in relevant events.
Other initiatives include, in Germany, the organisation of
a “girls’ day” which is an open day for girls at German
EADS locations to allow them to find out more about theengineering profession, and in France participation in the“they move” (“Elles bougent”) initiative. Led by major
French engineering universities (ENSAM, ESTACA)
together with key players from the transportation industry(EADS, PSA, Dassault, SNCF…), this project aims at raising
young women’s awareness of technical studies, as well asinteresting them in complex technologies through regularcontacts with female engineers currently working in themember companies, plant visits, conferences…
Finally, in keeping with this overall strategy, a meeting withparticipants of the IIWE (International Institute for Womenin Engineering) took place in July 2005 at the EADS Paris
headquarters, the EADS ST plant in les Mureaux and at
Eurocopter in la Courneuve. 80 young women took part inworkshops on diversity and scientific vocations.

EADS was also a strategic partner to the first “Women’s
forum for the economy and society”. This forum,
which took place in October 2005, was created to promote
the vision, influence and impact of women on all the major
economic and social issues. It gives women an opportunity to
express their views, ideas and solutions. It aims at defining
directions for progress in the world of tomorrow.
The implementation in France of the agreement signedwith trade unions, which was signed in 2004 (“Accord surl’égalité et la mixité professionnelle”), is monitored by each
EADS company, and also at Group level, using a defined setof common indicators to evaluate results and track progresswith an action plan covering the 2004 / 2006 period. Thisaction plan is to be re-negotiated every three years.
Finally, in 2005, EADS France and Airbus, Astrium,
Eurocopter, Matra Electronique, and EADS SpaceTransportation received the “Label Egalité” from the French
Ministry of professional equality. This label is awarded
to companies that can show a pro-active policy regarding
women employment and development.

Age diversity
A group agreement covering EADS entities in France signedwith trade union organisations in 2005 aims at banning all
career development based on age criteria.
Being concerned with the lengthening of working life, theother European components of the EADS Group are also
working on this issue of second half of career development.

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Number of employees per age group

31st December 2005

31st December 2004

18-25

7,179

6,812

26-35

27,30326,081

36-45

37,12737,54446-55

35,35834,56556-65
Total EADS

11,22910,984

118,196

115,986

Consolidated companies are counted 100%.
Average age of employees

31st December 2005

31st December 2004

France41.4

41.6

Germany

42.2

42.1

Spain

42.4

42.9

U.K.

41.9

41.7

U.S.

43.9

42.4

Other Countries

40.8

39.5

Total EADS

41.9

41.9

Performance and Best Practices

2.4.3.4 Career Development:
Efficient Managementof Skills and Know-How

Astrium and Eurocopter have implemented knowledgetransfer programmes, which seek to ensure knowledgetransfer on the occasion of employees’ retirement.

Policyensures that working time, including overtime,“– EADSis regulated so as to support a healthy balance

Recruitment and retaining of talent
EADS strongly believes that developing close contacts withtarget universities and their students will contribute to thestudents’ growth and will efficiently brand the group among
potential future recruits.

between employees’ work and their private life.
– EADS strives to develop the skills and knowhow of its employees, for their individual benefit
as well as for its collective success. The EADS
personnel development policy aims at:

EADS demonstrates its commitment in many different ways:
by sitting on boards, advising on classroom content, preparing
case studies, giving technical lectures or on-campus conferences,arranging plant visits, maintaining a presence at career fairs, orby enhancing cooperation in common research areas.

- Supporting training to enhance
performance and quality of work;- Encouraging cross-border and cross functional
teamwork, in the frame of intra-Group mobility;- Assessing and recognising individual technical expertise
via a global scheme developed throughout the Group; and- Associating personnel to the performances of the Groupand its subsidiaries through a success sharing scheme.

”

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For instance: EADS attends more than 40 recruitment
events per year such as the Bonding student fairs inGermany, the Polytechnique, Centrale and Supaero career
fairs in France, as well as the MIT or Berkeley fairs in the
U.S. to name but a few. Dedicated branding and recruitment
meetings are also held during major air shows such as ILA
or Paris Air Show, thus promoting EADS’ employer brandamong real aerospace fans and attracting talented candidates.

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In addition to increasing on-site presence among students
directly at universities, EADS also organises more than 60
factory tours at most of its BUs.
Such partnerships also demonstrate EADS’ long-term
commitment to building and maintaining a lasting
relationship with a key universities or networks such as
Pegasus (Partnership of a European Group of Aeronautics
and Space Universities).
Specific recruitment and development programmes havealso been created internally to contribute to the ongoingdevelopment of EADS’ workforce. In addition to the
Corporate Young Manager Programme, which is available
for young graduates, EADS Development Programmes(Financial Management Development Programme andAdvanced Marketing and Sales Programme) are offered toyoung professionals who are interested in key fields such as
sales and finance.
In addition, with more than 5,000 internships offeredeach year in Europe EADS provides students with valuable
technical and personal experience as well as with the unique
opportunity to have a closer look at the industrial world.
Most of EADS’ internships concern students in the fieldsof aviation and space technology, electronics, information
technology, finance, or management.
In order to enhance the personal skills and abilities of its
former trainees, EADS developed the Juniors programme
to follow-up all EADS interns, and thus retain and recruit
highly motivated interns.
A variety of other opportunities (depending on national
regulations and policies), including vocational training andscholarships programmes, are also offered to students.

Development and training
Personnel development starts at EADS on the first dayof recruitment. From then on, several formal or informal
meetings are organised at BU or corporate level, for example
the Welcome Event.

Contributing to the induction and motivation of newly
recruited employees, EADS performs one “EADS welcome
event” each year, welcoming around 400 newcomers fromall entities. Hosted by the CEOs, these events enable EADS
employees to discover the diversity of the Group, to fully
experience its global dimension from the moment they arrive
and to initiate their own network.
Recognising the development of technical expertise asa major asset, EADS has developed a specific policy forengineering experts, who are key to EADS maintaining its
competitive advantage through R&T developments.
Aiming at creating attractive career paths for engineeringexperts, the policy also includes development programmes
customised for the specific requirements of technical experts.
Personal development also includes training. EADS’
expenses amount to approximately 4% of its payroll (over€150 million) in training per year. EADS trains more than
70,000 employees every year for a total of 2.5 million hours.
EADS created the CBA in 2000 as its Corporate University
to develop the current executives and prepare the next
generation of executives, as well as optimising the global
investment in training within EADS. CBA was recognised as
the most innovative Corporate University in the world by its
peers. CBA has developed and run several activities in Asiaand the United States in 2005 in order to cope with the newexpertise requested at Group level.
In 2005, the Centre for Executive Education of EADS,in Villepreux close to Bordeaux has hosted more than
1,000 guests for its first year. This centre has been designed
to provide facilities to the whole Group for top management
meetings, training sessions and executive seminars.
At EADS, training is considered a joint responsibility.
Employees are expected to be proactive in their personal
development, and line managers must identify training
needs.

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2.4 Human Resources: Employer - Employee Relationship3
4
Training

2005

2004

2,500,000*

1,200,000

23

11,8

Number of trained people

75,00065,000Training expenses in % of wages

~3%**

~3%**

Hours of training per year
Average hours of training/employee(*) Hours have been recorded according to the various definitions of training per country.
(**)Estimate EADS Group.

Average length of service

2005

2004

In years

In years

Airbus

13.4

13.6

Military Transport Aircraft

20.8

21.5

Eurocopter

14.2

15.1

Defence and Security Systems

16.7

16.5

Space

15

14.9

HQ, Research Centre and other businesses

13.3

13

Total EADS

14.6

14.7

Breakdown of employees per qualification

2005

2004

In percentage

In percentage

24

23.9

University (up to 3 years)

18.9

19.1

Higher vocational school

11.3

9.5

Vocational school

41.5

41.4

General school

4.3

6.1

University (4 years and more)

Mobility

Remuneration

EADS employees are also offered a wide range ofmobility opportunities. Mobility at EADS means mobility
across functions, BUs and divisions in its four homecountries, France, Germany, Spain and the U.K., as well as
appointments to regions such as America or Asia.

The total wage bill amounted to €8.46 billion in 2005(€7.9 billion in 2004), including employee and salary cost,
success and profit sharing, restructuring cost, pensions andother costs.

As of 31st December 2005, EADS had 1,800 expatriate
employees, 75% of them working in one of the European
countries.

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Success Sharing Practices
EADS’ reward schemes policy is strongly linked to theachievement of individual and Company objectives, both foreach division and for the overall Group. For the sixth year
in 2005, a stock option plan has been established for the89

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2.4 Human Resources: Employer - Employee Relationship34senior management of the group (See “Part 1 / 2.3.3 Options
Granted to Employees”) and employees were offered sharesat favourable conditions at the time of the public offeringand listing of EADS (See “Part 1 / 2.3.2 Employee Share
Offering”).
For the first time in 2005, the success sharing schemes
which are now implemented in EADS in France, Germany,
Spain, the U.K. follow one set of common rules of theGroup, ensuring a consistent application in these four
countries.

2.4.3.5 Employee Relations:
A Proactive Dialogue
Policyemphasises its belief that a continuous and high“– EADS
quality social dialogue is key to the Group. In particular,
the European Works Council (“EWC”) facilitates a proactive and fluid dialogue with employee representatives.
– EADS ensures that the representation of
personnel is conducted throughout all its BUs
in a constructive atmosphere. This maintains aproper balance between the interests of employees
and the economic interests of the Group.

”

Performance and Best Practices
European Works Council
On 23rd October 2000, at an early stage of the formation of
EADS, the management and employee representatives fromthe unions and works council operating within EADS in
France, Germany, Spain and U.K. signed an agreement for
the establishment of the EWC.
• The EWC meets twice a year for information andconsultation on evolution of the business and theprospects of the Group.

• European sub-committees have also been set up in various
BUs such as Airbus, Eurocopter, EADS SPACE and EADSDS and replicate the EADS EWC model.
• National committees in France, Germany, and Spain
enable dialogue on national matters, under the subsidiarity
principle.

International Framework Agreement
Placed in the context of globalization of EADS activities andas an illustration of the continuous dialogue principle the
EADS Group and the Group’s European Works Council
concluded in June 2005 an International Framework
Agreement. By this agreement, the signatories expressed
their attachment to common principles and social standards
which they recognise as fundamental, and which they
intend to promote worldwide, in the countries where EADS
activities are implemented. EADS and the Group’s European
Works Council so expressed their strong belief that
Corporate Social Responsibility is a key to long-term success.
The European Metalworkers’ Federation (EMF) and theInternational Metalworkers’ Federation (IMF) associatethemselves with these principles and are, accordingly,
co-signatories of the agreement.
The principles contained in the International Framework
Agreement are aligned with the general rules of ILO
conventions, the OECD Guidelines for Multinational
Enterprises and the principles laid down by the UN Global
Compact, which EADS signed in October 2003, and they arein compliance with the Code of Ethics.
They cover the fields of equal opportunities andnon-discrimination in respect of employment, of working
conditions and environmental protection, condemn recourse
to child labour, recognise the principles of freedomof association and the protection of trade unions’ rights.
EADS expects all its suppliers to recognise and apply
the principles of this framework agreement.

• The EWC also comprises an economic committee whichmeets four times a year and focuses on economic matters.

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2.4 Human Resources: Employer - Employee Relationship3
4
Overview of collective agreements signedwith Unions since 2000
• EADS Group Agreements were concluded on thefollowing matters:– Establishment of a European Works Council (1);
– Linking personnel to the business performance of theGroup (2);– International Framework Agreement.
• In Germany, Tariff Agreements were concluded in relation
to such matters as holiday pay, Christmas bonus, sickpay, and early retirement, as well as agreements withthe works council on success sharing, insurance package,company pension, early retirement deferred compensation,suggestion scheme, family and work life balance, disabled
people.

• In France, Group Agreements were concluded in relation
to such matters as employment issues, union’s rights andsocial dialogue, pre-retirement, management of second halfof career, health cost coverage, French national committee
and unions coordinators, professional equality anddiversity, working time.
• In Spain, a collective bargaining agreement includes social
benefits such as aid to children of employees, collective
transport, retirement, life insurance, loans, prize atretirement, canteens, aids to worker association.
It has to be noted that collective agreements can be signed
at the BU level on matters directly related to their specificsocial perimeters.

(1) Agreement for the establishment of a European Works Council and its sub Committees for information and consultation of the workforce between EADS NV and its Employees Representatives
dated 23rd October 2000.

(2) Group Agreement on implementation of a success sharing scheme within EADS- NV Group between Head of EADS NV HR and the EADS NV European Worker Council dated 29th June 2004.

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2.5 Corporate Citizenship34

2.5 Corporate Citizenship2.5.1 Maintaining an Open Dialogue with EADS’ Stakeholders
2.5.1.1 Policy
one of the largest European companies, EADS“Asis awareof its duties and is willing to develop its
contribution to the cultural, educational and social
background in the countries where EADS operates.
In particular, EADS aims at reinforcing project
partnerships with universities and research centres,
through, for example, the EADS Research Foundation.
EADS shall do its best to maintain an open dialogue with
its stakeholders and to provide clear answers to requests
for clarifications within the limits of its obligations.

”2.5.1.2 Organisation
EADS’ contributions come in different forms; they include
sponsorships, donations, or partnerships. Wherever it
is located, EADS contributes to a range of activities,
conferences or institutions, which address social, educational,
cultural or sport issues. In most cases, such activities are
initiated by EADS local entities which are also in daily
contact with the relevant stakeholders.

EADS contributes to humanitarian activities by donating
and giving material or providing air transportation capacities
when necessary. EADS has a long-term partnership with
“Aviation sans Frontières” in France, Germany and Spain, ahumanitarian organisation which provides air transport for,in particular, seriously ill children.
Through its support for “Wings of Help”, EADS broughtsome 95 tons of relief supplies to the afflicted region of
Pakistan following a devastating earthquake. EADS offered
its help in boosting the airlift capability so that the injured
could be evacuated.
In 2005, the EADS Group actively participated in the global
relief support following the Hurricane Katrina along the
Gulf Coast. This humanitarian support was the result of acooperative effort involving EADS, its companies the U.S. andEuropean governments, and employees around the world.
In total, EADS, its subsidiaries and the Group employees
donated nearly $2 million for the victims battered by
Hurricanes Katrina and Rita along the Gulf Coast in Augustand September 2005, and responded actively to the urgent
needs by providing air transportation capacities.

However, EADS has implemented a donation guidelines(under the responsibility of EADS Corporate Secretary) as
well as sponsoring guidelines (under the responsibility of
EADS Corporate Communications) which set out criteria
for granting sponsoring/donation to projects while leaving
certain independence to the BUs.

Immediately after the passage of the hurricane Katrina,
Eurocopter helicopters EC 120 and EC 135, rescued stranded
victims and transported medical personnel, and delivered
supplies along the Golf Coast. The Eurocopter HH-65
Dolphin helicopter rescued some 4,400 victims during
approximately 1,480 hours of operational mission.

The guidelines also provide certain thresholds above whichsuch activity has to be reported to the Corporate Secretary or
Corporate Communications as applicable and approved at thelevel of the CEOs.

Within days of the disaster, Airbus sent its A300-600ST
Beluga from Europe to the United States to transport 23
tons of blanket, cots, tents and other material donatedby the French and the British governments and tocarry to Mississippi a 12-ton EADS-built mobile rescue
station supplied by the German Army and government.
Approximately 150 patients a day were treated in the EADSTransHospital location.

2.5.1.3 Performance and Best Practices
In 2005, EADS contributed more than €2 million to social,
cultural, sport or educational projects.

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2.5 Corporate Citizenship34
2.5.2 Encompassing Community Interests in EADS’ Global Strategy
Group’s global industrial footprint. This will complement
the EADS International function, which continues to leadthe marketing process and to develop the regional strategies.

2.5.2.1 Policy
is proud of selling its products and“– EADS
providing its services to an increasing numberof countries, thanks to the trust placed byinternational customers in its global reputation.
– EADS is conscious of its responsibility as a global
company in the spreading of sound international
business practices that foster the expansion of a balanced
and fair globalisation benefiting all countries.
– EADS encourages industrial cooperation with local
industries whenever possible in order to support
the development of skills and competencies.
– EADS supports local initiatives dedicated to the promotionof corporate social responsibility-oriented projects.

”

2.5.2.2 Organisation
In 2005, EADS put in place a new organisation in order todesign, coordinate and implement the international industrial
development of EADS. This followed the conclusions of
the GIS (Global Industrial Strategy) study which had beenlaunched in 2004.
The EADS Executive Committee has created as of November
2005 a new corporate function, GID (Global Industrial
Development), focusing on the implementation of the

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The main missions of the newly created GID function are
to be EADS’ industrial architect in the countries where itis expanding and to drive the global industrial expansion,
which includes not only manufacturing projects but
also engineering, R&T and services initiatives, as well as
structural partnerships. Countries within GID’s scopeinclude all countries outside home countries (France,
Germany, Spain, U.K.).
GID will act as a driving force to nurture new projects andto support BUs. It will also act as a moderator to orchestrateactions across the Group and the countries, and to preserve
all EADS stakeholders’ long-term interests (shareholders,customers, suppliers, employees). In particular, GID will
promote the Group Corporate Social Responsibility incountries where EADS is present.

2.5.2.3 Performance and Best Practices
EADS shall report in a timely fashion on the definitionof industrial action plans in targeted countries, and on theimplementation of industrial projects in these countries.

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3.3 Shareholdings and Voting Rights
p. 96

Shareholding Structurep. 111

3.3.2

Relationships with Principal Shareholders

p. 1133.3.3

Form of Sharesp. 1193.3.4

Changes in the Shareholdingof the Company Since its Incorporation

p. 1193.3.5

Persons Exercising Control over the Company

p. 121

3.3.6

Simplified Group Structure Chart

p. 121

3.3.7

Purchase by the Company of its Own Sharesp. 123

p. 96

3.1.2

Legal Form

p. 96

3.1.3

Governing Law — Dutch Regulations

p. 96

3.1.4

Date of Incorporation and Durationof the Company

p. 101

3.1.5

Objects of the Company

p. 101

3.1.6

Commercial and Companies Registryp. 101

3.1.7

Inspection of Corporate Documents

p. 101

3.1.8

Financial Year

p. 101

3.4 Dividends

3.1.9

Allocation and Distribution of Income

p. 102

3.4.1

3.1.10 General Meetingsp. 102

3.1.11 Disclosure of Holdings

p. 1043.1.12 Mandatory Tender Offers

p. 106

3.2 General Descriptionof the Share Capital

p. 108

Modification of Share Capitalor Rights Attaching to the Sharesp. 1083.2.2

Issued Share Capital

p. 1083.2.3

Authorised Share Capital

p. 1093.2.4

Securities Granting Accessto the Company’s Capital

p. 109Changes in the Issued Share Capital
Since Incorporation of the Company

p. 1103.2.5

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p. 111

3.3.1

Commercial and Corporate Names,
Seat and Registered Office

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p. 128Dividends and Cash Distributions Paid
Since the Incorporation of the Company

p. 1283.4.2

Dividend Policy of EADS

p. 1283.4.3

Unclaimed Dividends

p. 1283.4.4

Taxationp. 129

3.5 Annual Securities
Disclosure Reportp. 13195

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3.1 General Description of the Company

34

3.1 General Description of the Company
3.1.1 Commercial and Corporate Names, Seat and Registered OfficeCommercial Name: EADS

Seat (statutaire zetel): Amsterdam

Corporate Name: European Aeronautic Defence
and Space Company EADS N.V.

Tel: +31.20.655.48.00
Fax: +31.20.655.48.01

Registered Office: Le Carré, Beechavenue 130-132, 1119
PR, Schiphol-Rijk, the Netherlands

3.1.2 Legal Form
The Company is a public limited liability company(naamloze vennootschap) organised under the laws of theNetherlands.

As a company operating worldwide, EADS is subject to,and operates under, the laws of each country in which it
conducts business.

3.1.3 Governing Law — Dutch Regulations
The Company is governed by the laws of the Netherlands,
in particular by Book 2 of the Dutch Civil Code and by its
Articles of Association (the “Articles of Association”). The
shares of the Company have been admitted for trading at theTraded but Not Listed Segment of Euronext Amsterdam.
The Company is subject to various legal provisions of the
Dutch Securities Market Supervision Act 1995 (Wet toezicht
effectenverkeer 1995) (the “WTE”). These are summarised
below.
Pursuant to section 47a of the WTE, certain persons
discharging managerial responsibilities within the Company
and, where applicable, persons closely associated with them(together “Insiders”, as defined below) must notify the
Netherlands Authority for the Financial Markets (Autoriteit
Financiële Markten (the “AFM”)) of all transactions
conducted on their own account relating to shares of theCompany, or to derivatives or other financial instruments
linked to them. In principle, failure to comply with therequirements of the WTE is a criminal offence punishable
by criminal and administrative penalties in the Netherlands.
In particular, “Insiders” include (i) members of the Board of
Directors and the Executive Committee of the Company,(ii) certain senior executives, (iii) persons closely associatedwith any person mentioned under categories (i) and(ii) (including their spouses, dependent children and otherrelatives who have shared the same household), and (iv)
legal entities, trusts or partnerships whose managerial
responsibilities are discharged by any person referred toin point (i), (ii) or (iii) or which are directly or indirectly
controlled by such a person, or that have been set up for the
benefit of such a person, or whose economic interests aresubstantially equivalent to those of such person.
Pursuant to Dutch law, EADS has adopted specific internal
insider trading rules (the “Insider Trading Rules”), in
order to ensure the confidentiality of sensitive company
information, the transparency of EADS share trading andthe compliance of EADS share trading rules with share

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3.1 General Description of the Company

3
4
trading regulations applicable in the Netherlands, France,
Germany and Spain (for examples of Dutch, German,
Spanish and French disclosure requirements applicable
to members of the Board of Directors and the Executive
Committee, see “3.1.11 Disclosure of Holdings-Disclosure
Requirements for Members of the Board of Directors and of
the Executive Committee”). Pursuant to the Insider Trading
Rules, (i) all employees and directors are prohibited fromconducting transactions in EADS shares or stock options
if they have inside information, and (ii) certain persons
are only allowed to trade in EADS shares or stock options
within very limited periods and have specific information
obligations to the compliance officer of the Company andthe competent financial market authorities with respect
to certain transactions. The updated version of the Insider
Trading Rules effective 1st January 2006 is available on the
Company’s website.
Hans Peter Ring, Chief Operating Officer for Finance of
EADS, was appointed Compliance Officer by the Board of
Directors of EADS. The Compliance Officer is essentially
responsible for the implementation of the Insider Trading
Rules and for reporting to the AFM.
Pursuant to Article 47 paragraph 7 of the WTE, theCompany has to maintain a list with all persons working for
it by virtue of a labour relationship or otherwise, who may
have access to inside information. Equivalent requirements
exist under French, German and Spanish law.
In addition, given the fact that its shares are admitted for
trading on a regulated market in France, Germany and Spain,
the Company is subject to laws and regulations in thesethree jurisdictions. A summary of the main regulations
applicable to the Company in relation to information to bemade public in these three jurisdictions is set out below.

3.1.3.1 Ongoing Disclosure Obligations
Dutch Regulations
Pursuant to Article 1k of the Securities Markets Supervision
Decree (Besluit toezicht effectenverkeer) (the “Decree”),
resulting from the implementation of the EC Directive
2003/71 dated 4th November 2003, the Company may
prepare a registration document, the purpose of which isto provide legal and financial information on the Company(shareholding, activities, management, recent events, possible

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evolution and other financial information). In practice, theregistration document of the Company may be used as aprospectus provided it is completed by a securities note and asummary approved by the AFM. Such registration document
is filed for approval with the AFM and, once approved, ismade available to the public.
Additionally, and pursuant to Article 6a of the Decree also
resulting from the implementation of the EC Directive
2003/71, the Company is required to provide at least
annually a list of certain corporate and financial documents
or other information that it has published or made available
to the public over the last 12 months and details of wherethese documents can be obtained (see “3.5 Annual Securities
Disclosure Report”).

French Regulations
The Autorité des marchés financiers (the “AMF”) issued
general regulations effective as from 24th November 2004
(the “AMF General Regulations”).
A foreign issuer must take all necessary measures to enable
shareholders to manage their investments, and to exercise
their rights. Pursuant to Articles 212-37 and 222-9 of the
AMF General Regulations:(i) the Company is required to inform its shareholders of(a) all forthcoming shareholders’ meetings and of the various
ways for them to exercise their voting rights; (b) paymentsof dividends; and (c) issues of new shares or subscriptions,
allocations, renunciations, or conversions of shares;(ii) the Company is also required to (a) inform the publicof any modifications in its shareholder structure comparedto the latest published data; (b) publish any relevant
information concerning its activities and results for the firsthalf of its financial year within four months of the end of
the first half of the financial year, (c) publish its annual
accounts, and consolidated accounts and the management
report, which report (or the most significant extracts thereof)
must be translated into French, within six months of theend of the financial year; and (d) publish as soon as possible
all modifications of the rights attached to each category ofshares;(iii) the Company is required to inform the AMF in duetime of any contemplated amendments of its Articles of
Association; and97

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3.1 General Description of the Company

34(iv) furthermore, the Company is required to provide
simultaneously in France the same information as that given
abroad.

German Regulations
Due to the listing of the Company’s shares in the amtlicher
Markt (specifically, in the sub-segment of the amtlicher
Markt, Prime Standard) on the Frankfurt Stock Exchange, theCompany is subject to the post-listing obligations described
below. In addition, the Company is included in the selection
index MDAX, the MidCap index of Deutsche Börse AG.
Pursuant to paragraph 65 of the German Stock Exchange
Admissions Regulation (Börsenzulassungs-Verordnung),
the Company is required to promptly make available its
statement of annual accounts and its management reportas soon as these have been produced, insofar as these are
not published nationally. If the Company produces its own
statement of annual accounts in addition to a consolidated
one, both types must be made available. According toparagraph 62 of the Exchange Rules (Börsenordnung) of theFrankfurt Stock Exchange, the listing in the Prime Standardof the amtlicher Markt results in the further obligation of
the Company to compile and publish consolidated annual
accounts in accordance with the International Financial
Reporting Standards (“IFRS”) or the U.S.-Generally
Accepted Accounting Principles (“U.S. GAAP”) in theGerman and English languages.
In addition, the Company is required to publish an interim
report pursuant to paragraph 40 of the German Stock
Exchange Act (Börsengeset). The interim report must be
published within a period of two months after the end of
the first six-month period of the Company’s current fiscal
year, in at least one German supra-regional mandatory stock
exchange newspaper (überregionales Börsenpflichblatt), theFederal Gazette (Bundesanzeiger) or as a printed newsletterthat is available to the public free of charge upon request.
The report must also be given to the stock exchange
admissions authorities of those exchanges where the shares
are officially listed.

quarterly reports in the German and English language
according to the same international accounting principles as
the annual accounts.
Pursuant to paragraph 63 et seq. of the German Stock
Exchange Admissions Regulation, the Company is required
to inform the public and the stock exchange admissions
authorities of certain developments or changes that affect theCompany or its shares.
The Company is also obliged to inform the stock exchange
admissions authorities about all material events arisingfrom or affecting its legal situation. For that reason, allannouncements concerning events that may be of interestto shareholders, such as the shareholders’ meeting,announcements concerning determinations and paymentsof dividends, the issuance of new shares and the exerciseof conversion, warrant and subscription rights, must be
published in an official stock exchange newsletter. The
Company is, furthermore, required to publish without
delay all changes concerning rights that are connected withsecurities.
If the Company provides information to the stock exchanges
in France and Spain and if such information could be
relevant for the assessment of securities of the Company,
then the Company has to publish at least equivalent
information at the Frankfurt Stock Exchange in at least one
German supra-regional mandatory stock exchange newspaper.
In addition, the Company is required as a result of its
listing in the amtlicher Markt (Prime Standard), to prepare
a continuous update of a corporate action timetable at the
beginning of each fiscal year, for at least the respective fiscal
year, in the German and English languages. This timetablemust include details about the most important events of theCompany. The Company is also required to hold a meetingof analysts at least once a year in addition to the press
conference regarding the balance sheet.
Save for certain exemptions, the Company has to apply foradmission of shares issued at a later date to the amtlicher
Markt of the Frankfurt Stock Exchange, see paragraph 69 of
the German Stock Exchange Admissions Regulation.

Pursuant to paragraph 63 of the Exchange Rules of theFrankfurt Stock Exchange, the Company, being part of theamtlicher Markt (Prime Standard), is required to publish

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3.1 General Description of the Company

34Spanish Regulations

3.1.3.2 Disclosure of Specific Information

Pursuant to the Ministerial Order of 18th January 1991, theCompany is required to file with the Comisión Nacional del
Mercado de Valores (the “CNMV”) and with the relevant
Spanish stock exchange authorities (who will disclose it to
the market), relevant information regarding its financial
situation for each half year and which is communicated,for each 30th June and 31st December, no later than thefollowing 1st September and 1st March respectively. If after
this communication the annual accounts are produced by
the Board of Directors and they do not conform with thehalf-yearly information for 31st December, the Board of
Directors must disclose this inconsistency in the following
ten trading days. An exemption from the obligation to
publish quarterly information of a financial or economic
nature has been obtained from the CNMV.

French Regulations

According to Article 35 of the Spanish Securities Market
Act 24/1988, of 28th July 1988, as amended (the“Spanish Securities Act”) and Order EHA/3050/2004
of 15th September, the Company must provide detailed
information, including, without limitation, the number andamount of the transactions, in relation to every transaction
carried out with any related party in the half-yearly
information which the Company is required to file with the
Comisión Nacional del Mercado de Valores (the “CNMV”)
and the Spanish Stock Exchanges, without prejudice
to information to be included in the annual corporate
governance report to be filed with the CNMV on an annual
basis (the “Annual Corporate Governance report”
pursuant to the Ministry of Economy Order 3722/2003
dated 26th December 2003 (the “Ministerial Order”)).
Pursuant to the Spanish Securities Act, the Company has toprovide detailed information about transactions carried out
with (i) directors which are outside the ordinary activity of
the Company or which are not in market conditions; and(ii) any related party transaction which are material due totheir amount or for an adequate understanding of the public
economic information.
EADS discloses such information in its Registration
Document.

Pursuant to Article 222-3 I of the AMF General Regulations,
any inside information must be disclosed to the public.
Pursuant to Article 621-1 of the AMF General Regulations,inside information means precise information that has
not been publicly disclosed and that concerns, directly or
indirectly, one or more issuers or financial instruments, andthat, if publicly disclosed, would be susceptible to having a
noticeable influence on the price of the financial instruments
themselves or on the price of financial instruments linked
therewith.
Pursuant to Article 222-11 of the AMF General Regulations,
the AMF may request that the Company or any third party
disclose any information relevant in respect of the investors’
protection and of the functioning of the market. If such
requests are not satisfied, the AMF may itself disclose suchinformation.
Pursuant to Articles 222-3 to 222-7 of the AMF General
Regulations, the party responsible for the disclosure of
inside information may decide, under its own responsibility,
to defer its disclosure if (i) it is able to ensure confidentialityof such information; and (ii) it considers that (a) should
the party be the Company, confidentiality is necessary topreserve its legitimate interests, provided that such deferral
does not run the risk of misleading the public and that theCompany monitors access to such information; or (b) should
the party be the Company or a third party, confidentiality is
temporarily necessary to achieve completion of a transaction.

German Regulations
Pursuant to paragraph 15 of the German Securities Trading
Act (Wertpapierhandelsgesetz), the Company is required to
publish, without undue delay, any inside information which
directly concerns the Company, in particular but not limited
to information within the Company’s sphere of activity,
and which has the potential to materially influence theCompany’s share price (ad hoc disclosure requirement).
Prior to publication, the Company must disclose suchinformation to the German Federal Financial Supervisory

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4
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht)
as well as to the board of directors of the organised markets
on which the Company’s shares are admitted to trading.
Due to the listing in amtlicher Markt (Prime Standard),
the Company is also required to publish this information in
the English language (paragraph 66 of the Exchange Rules(Börsenordnung) of the Frankfurt Stock Exchange).
In accordance with the implementation into German lawof the EC Directive 2003/6/EC dated 28th January 2003
on insider dealing and market manipulation (Market Abuse
Directive), the Company is obliged to decide whether it
is exempt from the ad hoc disclosure requirement in cases
where its legitimate interests would require a postponementof the disclosure.
The Company and any person acting for or on behalf of
the Company are also subject to the ad hoc disclosure
requirement if they have communicated inside information
to another person or allowed another person access to inside
information, unless that other person is subject to a legal
duty of confidentiality.
Pursuant to paragraph 15b of the German Securities Trading
Act the Company must establish and maintain a list with all
persons who have access to inside information.

Spanish Regulations
Pursuant to Article 82 of the Spanish Securities Act, theCompany is required to make public, as soon as possible, any
fact or decision that may substantially affect the quotationof its shares. Any such relevant event must be notified to
the CNMV as quickly and as efficiently as possible, always
prior to its communication to third parties or other means ofpublication and, in any event, as soon as the relevant fact isknown, the relevant decision has been made or, the relevant
agreement has been executed, as the case may be. Wherever
possible, the relevant event should be notified to the CNMV
after the close of the markets on the day of notification so as
to avoid impacting on the quotation of the Company’s sharesin the corresponding trading session. Furthermore, pursuant
to Article 117 of the Spanish Securities Act, the Company

must post details of any relevant event on its website. Undercertain circumstances, the CNMV may authorize the issuer
not to make public relevant information, which may affectits legitimate interests.
Pursuant to the Royal Decree 1333/2004, of 11th November 2004
(the “MAD Royal Decree”) the Company must try
to ensure that the relevant information is disclosed
simultaneously to all type of investors in the European
Union Member States where it is listed.
Pursuant to the Spanish Securities Act and the Order3722/2003 of 26th December 2003 of the Ministry of
Economy (the “Ministerial Order”) and Circular 1/2004 of
the 17th March 2004 of the CNMV (the “Circular”), theCompany is required:(i) To have rules of the Board of Directors which must be
filed with the CNMV and published on the Company’s
website;(ii) To file with the CNMV a description of the relevant
Dutch law provisions and provisions in the Articles of
Association governing the conduct of shareholders’ meetingsand post such description on its website;(iii) To have a website which must contain as a minimum
the information specified in the Ministerial Order and the
Circular;(iv) To file a corporate governance report with the CNMV
on an annual basis (the “Annual Corporate Governance
Report”) which must contain the information specified in
the Ministerial Order and the Circular; and(v) In respect of the provisions of the Participation
Agreement which relate to the exercise of voting rights atshareholders’ meetings or restrictions or conditions on thefree transferability of shares, to (a) file by July 2006 (orearlier in the case of a takeover bid or if a new agreement
is entered into) such provisions with the CNMV who willthen publish the provisions as a relevant event, (b) post theprovisions on the Company’s website, unless the CNMV
exempts the Company from doing so, and (c) set out detailsof the provisions in the Annual Corporate Governance
Report.

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3.1.4 Date of Incorporation and Duration of the Company
The Company was incorporated on 29th December 1998 for an unlimited duration.

3.1.5 Objects of the Company
Pursuant to Article 2 of the Articles of Association, theobjects of the Company are to hold, co-ordinate and manage
participations or other interests in and to finance and assume
liabilities, provide for security and/or guarantee debts
of legal entities, partnerships, business associations andundertakings that are involved in:(a) the aeronautic, defence, space and/or communicationindustry; or(b) activities that are complementary, supportive or ancillary
thereto.

3.1.6 Commercial and Companies Registry
The Company is registered with the Registry of the Chamber of Commerce of Amsterdam (Handelsregister van de Kamer van
Koophandel en Fabrieken voor Amsterdam) under number 24288945.

3.1.7 Inspection of Corporate Documents
The Articles of Association are available for inspection in
Dutch at the Chamber of Commerce of Amsterdam.
Pursuant to Article 57 of the French Decree n° 84-406 of
30th May 1984, a certified copy of a translation in Frenchof the Articles of Association has been filed with the Greffeof the Tribunal de commerce of Paris. It is also available
at the Head office of EADS in France (37, boulevard deMontmorency, 75016 Paris, France, Tel.: 00 33 1 42 24 24 24).
In the event of amendments being made to the Articles of
Association, an updated certified copy of the translation in

French thereof will be filed with the Greffe of the Tribunal
de commerce of Paris and made available at the Head officeof EADS in France.
In Germany, the Articles of Association are available atthe Head office of EADS in Germany (81663 Munich,Germany, Tel.: 00 49 89 60 70).
In Spain, the Articles of Association are available
at the CNMV and at the Head office of EADSin Spain (Avda. Aragón 404, 28022 Madrid, Spain,
Tel.: 00 34 91 585 70 00).

3.1.8 Financial YearThe financial year of the Company starts on 1st January and ends on 31st December of each year.

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3.1.9 Allocation and Distribution of Income
3.1.9.1 Dividends
The Board of Directors shall determine which part of the
profits of the Company shall be attributed to reserves. The
remaining distributable profit shall be at the disposal of theshareholders’ meeting.
The shareholders’ meeting may resolve (if so proposed by
the Board of Directors) that all or part of a dividend shall be
paid in shares of the Company as opposed to cash.
The declaration of a dividend, an interim dividend or another
distribution to the shareholders shall be made known tothem within seven days after such declaration. Declared
dividends shall be payable within four weeks of suchdeclaration unless another date for payment is proposed by

the Board of Directors and approved by the shareholders’meeting.
Dividends, interim dividends and other distributions onshares shall be paid by bank transfer to the bank or giroaccounts designated in writing to the Company by, or on
behalf of, shareholders at the latest 14 days after theirannouncement.

3.1.9.2 Liquidation
In the event of the dissolution and liquidation of theCompany, the assets remaining after payment of all debts
and liquidation expenses shall be distributed amongst theholders of the shares in proportion to their shareholdings.

3.1.10 General Meetings
3.1.10.1 Calling of Meetings
Shareholders’ meetings are held as often as the Boardof Directors deems necessary or upon the request ofshareholders holding, individually or together, at least 10%of the total issued share capital of the Company.
The Board of Directors must give notice of general meetings
in at least one of the Netherlands’ national daily newspapers,
at least one international daily newspaper and at least one
daily newspaper in each of the countries in which theCompany’s shares are listed. Such publication must be madeat least 15 days before the day of the meeting, not counting
the day on which notice was given, and shall state either thematters to be considered at such meeting or that the agenda
is open to inspection by the shareholders at the offices of theCompany and at such other locations as may be specified in
the notice.
The annual shareholders’ meeting of the Company is held
within six months of the end of the financial year.
Shareholders’ meetings are held in Amsterdam, Den
Haag, Rotterdam or Haarlemmermeer (Schiphol Airport).
The Board of Directors may decide that shareholders’meetings may be attended by means of electronic or videocommunication devices from the locations mentioned in theconvening notice.
The Board of Directors must announce the date of theannual shareholders’ meeting at least two months before
the meeting. Requests made by one or more shareholders
collectively representing at least 1% of the issued sharecapital (or shares having an aggregate market value of€50 million), to put items on the agenda for the annual
shareholders’ meeting, must be effected by the Board of
Directors, if such requests to the Board of Directors havebeen made at least six (6) weeks prior to the date scheduled
for the meeting except if, in the opinion of the Board of
Directors, important interests of the Company prevail overthe insertion of such items into the agenda.

3.1.10.2 Right to Attend Meetings
Each holder of one or more shares may attend shareholders’meetings, either in person or by written proxy, to speak andto vote according to the Articles of Association.
See “— 3.1.10.4 Conditions of Exercise of Right to Vote”.
A shareholder or person who has the right to attend ameeting can see to it that he is represented by more than one

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4proxy holder, provided that only one proxy holder can beappointed for each share.
In relation to holders of registered shares, the Board of
Directors may provide in the convening notice that those
persons are recognised as authorised to exercise the rights toattend, speak and vote at the shareholders’ meetings, whoat the point in time mentioned in the convening notice areauthorised to exercise those rights and as such have beenregistered in the register appointed for the purpose by the
Board of Directors, irrespective of who is authorised toexercise those rights on the day of the meeting.
Any person who is entitled to exercise the rights set out
in the above paragraph (either in person or by means of awritten proxy) and is attending the meeting from anotherlocation (see “— 3.1.10.1 Calling of Meetings”) in suchmanner that the person(s) acting as chairman/chairmen of
the meeting is/are convinced that such person is properly
participating in the meeting, shall be deemed to be present or
represented at the meeting, shall be entitled to vote and shallbe counted towards a quorum accordingly.
As a prerequisite to attending the shareholders’ meeting andto casting votes, the holders of bearer shares and those who
derived the aforementioned rights from these shares shallbe obliged to deposit their share certificate or the documents
evidencing their rights against receipt, at such locations as
shall be determined by the Board of Directors and stated in
the convening notice.
Such convening notice shall also state the day which has
been fixed as the final day on which the share certificates
and the documents evidencing the aforementioned rights
may be deposited. That day may not be earlier than fivebusiness days, but in each case not earlier than the seventhday, prior to the meeting.
As far as registered shares are concerned, the Board of
Directors should be informed in writing within thetimeframe mentioned in the two preceding sentences of theintention to attend the meeting.
Holders of shares that are registered in the shareholders’register kept in Amsterdam have the option of holding themthrough Euroclear France S.A. In this case the shares areregistered in the name of Euroclear France S.A.

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Shareholders holding their EADS shares through Euroclear
France S.A. who wish to attend general meetings will haveto request from their financial intermediary or accountholder
an admission card and be given a proxy to this effect fromEuroclear France S.A. in accordance with the instructions
specified by the Company in the convening notice. For thispurpose, a shareholder will also be able to request that it
be registered directly (and not through Euroclear FranceS.A.) in the register of the Company. However, only sharesregistered in the name of Euroclear France S.A. may be
traded on the stock exchanges.
In order to exercise their voting rights, the shareholders will
also be able, by contacting their financial intermediary or
accountholder, to give their voting instructions to Euroclear
France S.A. or to any other person designated for thispurpose, as specified by the Company in the convening
notice.

3.1.10.3 Majority and Quorum
All resolutions are adopted by means of a simple majorityof the votes cast except when a qualified majority isprescribed by the Articles of Association or by Dutch law.
No quorum is required for any shareholders’ meeting to be
held. Dutch law requires a special majority for the passingof certain resolutions: inter alia, capital reduction, exclusionof preemption rights in connection with share issues,
statutory mergers or statutory demergers; the passing of such
resolutions requires a majority of two-thirds of the votes castif 50% of the share capital with voting rights is not present
at the meeting (or otherwise a simple majority). In addition,
resolutions to amend the Articles of Association or todissolve the Company shall only be capable of being adopted
with a majority of at least two-thirds of the valid votes castat a shareholders’ meeting, whatever the quorum present atsuch meeting.
Pledgees of shares and beneficiaries of a usufruct, which do
not have voting rights, do not have the right to attend andto speak at shareholders’ meetings. The owners of shares
which are subject to a pledge or a usufruct, which do nothave voting rights, are entitled to attend and to speak atshareholders’ meetings.

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3.1.10.4 Conditions of Exerciseof Right to Vote
In all shareholders’ meetings, each shareholder has one votein respect of each share it holds.
A shareholder whose shares are subject to a pledge or
usufruct shall have the voting rights attaching to such shares

unless otherwise provided by law or by the Articles of
Association or if, in the case of a usufruct, the shareholder
has granted voting rights to the usufructuary. Pursuant
to the Articles of Association and subject to the priorconsent of the Board of Directors, a pledgee of shares in the
Company may be granted the right to vote in respect of suchpledged shares.

3.1.11 Disclosure of Holdings
Any person, acting alone or in concert (as defined in the
Netherlands Act on reporting of shareholdings, Wet melding
zeggenschap in ter beurze genoteerde vennootschappen
1996 (the “WMZ”)), acquiring or disposing of, directly or
indirectly, an interest in the share capital or voting rights of
the Company resulting in such person, after such acquisition
or disposal, being in a different range of thresholds interms of capital or voting rights than that in which he
was prior to such acquisition or disposal is required by the
WMZ to promptly notify the Company and the AFM ofsuch interests. The same notification requirements apply
in relation to acquiring or disposing of actual or contingent
rights to obtain shares or voting rights. The applicable rangesof relevant interests pursuant to the WMZ are as follows:
0% to 5%; 5% to 10%; 10% to 25%; 25% to 50%;
50% to 66 2/3%; 66 2/3% and over. The disclosures are
published by the AFM on its website (www.afm.nl).
Furthermore, pursuant to the WMZ, the AFM is required
to publish an advertisement in a nationally distributed
newspaper in each of the Member States of the European
Economic Area where the shares are admitted to trading
on a regulated market (France, Germany and Spain). It is
expected that the WMZ will be amended on or prior to
20th January 2007, amongst others, to implement certain
provisions of EC Directive 2004/109 dated 15th December
2004. In addition, the Articles of Association require
notification to the Company in the event of an acquisition or
disposal of an interest resulting, for any person acting alone
or in concert, in a change of range from or to the ranges 25%
to 33 1/3% and 33 1/3% to 50%.

newspaper, if the percentage of voting rights held by ashareholder of the Company reaches, exceeds or falls shortof 5%, 10%, 25%, 50% or 75% of the voting rights.
The Company has to inform the CNMV and the Spanish
Stock Exchanges of any disclosure of holdings exceeding theabove mentioned thresholds that it receives.
The Articles of Association also require that any person
acquiring directly or indirectly or with others with whom
it is acting in concert (as defined in the WMZ) more than
one tenth of the issued share capital or voting rights of
the Company must notify the Company of its intentions(i) to buy or sell shares of the Company in the following
12 months; (ii) to continue or to stop acquiring shares orvoting rights of the Company; (iii) to acquire control of theCompany; or (iv) to seek to designate a member of the Boardof Directors of the Company. The Company will provide theAMF with the information received in this context.
The AMF has indicated that it will publish a noticeconcerning any communication so transmitted. The CNMV
and the Spanish Stock Exchanges will publish all such
notifications received.
Failure to comply with the legal obligation to notify a change
in range of thresholds under the WMZ is a criminal offence
punishable by criminal and administrative penalties as well ascivil law penalties, including the suspension of voting rights.

According to paragraph 26 of the German Securities Trading
Act (Wertpapierhandelsgesetz), the Company has to publish
in a German supra-regional mandatory stock exchange

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34Disclosure Requirements for
Members of the Board of Directors
and the Executive Committee
Disclosure of holdings
In addition to the WMZ requirements regarding disclosureof holdings, members of the Board of Directors must reportto the AFM the number of shares in EADS and attachedvoting rights (1) held by him or an entity controlled byhim, within two weeks following their appointment as
director, whether or not such shareholdings reach specified
thresholds. Subsequently, any member of the Board of
Directors is required to notify to the AFM any changes insuch number of shares in EADS and attached voting rights.
The Company has to inform the AMF, the German Federal
Financial Supervisory Authority, the CNMV and the
Spanish Stock Exchanges of any disclosure of holdings
by the Directors involving shares of the Company that it
receives. The CNMV and the Spanish Stock Exchanges
will publish such received notifications. In addition, theCompany must update the information contained in its
website related to holding of shares by Directors.

Disclosure of transactions carried out
on any securities issued by the Company
Pursuant to section 47a of the WTE, certain persons
discharging managerial responsibilities within the Company(i.e., for EADS, the members of the Board of Directors andof the Executive Committee) and, where applicable, persons
closely associated with them must in principle notify the
AFM of all transactions conducted for their own accountrelating to shares of the Company, or to derivatives or otherfinancial instruments linked to them. These persons have to
notify the AFM of the transactions within five trading days
unless the aggregate amount of such transactions does notexceed €5,000 in respect of all transactions in a calendar year.
According to paragraph 15a of the German Securities
Trading Act, persons with significant managerial
responsibility with respect to the Company (i.e., for EADS,
the members of the Board of Directors and the members of

the Executive Committee), or the persons closely associatedwith them, must disclose transactions conducted for theirown account involving shares of the Company or financial
instruments that relate to those shares, especially derivatives.
These persons have to notify the Company and the German
Federal Financial Supervisory Authority of the transactions
within five trading days unless the aggregate amount ofsuch transactions does not exceed €5,000 in respect of alltransactions in a calendar year. The Company is required
to publish the notification without undue delay on the
Company’s website or in a German supra-regional mandatory
stock exchange newspaper. To some extent, this requirement
also applies in connection with employee profit sharing andincentive plans and other kinds of stock option plans grantedby the Company.
Pursuant to Spanish law, EADS must report to the
CNMV and the Spanish Stock Exchanges any disclosuresof transactions it receives and which is carried out by themembers of the Board of Directors on both EADS sharesand derivative instruments linked to them made under thelaw applicable to the Company (i.e., Dutch law).
Pursuant to Articles 222-14, 222-15, 222-15-1 and222-15-2 of the AMF General Regulations, directors,
persons with significant managerial responsibility withrespect to the Company and having access on a regularbasis to inside information about the Company (membersof the Board of Directors and members of the Executive
Committee), and, where applicable, any person closely
associated with them, must report by e-mail to the AMF,
within a period of five trading days following completion,
any transactions in securities of the Company carriedout by these persons, unless the aggregate amount ofsuch transactions does not exceed €5,000 in respect of alltransactions carried out in a calendar year. These persons
must also provide the AMF with the confirmation of theorder. The AMF makes such disclosure information publicly
available on its website. In addition, the Company must
establish, update and provide the AMF with a list detailingthe persons with significant managerial responsibility withrespect to the Company and having access on a regular basis
to inside information about the Company.

(1) In this context, the term “shares” also includes for example depositary receipts for shares and rights resulting from an agreement to acquire shares or depositary receipts for shares, specifically call
options, warrants, and convertible bonds. Equally, the term ‘voting rights’ also includes actual or contingent rights to voting rights (e.g., embedded in call options, warrants or convertible bonds).

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3.1.12 Mandatory Tender Offers
Pursuant to Article 15 of the Articles of Association, in theevent that a direct or indirect acquisition of shares in the
Company results in a person acting alone or in concert(as defined in the WMZ) holding shares or voting rights
where the control over the number of shares or votes
reaches or exceeds 33 1/3% of the issued share capital of theCompany then such person(s) is (are) required to make anunconditional public offer to all shareholders to acquire allof their shares or to procure that such an offer is made. Suchoffer must comply with all of the applicable regulatory orother legal requirements in each jurisdiction in which theCompany’s shares are listed.
Pursuant to Article 16 of the Articles of Association, in theevent of a failure to launch such an offer (or if the offer
does not satisfy the relevant legal or regulatory requirementsin each of the jurisdictions where the Company’s sharesare listed) within two months after notification to theCompany of shareholdings reaching or exceeding 33 1/3%
or failing such notification, within a period of 15 days ofreceipt of notice from the Board of Directors confirming theobligation to make the public offer, then any person(s) whois (are) required to make the offer shall within the period
specified by the notice sent by the Board of Directors
exchange for depository receipts to be issued by the
Stichting Administratiekantoor EADS (the “Foundation”),
such percentage of shares they hold over and above
the 33 1/3% of the shares issued by the Company (the“Excess Percentage”). From the date specified in the noticesent by the Board of Directors, the right to attend meetings,
to vote and to receive dividends shall be suspended in
respect of the Excess Percentage. If, within a period of 14days from a further notice from the Board of Directors,
the person required to exchange his shares representing his
Excess Percentage for depository receipts still has not doneso, then the Company is irrevocably authorised to exchangesuch shares for depository receipts issued by the Foundation.
The constitutive documents of the Foundation providethat the Foundation shall not have the right to attend
shareholders’ meetings of the Company as a shareholder,to speak at such meetings and to exercise the voting rights
attached to the shares it holds, except if, in the view of
the Board of Directors of the Foundation (comprising
the two independent Directors and one of the two Chief

Executive Officers of EADS), such action is required forthe performance of the mandatory offer provisions in the
Articles of Association.
The obligation to make a public offer does not apply
in the following situations:(i) to a transfer of shares to the Company itself or to theFoundation;(ii) to a securities custody, clearing or settlement institution
acting in that capacity, provided that the provisions ofArticle 16 of the Articles of Association described above
shall be applicable where shares are held for persons acting
in breach of the provisions of Articles 15 and 16 of the
Articles of Association described above;(iii) to a transfer of shares by the Company or to an issue ofshares by the Company on a merger or on an acquisition by
the Company of another company or business;(iv) to a transfer of shares from one party to another party
who is a party to an agreement as envisaged in the WMZ todefine “concert parties” where the agreement is entered into
before 31st December 2000 (as amended, supplemented or
replaced by a new agreement by the admission of one
or more new parties or the exclusion of one or more parties)
except that this exemption will not apply to a new party
that individually or with its subsidiaries and/or groupcompanies holds at least 33 1/3% of the control over sharesor votes in the Company; this exemption is intended to
exclude the parties to the Participation Agreement(See “3.3.2 Relationships with Principal Shareholders”) as
amended, supplemented or replaced by a new agreement by
the admission of one or more new parties or the exclusionof one or more parties from the obligation to make themandatory offer in the event of a transfer of shares between
themselves; or(v) to a transfer by a shareholder to a subsidiary in which
it holds more than 50% or by a shareholder to a company
which holds more than 50% in such transferring shareholder.
Spanish securities legislation sets forth specific provisions
which are applicable in the event an investor acquires,directly or indirectly, certain percentages of the sharecapital of a company listed on a Spanish Stock Exchange,

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4
because they are deemed to be significant. These provisions,set forth in Article 1 of the Royal Decree 1197/1991, of
26th July, regarding Takeover Bids, amended by Royal
Decree 432/2003, of 11th April, provide that said investor
will have to offer to acquire the following percentages: theoffer must be (a) for at least 10% if the investor acquires
25% of the shares, or other securities (such as subscription
rights, convertible debentures, warrants, or any othersimilar securities that may directly or indirectly entitle suchinvestor to subscribe or acquire shares) or a threshold that,without reaching such percentage, enables the appointmentof a number of directors who, together with those alreadyappointed, if any, represent more than 1/3 and less than
1/2 plus one of the total directors of the target company,
or, if the investor already holds between 25% and 50%, andintends to purchase an additional 6% within the following
12 months, and (b) for 100% in the event that the investor
reaches or exceeds the threshold of 50% or a threshold that,without reaching such percentage, enables the appointmentof a number of directors who, together with those alreadyappointed, if any, represent more than 1/2 of the total
directors of the target company. Given the different
thresholds set forth in Article 1 of the Royal Decree
1197/1991 and in Article 15 of the Articles of Associationof EADS (which in short requires, in principle, that a tender

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offer for 100% of the share capital be launched in the event a
shareholder controls (alone, or in concert with shareholders)
directly or indirectly a number of shares or voting rights
exceeding 33 1/3% of the share capital of EADS, as describedabove), Sociedad Estatal de Participaciones Industriales(“SEPI”), a minority shareholder of EADS, taking thestand that the Royal Decree 1197/1991 is not applicable
to EADS, as a Dutch company listed in three different
countries (Spain, France and Germany), the Articles of
Association of which duly provide that a tender offer mustbe launched whenever control of 33 1/3% of the share capitalis taken, has, on behalf of EADS, consulted on this issue
with the CNMV, which has confirmed in writing that ‘theevent posed does not fall within those contemplated in the
aforementioned Royal Decree 1197/1991’ and, therefore,
said Royal Decree 1197/1991 is not applicable to EADS.
In addition, the CNMV, responding to a request from certain
shareholders of EADS, stated in a letter dated 19th June 2000
that the Royal Decree 1197/91 dated 26th July 1991
relating to takeover bids does not apply to transfers of shares
between parties in the EADS shareholders agreements,
provided such transfers are made within the frameworkof the shareholders agreements and that such agreements
remain in force.

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3.2 General Description of the Share Capital
3.2.1 Modification of Share Capital or Rights Attaching to the Shares
Unless such right is limited or eliminated by theshareholders’ meeting as described below, holders of shares
have a pre-emptive right to subscribe for any newly issued
shares pro rata to the aggregate nominal value of shares heldby them, except for shares issued for consideration otherthan cash and shares issued to employees of the Company
or of a Group company. For the contractual position as topre-emption rights, see “3.3.2 Relationships with Principal
Shareholders”.
The shareholders’ meeting has the power to issue shares.
The shareholders’ meeting may also authorize the Board of
Directors for a period of no more than five years, to issue
shares and to determine the terms and conditions of shareissuances.
The shareholders’ meeting also has the power to limit or to
exclude pre-emption rights in connection with new issuesof shares, and may authorize the Board of Directors for aperiod of no more than five years, to limit or to exclude
preemption rights. All resolutions in this context must be
approved by a two-thirds majority of the votes cast during
the shareholders’ meeting in the case where less than half ofthe capital issued is present or represented at said meeting.
A resolution will be submitted to the annual shareholders’meeting of EADS to be held on 4th May 2006 in order toauthorize the Board of Directors to issue shares representing
up to 1% of the Company’s authorised share capitalfrom time to time, to grant rights to subscribe for sharesfor a period up to and including the date of the annual
shareholders’ meeting to be held in 2007 and also in the casewhere the subscription rights may be exercised thereafter,
and to determine the terms and conditions of the sharesissuances. Further resolutions have also been submitted
to such shareholders’ meeting to authorize the Board of
Directors to limit or exclude the preferential subscription
rights for the period up to and including the date of theannual shareholders’ meeting to be held in 2007 and to
approve stock option plans and employee share ownershipplans which may include the granting of rights to subscribe
for shares, which can be exercised at such time as may be
specified in such plans.
The shareholders’ meeting may reduce the issued sharecapital by cancellation of shares or by reducing the nominal
value of the shares by means of an amendment to the
Articles of Association, the latter requiring the approvalof at least two-thirds of the votes cast at the general
meeting. In the annual general of shareholders to be held
on 4th May 2006, it will be proposed to cancel up to a
maximum of 6,956,970 shares.

3.2.2 Issued Share Capital
As at 31st December 2005, the Company’s issued share capital is €817,743,130 comprising 817,743,130 shares of a nominal
value of €1.0 each.

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General Description of the Company and its Share Capital2

3.2 General Description of the Share Capital3
4
3.2.3 Authorised Share Capital
As at 31st December 2005 the authorised share capital of the Company is €3 billion comprising 3,000,000,000 sharesof €1.0 each.

3.2.4 Securities Granting Access to the Company’s Capital
Except for stock options granted for the subscription
for EADS shares (See “Part 1/2.3.3 Options Granted
to Employees”), there are no securities that give access,
immediately or over time, to the share capital of EADS.

EADS’ potential share capital

Total number of EADS shares issued
as of the date of this document
Total number of EADS shares which
may be issued following exercise of stock options
Total potential EADS share capital

The table below shows the total potential dilutionthat would occur if all the stock options issued as at
31st December 2005 were exercised:

Number ofsharesDilution
percentage
in capital

Number of
voting rights

Dilution
percentage invoting rights

817,743,130

95.97%

807,150,421

95.9%

34,366,468

4.03%

34,366,468 *

4.1%

852,109,598

100%

841,516,889

100%(*) The potential dilutive effect on capital and voting rights of the exercise of these stock options may be limited as a result of the Company’s share purchase programmes and in the case of subsequentcancellation of repurchased shares. See “3.3.7.1 Dutch Law and information on share buy-back programmes”.

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General Description of the Company and its Share Capital2

3.2 General Description of the Share Capital3
4
3.2.5 Changes in the Issued Share Capital Since Incorporation of the Company

Date

29th December
1998
3rd April 2000
8th July 2000
13th July 2000
21st September
2000

5th December 2001

4th December 2002

5th December 2003

20th July 2004

3rd December 2004

In 2004
25th July 2005

29th July 2005

In 2005

Nominal
Number ofvalue per shares issued /sharecancelled

Nature of Transaction

Premium*

Total number
of issued shares
after transaction

Total issued
capital after
transaction

Incorporation

NLG 1,000

100

-

100

NLG 100,000

Conversion into €Issue of shares in exchange forcontributions by Aerospatiale
Matra, Dasa AG and SEPI
Issue of shares for the purposeof the initial public offering andlisting of the Company
Issue of shares for the purposeof the employee offering carriedout in the context of the initialpublic offering andlisting of the Company
Issue of shares for the purposeof an employee offering(note d’opération approved by the
COB** on 13th October 2001
under number 01-1209)
Issue of shares for the purposeof an employee offering (noted’opération approved by the COB
on 11th October 2002 under
number 02-1081)
Issue of shares for the purposeof an employee offering (noted’opération approved by the COB
on 25th September 2003 under
number 03-836)
Cancellation of shares upon
authorisation granted by theannual shareholders’ meeting
held on 6th May 2004
Issue of shares for the purposeof an employee offering (noted’opération approved by the AMF
on 10th September 2004 under
number 04-755)
Issue of shares following exercise
of options granted
to employees ***Cancellation of shares upon
authorisation granted by theannual shareholders’ meeting
held on 11th May 2005
Issue of shares for the purposeof an employee offering (noted’opération approved by the AMF
on 4th May 2005
under number 05-353)
Issue of shares following exercise
of options granted
to employees ***€1

50,000-50,000€50,000€1

715,003,828€1,511,477,044

715,053,828€715,053,828€1

80,334,580€1,365,687,860

795,388,408€795,388,408€1

11,769,259€168,300,403

807,157,667€807,157,667€1

2,017,894€19,573,571.80

809,175,561€809,175,561€1

2,022,939€14,470,149.33

811,198,500€811,198,500€11,686,682€19,363,109.36

812,885,182€812,885,182€1

5,686,682-

807,198,500€807,198,500€12,017,822€34,302,974

809,216,322€809,216,322€1

362,747€6,133,436

809,579,069€809,579,069€1

1,336,358-

808,242,711€808,242,711€1

1,938,309€34,618,198.74

810,181,020€810,181,020€17,562,110 €144,176,031.61

817,743,130€817,743,130(*) The costs (net of taxes) related to the initial public offering of the shares of the Company in July 2000 have been offset against share premium for an amount of €55,849,772.
(**) Former name of the Autorité des marchés financiers (the “AMF”).
(***) For information on stock option plans under which these options were granted to EADS employees, see “Part 1/2.3.3 Options Granted to Employees”.

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General Description of the Company and its Share Capital2

3.3 Shareholdings and Voting Rights

34

3.3 Shareholdings and Voting Rights
3.3.1 Shareholding Structure
EADS combined the activities of Aerospatiale Matra(“Aerospatiale Matra” or “ASM”), DaimlerChrysler
Aerospace AG (“Dasa AG”) (with the exception ofcertain assets and liabilities) (“Dasa”) and Construcciones
Aeronauticas SA (“CASA”) pursuant to a series oftransactions completed in July 2000.
In this document, the term ‘Completion’ relates to
the July 2000 completion of the contributions madeby Aerospatiale Matra, Dasa AG and SEPI to EADS to
combine such activities into EADS.
The term ‘Indirect EADS Shares’ relates to EADS shares
held by DaimlerChrysler AG (“DaimlerChrysler”), SEPIand Société de Gestion de l’Aéronautique, de la Défense etde l’Espace (“SOGEADE”), for which EADS Participations
B.V. exercises all the attached voting rights as well as
Lagardère SCA (“Lagardère”) and Société de Gestion
de Participations Aéronautiques (“SOGEPA”), or thecompanies of their group, the number of EADS shares held
indirectly via SOGEADE, reflecting by transparency, theirrespective interest in SOGEADE.
Unless the context requires otherwise, the shareholdings ofDaimlerChrysler Luft-und Raumfahrt Beteiligungs GmbH& Co. KG (“DC KG”) in EADS are referred to in thisdocument as shareholdings of DaimlerChrysler, and therights and obligations of DC KG pursuant to the agreements
described herein are referred to as rights and obligations ofDaimlerChrysler.

of Dasa AG, itself being a wholly owned subsidiary ofDaimlerChrysler Luft- und Raumfahrt Holding AG(“DCLRH”), a 93.85% subsidiary of DaimlerChrysler.
SOGEADE, a French partnership limited by shares(société en commandite par actions) whose share capital isheld 50% by SOGEPA (a French state holding company)
and 50% by Désirade (a French société par actions simplifiée
wholly owned by Lagardère), owns 29.89% of the EADS
shares. Thus, 59.78% of the share capital of EADS is heldin equal proportions by DaimlerChrysler and SOGEADE
who jointly control EADS through a Dutch law contractual
partnership (the “Contractual Partnership”). SEPI (aSpanish state holding company), being a party to theContractual Partnership, holds 5.47% of the share capitalof EADS. The public (including EADS employees) and theCompany hold, respectively, 33.39% and 1.30% of the sharecapital of EADS. The République française (the “French
State”) holds directly 0.06% of such share capital, suchshareholding being subject to certain specific provisions.
On 8th July 2004, DaimlerChrysler announced that it had
placed on the market (in the context of a hedging transaction)
all of its EADS shares (22,227,478 EADS shares),representing 2.73% of the capital and 2.78% of the EADS
voting rights at that date, except for its Indirect EADS
Shares. Thus, DaimlerChrysler does not hold directly any
EADS shares at the date of this document.
On 11th November 2005, Dasa AG transferred its wholeinterest in EADS to its wholly owned subsidiary DC KG.

As at 31st December 2005, 29.89% of the EADS sharesare held by DC KG, which is a wholly owned subsidiary

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General Description of the Company and its Share Capital2

3.3 Shareholdings and Voting Rights

3
4
The diagram below shows the ownership structure of EADS as at 31st December 2005 (% of capital (voting rights)) before
exercise of outstanding stock options granted for the subscription of EADS shares. See “Part 1/2.3.3 Options Granted to
Employees”.

French StateSOGEPA

Lagardère

Spanish State

100%

100%

Désirade

50%

DaimlerChrysler****
93.85%DCLRH

50%
SOGEADE(Managed by
SOGEADE' Gérance)

100%
SEPI

Dasa

100%
DC KG

29.89% (30.29%)

5.47% (5.53%)

29.89% (30.29%)

Contractual partnership(Managed by EADS Participations B.V.)

65.25% (66.11%) *0.06% (0.06%) **/***EADS N.V.

33.39% (33.83%)

Public

1.30% (-) *****(*) EADS Participations B.V. exercises the voting rights attaching to these EADS shares pledged by SOGEADE, DaimlerChrysler and SEPI who retain title to their respective shares.
(**)The French State exercises the voting rights attaching to these EADS shares (such shares being placed with the Caisse des dépôts et consignations) in the same way that EADS Participations B.V.
exercises the voting rights pooled in the Contractual Partnership.

(***) Shares held by the French State following the distribution without payment of consideration to certain former shareholders of Aerospatiale Matra as a result of its privatisation in June 1999. All
the shares currently held by the French State will have to be sold on the market.

(****) DCLHRH is 93.85% held by DaimlerChrysler; almost all the balance is held by the City of Hamburg.
(*****) As at 31st December 2005, the Company holds, directly or indirectly through another company in which the Company holds directly or indirectly more than 50% of the share capital, 10,592,709
of its own shares. The EADS shares owned by the Company itself do not carry voting rights.

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3.3 Shareholdings and Voting Rights

3
4
For the number of shares and voting rights held by membersof the Board of Directors and Executive Committee, “seePart 1 / 2.2.1 Compensation Granted to Directors andPrincipal Executive Officers”.

Approximately 2.25% of the capital and 2.28% of the voting
rights are held by EADS employees.
For further information on changes to shareholdings since
31st December 2005, see also “1.2 Recent Developments”.

3.3.2 Relationships with Principal Shareholders
The principal agreements governing the relationships
between the founders of EADS are an agreement(the “Participation Agreement”) entered into on
Completion between DaimlerChrysler, Dasa AG, Lagardère,
SOGEPA, SOGEADE and SEPI, and a Dutch law ContractualPartnership agreement entered into on Completion between
SOGEADE, Dasa AG, SEPI and EADS Participations B.V.
(the “Contractual Partnership Agreement”), which
repeats certain terms of the Participation Agreement and acertain number of other agreements (notably, a shareholder
agreement (the “SOGEADE Shareholders’ Agreement”)
entered into on Completion between SOGEPA and Lagardère
and an agreement between the French State, DaimlerChrysler
and DCLRH). EADS Participations B.V. is a Dutch privatecompany with limited liability (besloten vennootschap met
beperkte aansprakelijkheid) and is the managing partner of
the Contractual Partnership. The Indirect EADS Shares heldby DaimlerChrysler, SOGEADE and SEPI have been pledged
to EADS Participations B.V., which has been granted theexclusive power to exercise the voting rights attaching to thepledged shares (including the right to attend and speak atshareholders’ meetings) in accordance with the ContractualPartnership Agreement.
The agreements above contain, among other things,
provisions relating to the following matters:• the composition of the Boards of Directors of EADS,EADS Participations B.V. and SOGEADE Gérance(gérant commandité of SOGEADE);• restrictions on the transfer of EADS shares and
SOGEADE shares;• pre-emptive and tag-along rights of DaimlerChrysler,
SOGEADE, SOGEPA and Lagardère;• defences against hostile third parties;• a put option granted by SOGEADE to DaimlerChrysler
over its EADS shares in certain circumstances;• specific rights of the French State in relation to certain
strategic decisions, regarding among other issues, EADS’ballistic missiles activity; and• certain limitations on the extent of the French State’sownership of EADS.
Further details on the agreements among the principal
shareholders of EADS are set out below.
Organisation of EADS Participations B.V.
The board of directors of EADS Participations B.V. has anequal number of directors nominated by DaimlerChrysler
and by SOGEADE, respectively (taking into accountproposals made by Lagardère in respect of the SOGEADEnominated directors). DaimlerChrysler and SOGEADE eachnominate four directors, unless otherwise agreed, and eachnominates from among its nominated directors a chairman
and a chief executive officer. In addition, although from
8th July 2003, SEPI no longer has a right to nominate a
director, based upon the proposal of DaimlerChrysler and
SOGEADE, the board of directors of EADS Participations
B.V. decided to propose to the shareholders’ meetingof EADS Participations B.V. to held on 11th May 2005
appointed an additional Spanish director bringing the total
number of directors to nine.
This structure gives DaimlerChrysler and SOGEADE equal
nominating rights in respect of the majority of the directorsof the decision-making body of EADS Participations
B.V. All decisions of EADS Participations B.V.’s boardof directors shall require the vote in favour of at least six
directors, except for certain specified matters which require
the prior unanimous approval of DaimlerChrysler and
SOGEADE.

• consequences of a change of control of DaimlerChrysler,
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3.3 Shareholdings and Voting Rights

3
4
Transfer of EADS Shares

Control of EADS

During the period commencing at Completion and endingon 1st July 2003 (the “Standstill Period”), there wererestrictions on DaimlerChrysler’s, SOGEADE’s, SEPI’s,
Lagardère’s, SOGEPA’s and the French State’s ability totransfer EADS shares.

In the event that a third party to which DaimlerChrysler
or SOGEADE objects (a “Hostile Third Party”) has adirect or indirect interest in EADS shares equal to 12.5% ormore of the number of such EADS shares the voting rightsof which are pooled through the Contractual Partnership(a “Qualifying Interest”), then, unless a Hostile Offer(as defined below) has been made by the Hostile Third Partyor until such time as DaimlerChrysler and SOGEADE agree
that the Hostile Third Party should no longer be considereda Hostile Third Party or the Hostile Third Party no longer
holds a Qualifying Interest, the parties to the Participation
Agreement shall exercise all means of control and influence
in relation to EADS to avoid such Hostile Third Party
increasing its rights or powers in relation to EADS.

Following the expiration of the Standstill Period, as of
1st July 2003, each of DaimlerChrysler, SOGEADE, SEPI,Lagardère and SOGEPA has the right to sell its EADS shareson the market, subject to the following conditions:• if a party wishes to sell any EADS shares, it shall firstsell its shares other than its Indirect EADS Shares before
exercising its right to sell its Indirect EADS Shares inaccordance with the provisions set out below;• on the sale of Indirect EADS Shares, DaimlerChrysler(in the case of a sale by SOGEADE), SOGEADE (in thecase of a sale by DaimlerChrysler) or SOGEADE andDaimlerChrysler (in the case of a sale by SEPI) may either
exercise a pre-emption right or sell its Indirect EADS
Shares on the market in the same proportions as therespective Indirect EADS Shares of the relevant parties
bear to each other;• any transfer of Indirect EADS Shares by either SOGEPAor Lagardère is subject to a pre-emption right in favour of
Lagardère or SOGEPA, as the case may be. In the eventthat such pre-emption right is not exercised, the Indirect
EADS Shares may be sold (a) to an identified third party
subject to Lagardère’s or SOGEPA’s consent (as the casemay be) and also to DaimlerChrysler’s consent and(b) if such consent is not obtained, the Indirect
EADS Shares may be sold on the market, subject toDaimlerChrysler’s pre-emption right referred to above;• each of Lagardère and SOGEPA shall have a proportionalright to tag-along on a sale of its Indirect EADS Shares; and• the pre-emption and tag-along rights of Lagardère and
SOGEPA referred to above do not apply to a transfer of
EADS shares directly held by one of them.
Any sale on the market of EADS shares in accordance with
the Participation Agreement shall be conducted in an orderly
manner so as to ensure the least possible disruption to themarket of EADS shares. To this effect, the parties shallconsult with each other before any such sale.

Following the expiration of the Standstill Period, as of
1st July 2003, the parties to the Participation Agreement
may accept an offer (whether by way of tender offer orotherwise) by a Hostile Third Party which is not acceptableto either DaimlerChrysler or SOGEADE (a “Hostile
Offer”), subject to provisions requiring, inter alia, theparty wishing to accept, to first offer its EADS shares
to DaimlerChrysler and/or SOGEADE, in which caseDaimlerChrysler and/or SOGEADE may exercise theirpre-emption rights in respect of all or some only of the EADS
shares held by the party wishing to accept the Hostile Offer.
Any sale of EADS shares, other than the EADS Indirect
Shares, by DaimlerChrysler, SOGEADE or Lagardère, at
a time when a Hostile Third Party is a shareholder andpurchaser of EADS shares on the market, is subject to thepre-emption right of SOGEADE, DaimlerChrysler and
SOGEPA respectively. In the case of a sale by Lagardère,
if SOGEPA does not exercise its right of pre-emption,
DaimlerChrysler has in turn a pre-emption right.
Dissolution of Contractual Partnership and EADSParticipations B.V.
The Contractual Partnership and EADS Participations B.V.
will be dissolved and wound up upon the occurrence of
certain events (each, a “Termination Event”) including:(i) if the proportion which the Indirect EADS Shares of
either DaimlerChrysler or SOGEADE bears to the total
number of EADS shares is less than 10%, unless thedifference between the holdings of DaimlerChrysler and

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4
SOGEADE (calculated as a percentage by reference to thenumber of Indirect EADS Shares held by each of themas against the total number of EADS shares) is 5% or less,in which case the dissolution and winding up shall only
occur if the proportion which the Indirect EADS Shares ofDaimlerChrysler or SOGEADE bears to the total number of
EADS shares is 5% or less; or(ii) if, on a change of control of either Lagardère, SOGEPA,SOGEADE or DaimlerChrysler, no notice of an offer by athird party to purchase the SOGEADE shares or the Indirect
EADS Shares held by the party undergoing the change ofcontrol (the “Changed Party”) (which offer the Changed
Party wishes to accept) has been served in accordance with
the Participation Agreement (see below “— Change ofControl”) within 12 months of the date of the change ofcontrol occurring (the absence of notice of an offer by athird party to purchase the Indirect EADS Shares held by
SEPI upon a change of control of SEPI does not triggera dissolution of the Contractual Partnership or EADSParticipations B.V. but shall cause SEPI to lose its mainrights or liabilities under the Participation Agreement or
the Contractual Partnership Agreement).
On the occurrence of a Termination Event, EADSParticipations B.V. is prohibited from conducting further
business except as is necessary to its liquidation or theliquidation of the Contractual Partnership.

Change of Control
The Participation Agreement provides, inter alia, that if(a) Lagardère or SOGEPA undergoes a change of control andDaimlerChrysler so elects (b) SOGEADE undergoes a changeof control and DaimlerChrysler so elects (c) DaimlerChrysler
undergoes a change of control and SOGEADE so elects(d) SEPI undergoes a change of control and SOGEADE or
DaimlerChrysler so elects then:(i) the party undergoing the change of control shall use its
reasonable efforts to procure the sale of its SOGEADE interest(if the party undergoing the change of control is Lagardèreor SOGEPA) or of its Indirect EADS Shares (if the party
undergoing the change of control is DaimlerChrysler,
SOGEADE or SEPI) to a third party purchaser on bona fide
arm’s length terms. When the party subject to the change ofcontrol is Lagardère or SOGEPA, the third party purchaser

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shall be nominated with DaimlerChrysler’s consent, not to be
unreasonably withheld; and(ii) in the event that a third party offers to purchase the
SOGEADE interest held by Lagardère or SOGEPA or
the Indirect EADS Shares held by DaimlerChrysler,
SOGEADE or SEPI as the case may be, is received andthe party undergoing the change of control wishes to
accept that offer, such offer shall immediately be notified
to (a) DaimlerChrysler in the case of a change of control
occurring to Lagardère or SOGEPA, (b) SOGEADE in thecase of the change of control occurring to DaimlerChrysler,(c) DaimlerChrysler in the case of the change of control
occurring to SOGEADE, or (d) DaimlerChrysler or
SOGEADE in the case of the change of control occurring
to SEPI (the party notified under (a), (b), (c) or (d) being
the “Non-Changed Party”). The Non-Changed Party
shall have a first right to purchase the SOGEADE interestor the Indirect EADS shares being offered for sale at theprice being offered by the third party. In relation to (d),if DaimlerChrysler and SOGEADE have both elected thatSEPI procure a third party purchaser, then they shall eachhave the right to acquire SEPI’s Indirect EADS Shares in
the respective proportions which the number of their EADS
shares bear to one another at that time. In the event that the
Non-Changed Party does not give notice of its intention
to purchase the SOGEADE interest or the Indirect EADS
Shares within 30 days of the offer being made, then the
Changed Party is obliged to sell such SOGEADE interest or
Indirect EADS Shares to the third party on the terms of thethird party’s original offer.
The third party purchaser may not be a competitor of EADS,SOGEADE or DaimlerChrysler (as the case may be) nor
a member of the Group which has taken control of the
Changed Party.

Events of Default Other
Than Change of Control
The Participation Agreement provides for certain actions
following events of default (other than a change ofcontrol) (i.e., insolvency-related or a material breach of theParticipation Agreement). In particular, if such an event ofdefault occurs in relation to DaimlerChrysler, SOGEADE
or SEPI, the non-defaulting party (respectively SOGEADE,
DaimlerChrysler and SOGEADE and DaimlerChrysler

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acting together) has a call option over the defaulting party’s
EADS shares and interest in EADS Participations B.V. Ifsuch an event of default occurs in relation to Lagardère or
SOGEPA, such party is obliged to use its best efforts tosell its interest in the capital of SOGEADE on bona fide
arm’s length terms to a third party purchaser (who mustnot be a competitor of EADS or DaimlerChrysler). In thecase of a sale by Lagardère, the third party purchaser must
be nominated by SOGEPA with DaimlerChrysler’s consent(which may not be unreasonably withheld). In the case ofsuch a sale by SOGEPA, DaimlerChrysler must consent
to the sale (again, such consent may not be unreasonably
withheld).

Specific Rights and Undertakingsof the French StateThe French State, not being a party to the Participation
Agreement, entered into a separate agreement, governed
by French law, with DaimlerChrysler and DCLRH on
14th October 1999 (as amended) pursuant to which:• the French State undertakes to hold an interest of no
more than 15% of the entire issued share capital of EADS
through SOGEPA, SOGEADE and EADS Participations
B.V.;• the French State undertakes that neither it nor any of its
undertakings will hold any EADS shares directly;
in each case disregarding (i) those EADS shares heldby the French State following the distribution without
payment of consideration to certain former shareholdersof Aerospatiale Matra as a result of its privatisation inJune 1999 and which will have to be sold on the market;(ii) those shares held by SOGEPA or the French State
which may be sold or acquired pursuant to the Participation
Agreement or the SOGEADE Shareholders’ Agreement (seebelow); and (iii) those shares held for exclusively investment
purposes.
Moreover, pursuant to an agreement entered into between
EADS and the French State (the “Ballistic Missiles
Agreement”), EADS has granted to the French State(a) a veto right and subsequently a call option on the ballistic
missiles activity exercisable in the event that (i) a third party
which is not affiliated to the DaimlerChrysler and / orLagardère Groups acquires, directly or indirectly, either alone

or in concert, more than 10% or any multiple thereof of theshare capital or voting rights of EADS or (ii) the sale of theballistic missiles assets or of the shares of such companies
carrying out such activity is considered after the terminationof the SOGEADE Shareholders’ Agreement and (b) a rightto oppose the transfer of any such assets or shares during theduration of the SOGEADE Shareholders’ Agreement.

SOGEADESOGEADE is a French partnership limited by shares(société en commandite par actions) the share capital ofwhich is split between SOGEPA (50%) and Désirade, aFrench société par actions simplifiée (50%). The share capitalof Désirade is itself wholly owned by Lagardère. Lagardère
hence owns indirectly 50% of SOGEADE.
The general partner (associé commandité) of SOGEADE,SOGEADE Gérance, is a French société par actions simplifiée
which is the manager of SOGEADE.
SOGEADE Gérance’s board of directors consists of eight
directors, four of them nominated by Lagardère and four by
SOGEPA. Decisions of SOGEADE Gérance’s board shallbe approved by a simple majority of directors except for thefollowing matters which require the approval of a qualified
majority of six of the eight directors: (a) acquisitions ordivestments of shares or assets the individual value of
which exceeds €500 million; (b) agreements establishingstrategic alliances, or industrial or financial co-operation;(c) a capital increase of EADS of more than €500 million
to which no preferential right to subscribe for the sharesis attached; (d) any decision to divest or create a security
interest over the assets relating to prime contractor status,
design, development and integration of ballistic missiles or
the majority shareholdings in the companies Cilas, Sodern,
Nuclétudes and the GIE Cosyde. The decisions contemplated
under (d) above are also governed by the Ballistic Missiles
Agreement (see above “— Specific Rights and Undertakingsof the French State”).
When a vote of SOGEADE Gérance’s board on such matters
does not reach the qualified majority of six directors byreason of any of the SOGEPA-nominated directors castinga negative vote, the SOGEADE-nominated directors on theboard of EADS Participations B.V. are obliged to vote against
the proposal. This means that the French State as the owner

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4of SOGEPA can veto any decisions on these matters within
EADS Participations B.V. and in turn within EADS as longas the SOGEADE Shareholders’ Agreement remains inexistence.

provided that in both cases the French State still holds any
direct or indirect interest in EADS shares. The put option
may only be exercised in respect of all and not some only ofDaimlerChrysler’s EADS shares.

The shareholding structure of SOGEADE shall reflect at
all times the indirect interests of all the shareholders of
SOGEADE in EADS.

The exercise price of the option will be calculated on thebasis of an average market price for EADS shares.

In certain circumstances, in particular in the event of achange of control of Lagardère, Lagardère shall grant acall option over its SOGEADE shares to any non-public
third party designated by SOGEPA and approved byDaimlerChrysler. This option may be exercised during theterm of the SOGEADE Shareholders’ Agreement on thebasis of the market price for the EADS shares.
The SOGEADE Shareholders’ Agreement shall terminate
if Lagardère or SOGEPA ceases to hold at least 20% of thecapital of SOGEADE, except that: (a) the provisions relating
to the call option granted by Lagardère described above shallremain in force as long as the Participation Agreement is inforce, (b) as long as SOGEPA holds at least one SOGEADE
share, it will remain entitled to nominate a SOGEADE
Gérance Director whose approval will be required in
respect of any decision to divest or create a security interest
over the assets relating to prime contractor status, design,development and integration of ballistic missiles activity or
the majority shareholdings in the companies Cilas, Sodern,
Nuclétudes and the GIE Cosyde; and (c) the SOGEADE
Shareholders’ Agreement will be terminated in the eventof a dissolution of EADS Participations B.V. caused
by DaimlerChrysler. In the latter case, the parties haveundertaken to negotiate a new shareholders’ agreement in
the spirit of the shareholders’ agreement between them dated
14th April 1999 relating to Aerospatiale Matra and having
regard to their respective shareholdings in SOGEADE at thetime of the dissolution of EADS Participations B.V.

Put Option
Under the Participation Agreement, SOGEADE grants aput option to DaimlerChrysler over its EADS shares whichshall be exercisable by DaimlerChrysler, (i) in the event of adeadlock arising from the exercise by SOGEPA of its rights
relating to certain strategic decisions (listed above under
the description of SOGEADE) other than those relating to
the ballistic missiles activity or (ii) during certain periods

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In the event that DaimlerChrysler exercises the put option
granted to it by SOGEADE, SOGEADE will acquire
the EADS shares from DaimlerChrysler. However,
Lagardère has the right to require SOGEPA to substituteitself for SOGEADE in relation to the acquisition ofDaimlerChrysler’s EADS shares following the exercise
by DaimlerChrysler of the put option. Such substitution
right has been accepted by DaimlerChrysler. In the eventthat Lagardère does not exercise such substitution right,
Lagardère would have to provide its pro rata part of
the financing necessary for such acquisition. SOGEPA
undertakes to provide its pro rata part of the financing
corresponding to its rights in SOGEADE. Should Lagardère
decide not to take part in the financing, (a) SOGEPA
undertakes to substitute itself for SOGEADE to buy theshares sold by DaimlerChrysler as a result of the exercise
of its put option and SOGEPA or Lagardère may request
the liquidation of SOGEADE and EADS Participations
B.V. and the termination of the SOGEADE Shareholders’
Agreement (notwithstanding the termination provisions of
the SOGEADE Shareholders’ Agreement described under
the paragraph “SOGEADE” above). In that case, Lagardère
could freely sell its EADS shares on the market or in a blocksale to a third party.

Pledge over EADS Shares Granted to EADSParticipations B.V.
Upon Completion and in order to secure their undertakings
under the Contractual Partnership Agreement and theParticipation Agreement, SOGEADE, DaimlerChrysler and
SEPI granted a pledge over their respective Indirect EADS
Shares to EADS Participations B.V. for the benefit of EADSParticipations B.V. and the other parties to the ContractualPartnership Agreement.

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4
Contributions to EADS — SpecificUndertakings of EADSEADS has agreed not to dispose of the shares contributed
to it by Aerospatiale Matra, Dasa AG and SEPI for a periodof seven years. The contribution agreements entered into
between EADS on the one hand and Aerospatiale Matra,
Dasa AG and SEPI on the other hand, provide that EADS
may, if it determines that this is desirable, dispose of suchshares provided that EADS shall, on demand, indemnify
Lagardère and SOGEPA (in the case of a sale of sharescontributed by Aerospatiale Matra), Dasa AG or SEPI, as
the case may be, for all tax disadvantages (tax actually paidor borne by them as well as any consumption ofloss-carry-forward potential) they suffer as a result of theloss of the tax benefit triggered by the disposal of the shares
by EADS. Such obligation to indemnify shall cease after
seven years from the date of contribution. In the eventthat the indemnification would be made to all three of
Lagardère, SOGEPA and Dasa AG, the Board of Directors
would decide on the amount of the indemnity on the basisof a report made and presented by the two independent
Directors of EADS. The amount and the conditions of
this indemnification will be reported to the shareholders’meeting.

DADC
EADS holds 75% of the shares in DADC Luft- undRaumfahrt Beteiligungs AG (“DADC”) (the other 25%
being held by DCLRH). The share capital of Dornier GmbHis held as to 97.1% by DADC and as to 2.9% by the Dornierfamily. In shareholders’ meetings, DADC is entitled to morethan 95.2% and the Dornier family to less than 4.8% of thevoting rights in Dornier GmbH. DADC and Dornier GmbHhave entered into a control and profit and loss transfer
agreement.
A considerable number of shareholders’ resolutions in
Dornier GmbH require a majority of 100% of the votes castin the shareholders’ meeting notably resolutions to dissolve
the company, alterations of the Articles of Association if
they terminate, limit or have an impact on the rights of theminority shareholders, reduction of share capital, mergers(unless Dornier GmbH is the surviving entity), the transfer
of holdings in other enterprises or the transfer of wholeareas of enterprise activities with the exception of transfersof assets in return for shares or as a contribution in kind or
to a company associated with DaimlerChrysler, which isassumed to be the case if DaimlerChrysler controls at least
20% of its share capital. The same requirement applies withregard to all transfers of shares of Dornier GmbH held by
the DaimlerChrysler Group (including associated enterprises)
subject to certain exceptions including the transfer to otherDaimlerChrysler Group companies (including associatedenterprises). Furthermore, the Dornier family receives aguaranteed dividend from Dornier GmbH (depending on
the nature of the shares) of 8.7% or 15% of the nominal
amount of their shares plus any corporation tax credits.
The guaranteed dividend is indexed. DaimlerChrysler has
guaranteed the payment of the minimum dividend to theDornier family shareholders. In the case of the profit andloss transfer agreement, which presently exists between
DADC and Dornier GmbH, the Dornier family shareholders
are entitled to receive payments corresponding at least to theamount which they would be entitled to in the absence ofsuch profit and loss transfer agreement. Internally DADC
has assumed this obligation.
On 30th November 1988 DaimlerChrysler and the Dornierfamily entered into a separate agreement to strengthen
the rights of DaimlerChrysler and, simultaneously, toprotect the economic interests of the minority shareholders.
The latter can, in particular, demand that their sharesin Dornier GmbH be bought (i) for cash considerationor (ii) in exchange for DaimlerChrysler shares or (iii) in
exchange for shares in a company in which, or underwhich, DaimlerChrysler concentrates its aerospace activities
by DaimlerChrysler or another company associated with
DaimlerChrysler and nominated by DaimlerChrysler.
On 29th March 2000 DaimlerChrysler, DCLRH, DADC,EADS Deutschland GmbH and Dasa AG entered into anagreement according to which DaimlerChrysler has theright to demand from DADC to buy the shares so offeredby the Dornier family shareholders. DaimlerChrysler shall
reimburse DADC for any amount to be paid being above
the fair market value of the shares. Moreover, DADC willassume certain other rights and obligations relating to theprotection of the interests of the Dornier family.
On 29th December 2004, Silvius Dornier andDaimlerChrysler entered into an agreement to transfer all of
the remaining shares of Silvius Dornier in Dornier GmbH(3.58%) to DaimlerChrysler or another company of the

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4
DaimlerChrysler Group nominated by DaimlerChrysler
and to settle all of the rights and potential claims ofSilvius Dornier resulting from or in connection with hisshareholding in Dornier GmbH. None of the other family
shareholders exercised their three months’ right of firstrefusal to acquire these shares so that the legal transfer
became effective on 17th April 2005. According to theabove mentioned agreement between DaimlerChrysler,
DCLRH, DADC, EADS Deutschland GmbH and Dasa AG(“Handhabungsvereinbarung”), DADC had irrevocably
offered to DaimlerChrysler to buy these shares at market
value upon effectiveness of their sale to DaimlerChrysler,
which offer was accepted by DaimlerChrysler and the deal
being brought to closure on 3rd May 2005.

costs, claims, demands, expenses, losses or liabilities thatthey (or any of them) may suffer or incur from the dateof the business combination agreements entered into in
the context of the creation of EADS as a result of all or
any of the shareholders of Dornier GmbH other than amember of the Dasa Group obtaining or seeking to obtain
any rights or remedies against Lagardère (or any member ofthe Lagardère Group), SEPI, the Contractual Partnership,
EADS Participation B.V., Dasa AG, EADS or any entity
contributed by or on behalf of DaimlerChrysler which is
to become a member of the Group or any member of theDasa AG Group. This indemnity shall also extend to EADS
to the extent such protection is not provided for in thetransfer of the Dasa business to EADS.

Under the terms of the business combination agreements
entered into in the context of the creation of EADS,DCLRH has undertaken to indemnify Lagardère (for itself
and on behalf of each member of the Lagardère Group)and SEPI and shall keep them indemnified, against (save inrespect of any consequential loss not foreseeable by DCLRH(or any member of the DaimlerChrysler Group)) all or any

Other than the relationships between the Company and its
principal shareholders described above in this Section 3.3.2,
to the Company’s knowledge, there are no potential conflictsof interest relative to the Company between the duties of
the Directors and their respective private interests or otherduties.

3.3.3 Form of Shares
The shares of EADS are in registered form. The Board of
Directors may decide in respect of all or certain shares, onshares in bearer form.
Shares shall be registered in the shareholders’ register
without the issue of a share certificate or, should the Boardof Directors so decide, in respect of all or certain shares, with
the issue of a certificate. Share certificates shall be issued
in such form as the Board of Directors may determine.
Registered shares shall be numbered in the manner to be
determined by the Board of Directors.

3.3.4 Changes in the Shareholding of the Company Since its Incorporation
The Company was founded with an authorised share capitalof 500,000 Netherlands Guilders (“NLG”) divided into
500 shares each having a nominal value of 1,000 NLG,
of which 100 were issued to Aerospatiale Matra on
29th December 1998. These shares were transferredto Dasa AG by way of notarised transfer certificate on
28th December 1999.

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The changes in the shareholding of the Company since its
initial public offering and listing are set forth below (for a
description of the changes in the issued share capital of theCompany since its incorporation, see “3.2.5 Changes in theIssued Share Capital Since Incorporation of the Company”).
Since July 2000, 4,293,746 EADS shares (representing 0.52%
of the share capital of EADS as of the date of this document)
have been distributed without payment of consideration

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4by the French State to certain former shareholders of
Aerospatiale Matra as a result of its privatisation in June
1999. The last distribution took place in July 2002.
In addition, in January 2001, the French State and Lagardère
sold on the market all of their EADS shares (respectively
7,500,000 and 16,709,333 EADS shares) other than their
Indirect EADS Shares (and, in the case of the French
State, other than the EADS shares to be distributed toformer shareholders of Aerospatiale Matra, see “— 3.3.2
Relationships with Principal Shareholders — Specific
Rights and Undertakings of the French State”) that theyheld as a result of the non-exercise of the over-allotment
option granted to the underwriters in the context of theinitial public offering carried out by the Company for the
purpose of its listing in July 2000 (including, in the case of
Lagardère, those shares other than its Indirect EADS Sharespurchased from the French Financial Institutions at the endof the exercise period of the over-allotment option).
On 8th July 2004, DaimlerChrysler announced that it
had placed on the market (in the context of a hedging
transaction) all of its EADS shares (22,227,478 EADS

shares), representing 2.73% of the capital and 2.78%of the EADS voting rights at that date, except for its
Indirect EADS Shares. On 20th July 2004, the Company
cancelled 5,686,682 of its own shares. Finally, during
2004 and until the date of this document, the Company
issued 490,609 shares following the exercise of options
granted to Group employees within the framework ofstock option plans granted to them in 2000, 2002 and 2003
(see “Part 1 / 2.3.3 Options Granted to Employees”).
Since the date of filing with the AMF of the Documentde Référence of the Company for the financial year 2004
(19th April 2005), the Company has not received any
threshold notification. To the knowledge of the Company,
none of the shareholders of the Company, other than as
disclosed in the chart below, hold more than 5% of the sharecapital or voting rights of the Company.
The Division of the issued shares and voting rightsof the Company before exercise of outstanding stock
options granted for the subscription of EADS shares(see “Part 1 / 2.3.3 Options Granted to Employees”) in
respect of the past three years is indicated in the table below:

Shareholders

Position as at 31st Dec. 2005
% of
% of
votingNumber ofcapitalrightssharesPosition as at 31st Dec. 2004
% of
% of
votingNumber ofcapitalrightssharesPosition as at 31st Dec. 2003
% of
% of
votingNumber ofcapitalrightssharesDC KG (EADS shares heldby Dasa AG until 2005)

29.89%

30.29%

244,447,704

30.20%

30.43%

244,447,704

30.07%

30.52%

244,447,704

SOGEADE

29.89%

30.29%

244,447,704

30.20%

30.43%

244,447,704

30.07%

30.52%

244,447,704

SEPI
Sub-total ContractualPartnership

5.47%

5.53%

44,690,871

5.52%

5.56%

44,690,871

5.50%

5.58%

44,690,871

65.25%

66.11%

533,586,279

65.92%

66.42%

533,586,279

65.64%

66.62%

533,586,279

-

-

-

-

-

-

2.73%

2.78%

22,227,478

Dasa AGFrench State

0.06%

0.06%

502,746*

0.06%

0.06%

502,746

0.06%

0.06%

502,746

Public33.39%

33.83% 273,061,396**

33.25%

33.52%

269,248,792

30.10%

30.54%

244,640,745

Own share buy-back***

1.30%

0.77%

—

6,241,252

1.47%

—

11,927,934

Total

—

10,592,709

100.00% 100.00% 817,743,130 100.00% 100.00% 809,579,069 100.00% 100.00% 812,885,182(*) Shares held by the French State following the distribution without payment of consideration of 4,293,746 shares to certain former shareholders of Aerospatiale Matra as a result of its privatisation inJune 1999. All the shares currently held by the French State will have to be sold on the market.

(**) Including EADS employees. As at 31st December 2005, EADS employees hold approximately 2.25% of the share capital and 2.28% of the voting rights.
(***) The EADS shares owned by the Company itself do not carry voting rights.

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4
To the knowledge of the Company, except as disclosed
previously in “3.3.2 Relationships with Principal
Shareholders”, there are no pledges over the shares of theCompany.

1,552 shareholders holding a total of 234,778,123 EADS
shares (including 3,254,107 shares held by Iberclear on
behalf of the Spanish markets and 20,842,757 shares held byClearstream on behalf of the German market).

The Company requested a disclosure of the identity ofthe beneficial holders of its shares held by identifiable
holders (“Titres au porteur identifiables”) holding morethan 10,000 shares each. The study, which was completed
on 31st December 2005, resulted in the identification of

The shareholding structure of the Company is as shown inthe diagram in “3.3.1 Shareholding Structure”.
For further information on changes to shareholdings since
31st December 2005, see also “1.2 Recent Developments”.

3.3.5 Persons Exercising Control over the Company
See “3.3.1 Shareholding Structure” and “3.3.2 Relationships with Principal Shareholders”.

3.3.6 Simplified Group Structure Chart
The following chart illustrates the simplified organisational
structure of EADS, comprising five Divisions and themain BUs. For ease of presentation, intermediate holding
companies have been omitted. The shaded boxes represent
Divisions (with respect to the MTA Division) or BUs (withrespect to Military Air Systems) that are part of the legal
entities referred to in parentheses. The coloured boxes
denote entities forming part of one of EADS’ five Divisions.
The non-coloured boxes denote entities that are holding

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companies or participations not within one of EADS’ five
Divisions and do not directly form part of the management
responsibility of a specified director. Socata, EADS ATR,ATR GIE, EFW and Sogerma Services are ‘Other Businesses’and do not form part of EADS’ five Divisions and EFW
and Sogerma Services are under the direct responsibility of
Gustav Humbert and EADS ATR, ATR GIE and Socata
are under the direct responsibility of Hans Peter Ring.
See “1.1.1 Overview – Organisation of EADS Businesses”.

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DEFENSE &SECURITY SYSTEMS

Arianespace

SPACE

Eurofighter

EADS Casa **MBDA

Secure Networks

Defense &Security Systems

Dornier

DADC

Military Air Systems(EADS Deutschland/ EADS Casa)

EADS ST N.V.

EADS Astrium N.V.

Paradigm Services

Paradigm Sec Com

EADS Space B.V.

EUROCOPTER

Eurocopter

EADS France

AIRBUS

SogermaServices ***EFW ***

AirbusMILITARY
TRANSPORTAIRCRAFTATR GIE ***EADS ATR ***Socata ***MTA Division(EADS CASA)

Airbus Military

EADS CASAEADS allocated EFW, Sogerma Services, ATR and Socata to “Other Businesses” to reflect EADS’ management responsibility and reporting structure. See 1.1.7 “Other Businesses”.

<<<(*) EADS holds its interest in Embraer and Dassault Aviation through EADS France.
(**)EADS’ interest in Eurofighter is jointly held by EADS Deutschland and EADS Casa.
(***) In June 2005, the former Aeronautics Division, which included the Eurocopter, ATR, EFW, Socata and Sogerma Services BUs, was dissolved and a new Eurocopter Division was created. In the adapted segment reporting following this change,

Irkut

EADS France *Dassault Aviation

Embraer

AviChina

PatriaEADS N.A. Defense

EADS Deutschland

EADS N.V.

(Simplified structure)

2

EADS North America

EADS Group main shareholdings

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3.3.7 Purchase by the Company of its Own Shares
3.3.7.1 Dutch Law and Information
on Share Buy-Back Programmes
Pursuant to Dutch insider trading laws and Commission
Regulation (EC) No. 2273/2003, the Company is subject toconditions for share buy-back programmes and disclosure
relating thereto, as described below.
Under Dutch Civil law, the Company may acquire its
own shares, subject to certain provisions of the law of
the Netherlands and the Articles of Association, if (i) the
shareholders’ equity less the payment required to makethe acquisition does not fall below the sum of paid-up andcalled portion of the share capital and any reserves requiredby the law of the Netherlands and (ii) the Company andits subsidiaries would not thereafter hold or hold in pledge
shares with an aggregate nominal value exceeding one-tenthof the Company’s issued share capital. Share acquisitions may
be effected by the Board of Directors only if the shareholders
in general meeting have authorised the Board of Directors toeffect such repurchases. Such authorisation may apply for a
maximum period of 18 months.
Shares held by the Company do not carry voting rights.
Usufructuaries and pledgees of shares that are held by theCompany are, however, not excluded from their voting rights
in such cases where the right of usufruct or pledge was vested
before the share was held by the Company.
The annual shareholders’ meeting of EADS held on
11th May 2005 authorised the Board of Directors, in a
resolution that renewed the previous authorisation givenby the annual shareholders’ meeting of EADS held on
6th May 2004, for a period of 18 months from the dateof such meeting, to repurchase shares of the Company, by
any means, including by derivative products, on any stock
exchange or otherwise, as long as, upon such repurchase, theCompany shall not hold more than 5% of the Company’s
issued share capital and at a price not less than the nominal
value and not more than the higher of the price of the last
independent trade and the highest current independent bid
on the trading venues where the purchase is carried out.
As of July 2005, the Company had purchased in aggregate
10,275,521 of its own shares, 1,336,358 of which were cancelled
on 25th July 2005.

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As of the date of this document, the Company had purchasedin aggregate 3,686,270 of its own shares. In addition,
11 million of repurchased shares are being lent to a top
ranking French financial institution within the frameworkof a securities lending agreement implemented as from10th April to 2nd May 2006 inclusive.
A resolution will be submitted to the annual shareholders’meeting of EADS called for 4th May 2006 in order tosupersede and replace the authorisation given by the annual
shareholders’ meeting held on 11th May 2005 and authorize
the Board of Directors, for a new period of 18 months asfrom the date of such meeting, to repurchase shares of theCompany, by any means, including by derivative products,
on any stock exchange or otherwise, as long as, upon such
repurchase, the Company shall not hold more than 10% of theCompany’s issued share capital and at a price not less than thenominal value and not more than the higher of the price of thelast independent trade and the highest current independent bid
on the trading venues where the purchase is carried out.

3.3.7.2 French Regulations
As a result of its listing for trading on a regulated market
in France, the Company is subject to the regulations
summarised below.
Pursuant to Articles 241-1 to 241-6 of the AMF General
Regulations, the purchase by a company of its own shares, inprinciple, requires the publication of the description of the sharebuy programme. Such description must published prior to theimplementation of the share buy-back programme.
Under Articles 631-1 to 631-4 of the AMF General
Regulations, a company may not trade in its own shares for the
purpose of manipulating the market. Articles 631-5 and 631-6
of the AMF General Regulations also define the conditions for
a company’s trading in its own shares to be valid.
After purchasing its own shares, the Company is required todisclose, within at least seven trading days, specified information
regarding such purchases by way of a release which is available
to the public on the websites of the Company and the AMF.
Additionally, the Company must notably report to the AMF, on
at least a monthly basis, information concerning the cancellationof such repurchased shares.
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3.3.7.3 German Regulations
As a foreign issuer, the Company is not subject to German rules
on trading in its own shares, which only apply to German issuers.

3.3.7.4 Spanish Regulations
As a foreign issuer, the Company does not have to comply
with the Spanish rules on trading in its own shares, which
only apply to Spanish issuers.
However, according to the Conduct Rules under the Spanish
Securities Act 24/1988 of 28th July 1988, the Company may
not trade in its own shares for the purpose of manipulating
the market.

3.3.7.5 Description of the Share Buy-Back
Programme to be Authorised by
the Annual General Shareholders’Meeting to be held on 4th May
2006
Pursuant to Articles 241-2-I and 241-3-III of the AMF
General Regulations, below is a description of the sharebuy-back programme (“descriptif du programme”) to be
implemented by the Company:• Date of the general shareholders’ meeting toauthorise the share buy-back programme to be held:
4th May 2006.
• Number of EADS shares and corresponding percentageof share capital held directly and indirectly by theCompany: 3,686,270 shares representing 0.45% of the sharecapital as at the date of this document.
• Intended use of the EADS shares held by theCompany as at the date of this document:– The reduction of share capital by cancellation of all or partof the repurchased shares, in particular to avoid the dilution
effect related to certain share capital increases for cash (i)reserved or to be reserved for employees of the EADS Group
and/or (ii) carried out or to be carried out in the context ofthe exercise of stock options granted or to be granted tocertain EADS Group employees: 3,636,270 shares; and– The owning of shares for the performance of obligations
related to employee share option programmes or otherallocations of shares to the EADS Group employees:
50,000 shares.
In addition, 11 million of repurchased shares are being lent to a
top ranking French financial institution within the frameworkof a securities lending agreement implemented as from10th April to 2nd May 2006 inclusive.
For information on shares held by EADS at the date of
the entry into force of EC Regulation n° 2273/2003 of
22nd December 2003 on 13th October 2004 and still held by
EADS at the date of this document, see below.
• Purposes of the share buy-back programme to be
implemented by the Company (by order of decreasingpriority, without any effect on the actual order ofuse of the buy-back authorisation, which shall be
determined according to needs and possibilities):– The reduction of share capital by cancellation of all orpart of the repurchased shares, in particular to avoid the
dilution effect related to certain share capital increases forcash (i) reserved or to be reserved for employees of the
EADS Group and/or (ii) carried out or to be carried out
in the context of the exercise of stock options granted or
to be granted to certain EADS Group employees, it being
understood that the repurchased shares shall not carry any
voting or dividend rights;– The owning of shares for the performance of obligations
related to:- (i) Debt financial instruments convertible into
EADS’ shares,- (ii) Employee share option programmes or otherallocations of shares to the EADS Group employees;– The purchase of shares for retention and subsequent use forexchange or payment in the framework of potential external
growth transactions; and– The liquidity or dynamism of the secondary market of the
EADS shares carried out pursuant to a liquidity agreement
to be entered into with an independent investment services
provider in compliance with the decision of the AMF dated
22nd March 2005 related to approval of liquidity agreements
recognised as market practices by the AMF.

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General Description of the Company and its Share Capital2

3.3 Shareholdings and Voting Rights

3
4• Procedure:– Maximum portion of the issued share capital to be repurchasedby the Company: 10%;– Maximum number of shares to be repurchased by
the Company upon authorisation by the generalshareholders’ meeting: the portion of 10% would represent
82,155,442 shares of the Company issued share capital
representing 821,554,421 shares as of the date of thisdocument. This maximum portion of 10% would represent
85,209,112 shares based on the 852,091,123 shares which
would make up the entire fully-diluted share capital of theCompany after the issue of 30,536,702 shares as a result of theexercise of stock options, which can still be exercised as of thedate of this document, which the board of directors decided to
grant to certain EADS Group employees in 2000, 2001, 2002,
2003, 2004 and 2005.
– Furthermore, the amounts to be paid in consideration for thepurchase of the treasury shares must not, in accordance withapplicable Dutch law, exceed the equity components whichare, per se, repayable or distributable to the shareholders.
“Equity components repayable or distributable to theshareholders” means the contribution premiums (in relation tocontributions in kind), the issue premiums (in relation to cash
contributions) and the other reserves as set out in the financial
statements of EADS, from which the repurchase price for thetreasury shares must be deducted.
As at 31st December 2005, the respective values of eachof these EADS’ equity components which are by nature
repayable or distributable to the shareholders were:€8,459,000,000 (contribution premiums), €256,000,000 (issuepremiums), €(386,000,000) (other reserves) and €(445,000,000)(treasury shares), i.e., an aggregate amount of €7,884,000,000.
EADS reserves the right to implement the share purchaseprogramme to its full extent and undertakes not to exceed,
directly or indirectly, the threshold of 10% of the issued sharecapital as well as the amount of €7,884,000,000 throughout
the term of the programme.
Finally, EADS undertakes to maintain at any time a sufficientnumber of shares in public hands to meet the thresholds ofEuronext Paris S.A.
– Shares may be bought or sold at any time (including during apublic offering) to the extent authorised by the stock exchange
regulations and by any means, including, without limitation,

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that the part of the programme which may be carried out bymeans of sale or purchase of block trades and including the useof options, combinations of derivative financial instrumentsor the issue of securities giving rights in any way to EADS
shares within the limits set out in this prospectus. Moreover,
EADS will use call options and swap that have been acquired
pursuant to the agreements it had entered into during theprevious share repurchase programme (see below) and does
not exclude the possibility of using a structure of transaction
similar to the one that had been used in the previous share
repurchase programme in order to repurchase its own shares.
The portion of shares repurchased by means of the use ofblock trades may amount to all the shares to be repurchased in
the context of this programme.
In addition, in the event that derivative financial instruments
are used, EADS shall ensure that it does not use mechanisms
which would significantly increase the volatility of the sharesin particular in the context of call options.
– Characteristics of the shares to be repurchased by theCompany upon authorisation by the general shareholders’meeting: shares of EADS, a company listed on the marché
Eurolist of Euronext Paris S.A., on the Amtlicher Handelmarket of the Frankfurt Securities Exchange (“Frankfurter
Wertpapierbörse”) and on the Madrid, Bilbao, Barcelona andValencia Stock Exchanges.
– DaimlerChrysler, DC KG, the French State, Lagardère, SEPI,SOGEADE and SOGEPA will retain all of their rights,
depending on the circumstances, to sell their available EADS
shares to EADS as part of this share buy-back programme.
– Maximum purchase price per share: €70.
• Term of the share buy-back programme: this share
repurchase programme shall be valid until 4th November 2007
inclusive, i.e., the date of expiry of the authorisation requested
from the Annual General Meeting of 4th May 2006. One of
the main aims of this EADS share repurchase programme islinked to the possible exercise by EADS Group employeesof stock options granted to them in 2000, 2001 and 2002, itis currently intended (i) that such a programme be continued
and renewed so that it expires on 9th August 2012
(8th August 2012 being the latest date upon which an
employee of the EADS Group may exercise all or part ofhis/her stock options granted in 2002) and (ii) that the EADS
annual general meeting be asked to renew the authorisations
until such date.
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General Description of the Company and its Share Capital2

3.3 Shareholdings and Voting Rights

34• Declaration by the Company of transactions carried out in relation to its own shares from 11th May 2005 to the dateof this document:
Percentage of share capital held directly and indirectly:

1.79%

Number of shares cancelled during the last 24 months:

7,023,040

Number of shares held in portfolio:

14,686,270*

Book value of portfolio:€m 277.9

Market value of portfolio:€m 470.25(*) 11 million of repurchased shares are being lent to a top ranking French financial institution within the framework of a securities lending agreement implemented as from 10th April to 2nd May
2006 inclusive.

The 1,843,814 EADS shares held by EADS at the dateof the entry into force of EC Regulation n° 2273/2003
of 22nd December 2003 on 13th October 2004 and still
held by EADS at the date of this document shall be, inorder of decreasing priority, either (i) cancelled pursuant
to a decision to be made, according to Dutch law, by
an EADS annual general meeting, to avoid the dilution
effect related to certain share capital increases for cash
carried out, during the fiscal year preceding such annual
general meeting, in the context of an EADS employee
share ownership programme and/or upon the exercise ofstock options granted to certain EADS Group employees,or (ii) kept in order to allow the performance of certain
obligations described within the aims of the share
repurchase programme referred to in this document, or(iii) used for exchange or payment in the framework of apotential external growth transaction, or (iv) sold in thecontext of a liquidity agreement in compliance with theprovisions of Instruction AMF No. 2005-07.
In addition, it is envisaged that the EADS Annual General
Meeting to be held on 4th May 2006 be requested todecide upon the cancellation of 6,656,970 repurchased
shares to avoid the dilution effect related to the sharecapital increases for cash carried out (i) in the context
of an EADS employee share ownership programme for
2005, the terms and characteristics of which are describedin a prospectus approved by the AMF on 4th May 2005
under number 05-353, in an amount of 50% of the sharesissued in such context (representing 969,155 shares) and(ii) upon the exercise in 2005 of stock options granted tocertain EADS Group employees in 2000, 2001 and 2002
in an amount of 100% of the shares issued in such context(representing 5,687,815 shares).
As of the date of this document, EADS has not enteredinto any liquidity agreement with an independent
investment services provider in the context of this share
repurchase programme.
In the context of this share repurchase programme, EADS
used derivative financial instruments (see below). These
derivative financial instruments (call options) have thecharacteristics set out in the table below.

Gross cumulative flows
Sales /
Transfers
Purchases(Exerciseof Option)

Number of Shares

9,781,376-

Average Maximum Maturity Date*
Average Price of the Transaction*-

Average Exercise Price*

-

Total

€203,126,671

Opening positions as of the date of this document
Opening Positionon the Purchase

Opening Positionon the Sale

Callpurchased
9,455,727
9th August
2012

Forwardsale

Callpurchased

Sale

-

-

-

-

-

-

-

-

(*) See “Part 1 / 2.3.3 Options Granted to Employees”.

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General Description of the Company and its Share Capital2

3.3 Shareholdings and Voting Rights

3
4
A share repurchase programme is being implemented since2004 in order to avoid the dilution effect related to theshare capital increases in cash which would result from theexercise of the stock options granted to certain employeesof the EADS Group in 2000, 2001 and 2002. This share
repurchase programme is implemented according to theneutral delta method as a means of repurchase in order
to compensate for the dilution effect of such stock
option plans as approved by the Board of Directors on
5th December 2002 and 10th October 2003.
In relation to this repurchase programme, EADS enteredinto the following agreements: (i) call options agreementsallowing EADS to acquire from a top ranking French banka number of EADS’ shares equal to the number of shares
to be created as a result of the exercise of stock options
granted to certain employees of the EADS Group in 2000,
2001 and 2002, and (ii) swap agreements for the periodical
adjustment of an amount in cash equal to the premiums
paid by EADS to a top ranking French bank pursuant tothe call options agreements, in accordance with the neutral
delta method.
Pursuant to these agreements, the call options which
EADS acquired from a top ranking French bank, have thesame terms (as to exercise prices, exercise dates, quantities
and expiry dates) as the stock options granted pursuant to
the 2000, 2001 and 2002 stock option plans. If the EADS
share price increases, the top ranking French bank must
buy the number of EADS shares which then derived fromthe increase in price according to the delta neutral method
formula. The total amount paid for these shares by the top
ranking French bank corresponds to the financial charge
borne by EADS, as determined from the variable amounts
in the swap agreement. On the other hand, in the case of areduction in the EADS share price, the top ranking Frenchbank must sell a number of EADS shares which derived
from the reduction in the share price according to theneutral delta method formula. The total amount received
by the top ranking French bank for the sale of these sharescorresponds to the financial revenues received by EADS
as determined from the variable amounts in the swap

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contract. Under these conditions, the final amount due asa result of the purchases of the call options is only knownat the time of the payment as determined from the lastvariable amount of the swap contract.
The structure of the transaction aims at covering off thedilution effect and the price risk for EADS linked to theexercise of stock options granted to certain EADS Group
employees in 2000, 2001 and 2002.
Within this context, EADS uses the internal control
procedures put in place by the Company in order toensure the reliability of the management of the risks
linked to these call options and swap. The procedures andtools for reporting have been set up, the responsibility
and powers have been delegated to the Finance andTreasury department of EADS which has responsibility
for all operational decisions and all activities within
its competence. The relevant competent bodies within
the organisation must be made aware of all substantial
transactions, activities and risks.
From an accounting standpoint, the call options qualify
as equity instruments, provided that they are physicallysettled in EADS’ own stock (IAS 32.16). The initialaccounting led to a reduction in cash balances for thepremiums paid and in stockholder’s equity for the same
corresponding amount. With each variable payment
made in application of the delta neutral method formula,
there is a corresponding impact on cash and on equity toreflect the cumulative premiums paid on the call options.
Upon exercise of the call options, EADS decreases
cash by the amount paid (strike price times number of
options) and deducts treasury shares from shareholder’sequity. Variations in the market value of the call options
are not recognised in the financial statements. All suchtransactions are therefore neutral on the income statement.
The top ranking French bank has contractually undertaken
to comply with the regulations in force in relation to
repurchase procedures applicable to EADS and in particular
the provisions of Articles 241-1 to 241-6 and 631-1 et seq.
of the General Regulations of the AMF.

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General Description of the Company and its Share Capital2

3.4 Dividends

34

3.4 Dividends
3.4.1 Dividends and Cash Distributions Paid Since the Incorporationof the Company
A cash distribution was paid in respect of the years 2000
and 2001 for a gross amount of €0.50 per share respectively
on 27th June 2001 and 28th June 2002. In respect of theyears 2002 and 2003, a cash distribution was paid for a grossamount of €0.30 per share and €0.40 per share respectively
paid on 12th June 2003 and 4th June 2004.
A cash distribution was paid in respect of the year 2004 for agross amount of €0.50 per share and paid on 8th June 2005.

3.4.2 Dividend Policy of EADSThe Board of Directors will recommend to the annual
shareholders’ meeting of EADS called for 4th May 2006 thelevel of attribution to reserves, and a cash distribution of agross amount of €0.65 per share with respect to the year 2005.
The amount of the proposed cash distribution, up forthe third consecutive year, results from the Company’s
performance during the year 2005. This distribution levelalso reflects Management’s confidence in the Company’s
future earnings as the strength of the commercial aviation
cycle – particularly due to Asian demand, and the increasing

profitability of defence and space activities suggest sustained
growth.
Looking forward, EADS’ Board of Directors has adapted its
distribution policy, reflecting the belief that continuity andgrowth of dividends are desirable shareholder objectives,
subject to factors such as EADS’ distribution capacity arisingfrom performance, its priorities for cash utilisation andfuture prospects. However, no assurance may be given in
respect of the proposed dividend levels for the years 2006
onwards. (See also “3.1.9 Allocation and Distribution ofIncome”).

3.4.3 Unclaimed Dividends
Pursuant to Article 31 of the Articles of Association, theclaim for payment of a dividend or other distribution
approved by the general meeting shall lapse five years after
the day on which such claim becomes due and payable.

The claim for payment of interim dividends shall lapse five
years after the day on which the claim for payment of thedividend against which the dividend could be distributed
becomes due and payable.

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General Description of the Company and its Share Capital2

3.4 Dividends

34
3.4.4 Taxation
The statements below represent a broad analysis of thepresent Netherlands tax laws. The description is limited tothe material tax implications for a holder of the Company’s
shares (the “Shares”) who is not, or is not treated as, aresident of the Netherlands for Netherlands tax purposes(a “Non-Resident Holder”). Certain categories of holders of
the Company’s shares may be subject to special rules which
are not addressed below and which may be substantiallydifferent from the general rules described below. Investors
who are in doubt as to their tax position in the Netherlands
and in their state of residence should consult theirprofessional advisors.

Withholding Tax on Dividends
In general, a dividend distributed by the Company in respectof Shares will be subject to a withholding tax imposed by
the Netherlands at a statutory rate of 25%. Dividends include
dividends in cash or in kind, deemed and constructive
dividends, repayment of paid-in capital not recognised ascapital for Netherlands dividend withholding tax purposes,
and liquidation proceeds in excess of the average paidin capital recognised as capital for Netherlands dividend
withholding tax purposes. Stock dividends paid out of theCompany’s paid-in-share premium, recognised as capital for
Netherlands dividend withholding tax purposes, will not be
subject to this withholding tax.
A Non-Resident Holder of Shares can be eligible for apartial or complete exemption or refund of all or a portionof the above withholding tax under a tax convention
that is in effect between the Netherlands and the NonResident Holder’s country of residence. The Netherlands
has concluded such conventions with the U.S., Canada,
Switzerland, Japan, almost all European Union member
states and other countries.

French, German, and Spanish Tax Treaties
Under the Convention between the Republic of France
and the Kingdom of the Netherlands for the Avoidanceof Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income and Capital, concluded

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16th March 1973, the Convention between the Federal
Republic of Germany and the Kingdom of the Netherlands
for the Avoidance of Double Taxation with respect toIncome and Capital and Various Other Taxes and for
the Regulation of Other Questions relating to Taxation,
concluded 16th June 1959 or the Convention between the
Government of the State of Spain and the Governmentof the Kingdom of the Netherlands for the Avoidanceof Double Taxation with respect to Taxes on Income andCapital, concluded 16th June 1971, dividends paid by
the Company to a Non Resident Holder that is a residentof France, Germany or Spain as defined in the respective
Convention are generally eligible for a reduction of the
25% Netherlands withholding tax to 15%, provided that thedividends are not attributable to an enterprise or part thereof
which is carried on through a permanent establishment orpermanent representative in the Netherlands.

Withholding Tax on Saleor Other Dispositions of Shares
Payments on the sale or other dispositions of Shares will
not be subject to Netherlands withholding tax, unless thesale or other disposition is, or is deemed to be, made to theCompany or a direct or indirect subsidiary of the Company.
A redemption or sale to the Company or a direct or indirect
subsidiary of the Company will be treated as a dividend
and will in principle be subject to the rules set forth in“Withholding Tax on Dividends” above.

Taxes on Income and Capital Gains
A Non-Resident Holder who receives dividends distributedby the Company on Shares or who realizes a gain fromthe sale or disposition of Shares, will not be subject toNetherlands taxation on income or capital gains unless:• such income or gain is attributable to an enterprise orpart thereof which is either effectively managed in
the Netherlands or carried on through a permanentestablishment (“vaste inrichting”) or permanent
representative (“vaste vertegenwoordiger”) in the
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General Description of the Company and its Share Capital2

3.4 Dividends

34• the Non-Resident Holder is not an individual andthe Non-Resident Holder has, directly or indirectly, a
substantial interest (“aanmerkelijk belang”) or a deemed
substantial interest in the Company and such interest does
not form part of the assets of an enterprise, orValue-Added Tax• the Non-Resident Holder is an individual and (i) the NonResident Holder has, directly or indirectly, a substantial
interest (“aanmerkelijk belang”) or a deemed substantial
interest in the Company and such interest does not form
part of the assets of an enterprise, or (ii) such income orgain qualifies as income from miscellaneous activities(“belastbaar resultaat uit verage werkzaamheden”) in the
Netherlands as defined in the Dutch Income Tax Act 2001(“Wet inkomstenbelasting 2001”).

Other Taxes and Duties

Generally, a Non-Resident Holder of Shares will not havea substantial interest in the Company’s share capital, unlessthe Non-Resident Holder, alone or together with certain
related persons holds, jointly or severally and directly or
indirectly, Shares in the Company, or a right to acquire
Shares in the Company representing 5% or more of theCompany’s total issued and outstanding share capital or any
class thereof. A deemed substantial interest exists if all orpart of a substantial interest has been or is deemed to havebeen disposed of with application of a roll-over relief.

No Netherlands value-added tax is imposed on dividends on
the Shares or on the transfer of the Shares.

There is no Dutch registration tax, transfer tax, capital tax,
stamp duty or any other similar tax or duty other thancourt fees payable in the Netherlands in respect of or inconnection with the execution, delivery and/or enforcement
by legal proceedings (including any foreign judgment in the
courts of the Netherlands) with respect to the dividends
relating to the Shares or on the transfer of the Shares.

Residence
A Non-Resident Holder will not become resident, or bedeemed to be resident, in the Netherlands solely as a resultof holding a Share or of the execution, performance, delivery
and/or enforcement of rights in respect of the Shares.

Gift or Inheritance Taxes
Netherlands gift or inheritance taxes will not be levied on
the transfer of Shares by way of gift, or upon the death of a
Non-Resident Holder, unless:• the transfer is made by or on behalf of a person who, at
the time of the gift or death, is or is deemed to be resident
in the Netherlands; or• the Shares are attributable to an enterprise or part thereof
that is either effectively managed in the Netherlands
or carried on through a permanent establishment or apermanent representative in the Netherlands.

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General Description of the Company and its Share Capital2

3.5 Annual Securities Disclosure Report34

3.5 Annual Securities Disclosure Report
The list of the following announcements comprises the regulatory disclosures relating to price sensitive information which canbe accessed through the Company’s website at www.eads.com:
First Quarter 2005 Results press release
First Half 2005 Results press release
Third Quarter 2005 Results press release2005 Annual Results press release
Press Release – “DaimlerChrysler and Lagardère reduced their respective stake in EADS by 7.5%”

9th May 2005
27th July 2005
9th November 2005
8th March 2006
4th April 2006

In addition, EADS publishes announcements made in the ordinary course of business which are also available through its
website at www.eads.com.
This section constitutes the annual securities disclosure report in application Article 10 of the EC Directive 2003/71.

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Entity Responsible for
the Registration Document

4.1 Entity Responsible
for the Registration Document

p. 134

4.2 Statement of the Entity
Responsible for theRegistration Document

p. 1344.3 Information Policyp. 135

4.4 Undertakings of the Company
Regarding Information

p. 135

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Entity Responsible for the Registration Document2

4.2 Statement of the Entity Responsible for the Registration Document

34

4.1 Entity Responsible
for the Registration Document
EADS.

4.2 Statement of the Entity Responsible
for the Registration Document
The Company declares that, having taken all reasonable care to ensure that such is the case, the information contained in theRegistration Document is, to the best of the Company’s knowledge, in accordance with the facts and contains no omission
likely to affect its import.
EADS represented by:Thomas EndersNoël Forgeard

Chief Executive Officer

Chief Executive Officer

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Entity Responsible for the Registration Document2

4.3 Information Policy

34

4.3 Information Policy

EADS
81663 Munich
Germany
Telephone: + 49 89 607 34113
Fax: + 49 89 607 34110
E-mail: ir@eads.com

Association and any reports, letters, other documents,
historical financial information, valuations or statements
prepared by any expert at EADS’ request that are included
or referred to herein, as well as EADS’ historical financial
information and historical financial information with respect
to EADS’ subsidiary undertakings for 2005 and 2004,
may be inspected at EADS’ registered office at: European
Aeronautic Defence and Space Company EADS N.V.,
Le Carré, Beechavenue 130-132, 1119 PR, Schiphol-Rijk,
the Netherlands, Seat (statutaire zetel): Amsterdam,
Tel: +31 20 655 48 00.

A website, www.eads.com, provides a wide range of
information on the Company, including the Boardof Directors Report. Additionally, for the life of this
Registration Document, copies of EADS’s Articles ofSpecial toll-free hotlines are available to shareholders inFrance (0 800 01 2001), Germany (00 800 00 02 2002) andSpain (00 800 00 02 2002). An e-mail box is dedicated toshareholders’ messages: ir@eads.com.

Details of the person responsible for information:
Mr. Pierre de Bausset
Senior Vice President Investor Relations and Financial
Communication

4.4 Undertakings of the Company
Regarding Information
Given the fact that the shares of the Company are listedon the Marché Eurolist of Euronext Paris SA (the “Paris
Stock Exchange”), in amtlicher Markt (in the sub-segment
Prime Standard) on the Frankfurter Wertpapierbörse (the“Frankfurt Stock Exchange”) and on the Madrid, Bilbao,
Barcelona and Valencia Stock Exchanges (the “Spanish

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Stock Exchanges”), the Company is subject to certain
laws and regulations applicable in France, Germany andSpain in relation to information, the main ones of which
are summarised in “3.1.3 Governing Law — Dutch
Regulations”.

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Designed & Produced by:

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The complete EADS Annual Report Suite2005 consists of:Annual Review
2005 (1)Financial Statements andCorporate Governance2005 (2)Business, Legal andCorporate Responsibility
2005 (3)(available on request)The online version of the Annual
Report Suite 2005 is available atwww.reports.eads.com

Cover image
Airbus A380

European Aeronautic Defence
and Space Company EADS N.V.
Le Carré, Beechavenue 130–132
1119 PR Schiphol-Rijk
The Netherlands

This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.

3

www.eads.com

In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France

European Aeronautic Defence and Space Company EADS N.V.

In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain

Business,
Legal andCorporate
Responsibility
2005

Business, Legal and Corporate Responsibility 2005