Use these links to rapidly review the documentTable of contents PART I PART II PART III Item 17: Financial Statements

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

|o  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                   
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|OR
|ý  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006                                                 
|OR
|o  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                         
|OR
|o  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company
report 
For the transition period
from  to

COMMISSION FILE NUMBER 0-28578

DASSAULT SYSTÈMES (Exact name of Registrant as specified in its charter)

FRANCE(Jurisdiction of incorporation or organization)

9, quai Marcel Dassault
B.P. 310, 92156 Suresnes Cedex, France
(33-1) 40-99-40-99(Address of principal executive offices)

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

|Title of each class                                                                        | Name of each exchange on which registered
|------------------------------------------------------------------------------------------ | -----------------------------------------
|American Depositary shares, each representing
one common share, nominal value €1 per share | The NASDAQ Global Market                 
|Common Stock, nominal value €1 per share                                                   | The NASDAQ Global Market                 

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

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

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual Report.

Common Stock, nominal value €1 per share as of December 31, 2006: 115,770,290

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.   ý Yes    o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.   o Yes    ý No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):   ý Large accelerated filer    o Accelerated
filer    o Non-accelerated filer

Indicate by check mark which financial statement item the registrant has elected to
follow.   o Item 17    ý Item 18

If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).   o Yes    ý No

3

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TABLE OF CONTENTS



|Table of contents                      |  | 4                                                                           
|-------------------------------------- |  | ----------------------------------------------------------------------------
|Terminology Used in this Annual Report |  | 5                                                                           
|Our Business                           |  | 5                                                                           
|Our Principal Companies and Brands     |  | 5                                                                           
|Our Technology                         |  | 5                                                                           
|Part I                                 |  | 6                                                                           
|Item 1:                                |  | Identity of Directors, Senior Management and Advisers                       
|Item 2:                                |  | Offer Statistics and Expected Timetable                                     
|Item 3:                                |  | Key Information                                                             
|Item 4:                                |  | Information on the Company                                                  
|Item 4A:                               |  | Unresolved Staff Comments                                                   
|Item 5:                                |  | Operating and Financial Review and Prospects                                
|Item 6:                                |  | Directors, Senior Management and Employees                                  
|Item 7:                                |  | Major Shareholders and Related Party Transactions                           
|Item 8:                                |  | Financial Information                                                       
|Item 9:                                |  | The Offer and Listing                                                       
|Item 10:                               |  | Additional Information                                                      
|Item 11:                               |  | Quantitative and Qualitative Disclosures About Market Risk                  
|Item 12:                               |  | Description of Securities Other than Equity Securities                      
|Part II                                |  | 89                                                                          
|Item 13:                               |  | Defaults, Dividend Arrearages and Delinquencies                             
|Item 14:                               |  | Material Modifications to the Rights of Security Holders and Use of Proceeds
|Item 15:                               |  | Controls and Procedures                                                     
|Item 16:                               |  | [RESERVED]                                                                  
|Item 16A:                              |  | Audit Committee Financial Expert                                            
|Item 16B:                              |  | Code of Ethics                                                              
|Item 16C:                              |  | Principal Accountants Fees and Services                                     
|Item 16D:                              |  | Exemptions from the Listing Standards for Audit Committees                  
|Item 16E:                              |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers      
|Part III                               |  | 94                                                                          
|Item 17:                               |  | Financial Statements                                                        
|Item 18:                               |  | Financial Statements                                                        
|Item 19:                               |  | Exhibits                                                                    

|Report of Independent Registered Public Accounting Firm                                            |  | F-1
|-------------------------------------------------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firms                                           |  | F-2
|Consolidated Balance Sheets                                                                        |  | F-3
|Consolidated Statements of Income                                                                  |  | F-4
|Consolidated Statements of Cash Flows                                                              |  | F-5
|Consolidated Statements of Shareholders' Equity                                                    |  | F-7
|Notes to the Consolidated Financial Statements for the Year Ended December 31, 2006, 2005 and 2004 |  | F-9

4DASSAULT
SYSTÈMESForm 20-F 2006

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Terminology Used in this Annual Report

Our Business

We
currently organize our business and market our products and services according to two types of applications: "Product Lifecycle Management", or "PLM", and "Mainstream 3D". We describe them
in "Item 4B. Business Overview  Summary".

"Process-centric"
and "design-centric" are our two business segments:

Our Principal Companies and Brands

|Companies                                   |                                                                                                             | Main Brands |           
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----------- | ----------
|Product Lifecycle Management (PLM) business |                                                                                                             |             |           
|                                            | "Dassault Systèmes" or "DS": our parent company Dassault Systèmes S.A. (the "Company") and its subsidiaries |             | CATIA     
|                                            | "Dassault Systèmes Simulia Corp." (formerly, Abaqus, Inc.)                                                  |             | SIMULIA   
|                                            | "Delmia", which refers to Delmia Corp.                                                                      |             | DELMIA    
|                                            | "Dassault Systèmes Americas Corp." (DSAC) (formerly, Enovia Corp.)                                          |             | ENOVIA    
|                                            | "MatrixOne", which refers to MatrixOne, Inc.                                                                |             | ENOVIA    
|Mainstream 3D business                      |                                                                                                             |             |           
|                                            | "SolidWorks", which refers to SolidWorks Corporation                                                        |             | SolidWorks

You can find descriptions of our main brands in "Item 4.B Business Overview  Market Structure and Brands".

Our Technology

"CAA
V5": Component application architecture for our V5 platform, described in "Item 4B: Business Overview  Key Business Strengths" under "We have
an extended enterprise model".

"DMU":
Digital mock-up, described in "Item 4A: History and Development of the Company" under "1981 through 2005".

"PDM"
(Product Data Management) products refers collectively to our products under the ENOVIA brand.

"PPR":
Product, process and resources, described in "Item 4B: Business Overview  Technology, Research and Product Development" under
"Overview  Version 5 technology".

"SOA":
Service-Oriented Architecture, described in "Item 4B: Business Overview  Technology, Research and Product Development" under "Overview".

"V5"
(Version 5): our current generation software platform, described in "Item 4B: Business Overview  Technology, Research and Product Development" under
"Overview  Version 5 technology".

"3D
XML": 3D Extensible Markup Language, described in "Item 4B: Business Overview  Technology, Research and Product Development" under
"Overview  Openness of our software solutions".

DASSAULT SYSTÈMESForm 20-F
20065

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PART I



|                                                                       |  |   
|---------------------------------------------------------------------- |  | --
|Item 1:    Identity of Directors, Senior Management and Advisers       |  | 7 
|Item 2:    Offer Statistics and Expected Timetable                     |  | 7 
|Item 3:    Key Information                                             |  | 8 
|A.  Selected Financial Data                                            |  | 8 
|B.  Capitalization and Indebtedness                                    |  | 10
|C.  Reasons for the Offer and Use of Proceeds                          |  | 10
|D.  Risk Factors                                                       |  | 10
|Item 4:    Information on the Company                                  |  | 16
|A.  History and Development of the Company                             |  | 16
|B.  Business Overview                                                  |  | 17
|C.  Organizational Structure                                           |  | 30
|D.  Property, Plant and Equipment                                      |  | 31
|Item 4A:    Unresolved Staff Comments                                  |  | 31
|Item 5:    Operating and Financial Review and Prospects                |  | 32
|A.  Operating Results                                                  |  | 32
|B.  Liquidity and Capital Resources                                    |  | 47
|C.  Research and Development, Patents and Licenses                     |  | 47
|D.  Trend Information                                                  |  | 48
|E.  Off-Balance Sheet Arrangements                                     |  | 51
|F.   Tabular Disclosure of Contractual Obligations                     |  | 51
|Item 6:    Directors, Senior Management and Employees                  |  | 52
|A.  Directors and Senior Management                                    |  | 52
|B.  Compensation                                                       |  | 59
|C.  Board Practices                                                    |  | 65
|D.  Employees                                                          |  | 65
|E.  Share Ownership                                                    |  | 65
|Item 7:    Major Shareholders and Related Party Transactions           |  | 66
|A.  Major Shareholders                                                 |  | 66
|B.  Related Party Transactions                                         |  | 68
|C.  Interests of Experts and Counsel                                   |  | 68
|Item 8:    Financial Information                                       |  | 69
|A.  Consolidated Statements and Other Financial Information            |  | 69
|B.  Significant Changes                                                |  | 70
|Item 9:    The Offer and Listing                                       |  | 71
|A.  Listing Details                                                    |  | 71
|B.  Plan of Distribution                                               |  | 73
|C.  Markets                                                            |  | 73
|D.  Selling Shareholders                                               |  | 73
|E.  Dilution                                                           |  | 73
|F.   Expenses of the Issue                                             |  | 73
|Item 10:    Additional Information                                     |  | 74
|A.  Share Capital                                                      |  | 74
|B.  Memorandum and Articles of Association                             |  | 74
|C.  Material Contracts                                                 |  | 80
|D.  Exchange Controls                                                  |  | 80
|E.  Taxation                                                           |  | 80
|F.   Dividends and Paying Agents                                       |  | 84
|G.  Statements by Experts                                              |  | 85
|H.  Documents on Display                                               |  | 85
|I.    Subsidiary Information                                           |  | 85
|Item 11:    Quantitative and Qualitative Disclosures About Market Risk |  | 86
|Item 12:    Description of Securities Other than Equity Securities     |  | 88

6DASSAULT
SYSTÈMESForm 20-F 2006

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Item 1: Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2: Offer Statistics and Expected Timetable

Not applicable.

DASSAULT SYSTÈMESForm 20-F
20067

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Item 3: Key Information

A. Selected Financial Data

The following selected consolidated financial data with respect to each of the years in the five-year period ended December 31, 2006, are
derived from our audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles.

|                                         |  | Year ended December 31, |          |  
|---------------------------------------- |  | ----------------------- | -------- | -
|
|Consolidated Statement of Income Data(2) |  |                         |          |  
|Software revenue(3)                      |  | $                       | 1,271.3  |  
|Services and other revenue               |  |                         | 257.0    |  
|                                         |  |                         |          |  
|Total revenue                            |  |                         | 1,528.3  |  
|                                         |  |                         |          |  
|Cost of software revenue                 |  |                         | (65.5    | )
|Cost of services and other revenue       |  |                         | (189.7   | )
|Research and development                 |  |                         | (395.9   | )
|Marketing and sales                      |  |                         | (390.7   | )
|General and administration               |  |                         | (110.5   | )
|Amortization of acquired intangibles     |  |                         | (51.5    | )
|                                         |  |                         |          |  
|Total operating expenses                 |  |                         | (1,203.8 | )
|                                         |  |                         |          |  
|Operating income                         |  |                         | 324.5    |  
|                                         |  |                         |          |  
|As a percentage of total revenue         |  |                         | 21.2%    |  
|Financial revenue and other, net         |  |                         | 4.8      |  
|Income from equity investees             |  |                         | 1.3      |  
|                                         |  |                         |          |  
|Income before income taxes               |  |                         | 330.6    |  
|                                         |  |                         |          |  
|Income tax expense                       |  |                         | (93.5    | )
|Minority interest                        |  |                         | 0.1      |  
|Net income                               |  |                         | $237.2   |  
|                                         |  |                         |          |  
|As a percentage of total revenue         |  |                         | 15.5%    |  
|Basic net income per share               |  | $                       | 2.06     |  
|Diluted net income per share             |  | $                       | 1.99     |  
|Average number of shares                 |  |                         | 115.2    |  
|Diluted number of shares                 |  |                         | 119.4    |  
|                                         |  |                         |          |  
|Dividends per share(7)                   |  | $                       | 0.58     |  

8DASSAULT
SYSTÈMESForm 20-F 2006

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|                                                  |  | Year ended December 31, |        
|------------------------------------------------- |  | ----------------------- | -------
|
|Supplemental Non-GAAP Statement of Income Data(4) |  |                         |        
|Revenue                                           |  | $                       | 1,554.3
|Operating income                                  |  |                         | 417.4  
|As a percentage of total revenue                  |  |                         | 26.9%  
|Net income                                        |  |                         | 287.1  
|                                                  |  |                         |        
|Diluted net income per share                      |  |                         | 2.42   
|                                                  |  |                         |        

|
|

|                                                                      |  | December 31, |        
|--------------------------------------------------------------------- |  | ------------ | -------
|
|Consolidated Balance Sheet Data                                       |  |              |        
|Cash, cash equivalents and short-term investments                     |  | $            | 606.2  
|Net working capital(5)                                                |  |              | 615.6  
|Total assets                                                          |  |              | 2,450.0
|Long-term and short-term debt                                         |  |              | 264.0  
|Long-term obligations and current portion of long-term obligations(6) |  |              | 192.5  
|Capital stock                                                         |  |              | 152.8  
|                                                                      |  |              |        
|Shareholders' equity                                                  |  |              | 1,465.3

EXCHANGE RATE INFORMATION

We publish our consolidated financial statements in euro. Solely for the convenience of the reader, this report contains translations of certain euro amounts
into U.S. dollars at specified rates. Unless otherwise stated, the translations of euro into U.S. dollars have been made at the rate of $1.3197 per €1.00, which was the
noon buying rate for euro in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") on
December 31, 2006. These translations should not be construed as representations that the euro amounts represent such U.S. dollar amounts or could be converted into U.S. dollars
at the rates indicated or at any other rate.

DASSAULT SYSTÈMESForm 20-F
20069

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The
following table sets forth, for the periods indicated, certain information concerning the exchange rates based on the Noon Buying Rate expressed as U.S. dollar per euro. Such rates are
provided solely for the convenience of the reader and are not necessarily the rates used by us in the preparation of our consolidated financial statements.

EXCHANGE RATES

|                          |  | Period end |  | Average(1) |  | High |  | Low  | 
|------------------------- |  | ---------- |  | ---------- |  | ---- |  | ---- | 
|2002                      |  | 1.05       |  | 0.95       |  | 1.05 |  | 0.86 | 
|2003                      |  | 1.26       |  | 1.14       |  | 1.26 |  | 1.04 | 
|2004                      |  | 1.35       |  | 1.25       |  | 1.36 |  | 1.18 | 
|2005                      |  | 1.18       |  | 1.24       |  | 1.35 |  | 1.17 | 
|2006                      |  | 1.32       |  | 1.27       |  | 1.33 |  | 1.19 | 
|November 2006             |  | 1.33       |  | 1.29       |  | 1.33 |  | 1.27 | 
|December 2006             |  | 1.32       |  | 1.32       |  | 1.33 |  | 1.31 | 
|January 2007              |  | 1.30       |  | 1.30       |  | 1.33 |  | 1.29 | 
|February 2007             |  | 1.32       |  | 1.31       |  | 1.32 |  | 1.29 | 
|March 2007                |  | 1.34       |  | 1.32       |  | 1.34 |  | 1.31 | 
|April 2007                |  | 1.37       |  | 1.35       |  | 1.37 |  | 1.34 | 
|May 2007 (through May 24) |  | 1.36       |  | 1.35       |  | 1.36 |  | 1.34 | 

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

You should carefully consider the risks described below and the other information in this report. Depending on the extent to which any
of the following risks materializes, our business, financial condition, cash flow or results of operations could suffer and you could lose all or part of your investment in our shares. The risks
described below are not the only ones we face.

Our revenue and earnings depend on corporate spending on information technology infrastructure, which may decrease during periods of weak general economic and business
conditions or due to significant fluctuations in currency exchange rates.

The
deployment of a Product Lifecycle Management (PLM) solution may represent a large portion of a customer's investments in software technology. Decisions to make such an investment are impacted by
the economic environments in which our customers operate. Any important business slowdown or recession, or a significant fluctuation in currency exchange rates, particularly as between the
U.S. dollar and the euro, could lead our customers to reduce, defer or cancel their investments in information technology. A decline in such investments could cause our revenue, net earnings
and cash flows to decrease, or to grow more slowly, whether on an annual or quarterly basis.

Due
to their specific investment cycles and sensitivities to short-term economic conditions, the various industrial sectors we serve have different degrees of exposure to declines in
corporate investment, both in terms of intensity and timing. Although these differences have in recent years generally assisted us in mitigating the potential negative impact of downturns in any
particular industry, significant downcycles in several key industrial sectors might in the future occur over the same period, which could cause our revenues, net income and cash flow for such period
to decline.

10DASSAULT
SYSTÈMESForm 20-F 2006

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As a result of our historical approach to commercializing our PLM products, a substantial portion of our total revenue results from a long-standing marketing and
distribution agreement with IBM. Recently, we have begun to assume much
greater responsibility for both indirect and direct sales channels for our PLM products. If we do not effectively address the resulting management and commercial challenges, our revenue and ability to
grow could be negatively impacted.

Pursuant
to our long-standing, mutually non-exclusive agreement with IBM, IBM markets and distributes a substantial portion of our PLM products worldwide. According to the
terms of the agreement, we license these products to IBM, who then sub-licenses them to end-users. Revenue generated through our agreement with IBM represented 45%, 52% and 56%
of our total revenue in 2006, 2005 and 2004, respectively. IBM has substantial discretion and control over such marketing and distribution, including the financial resources devoted to marketing and
sales and the compensation of its sales personnel. A decision by IBM to cease, freeze or reduce substantially its marketing and distribution efforts for our PLM products would have an immediate and
material adverse effect on our financial condition and results of operations.

Starting
in 2005, we began to significantly expand our role in marketing and distributing our PLM products through the progressive transitioning from IBM to us of full responsibility for the indirect
PLM sales channels:

By
2008, we expect to have responsibility for PLM indirect sales channels on a global basis, while IBM will continue to market our PLM products, including DELMIA and ENOVIA MatrixOne, to large
enterprises. See "Item 4B: Business Overview  Sales and Marketing". We must ensure market understanding and acceptance of our evolving role to avoid sales
channel conflict, as well as to maintain an effective relationship with IBM. If IBM and we do not properly manage the transition as planned by the new agreement, our revenue and ability to grow may be
negatively affected.

In
order to support our expanding marketing and sales initiatives, we are taking steps to substantially strengthen our global PLM marketing and sales forces and develop the needed tools and processes.
If we do not effectively meet these management and commercial challenges, future growth in revenues may be adversely affected, we may lose clients and market opportunities and we may incur substantial
costs and inefficiencies.

IBM
also is not prohibited from competing with us, marketing and distributing competing PLM software applications, providing services around competing PLM software applications, or acquiring or
forming a strategic alliance with one or more of our competitors.

If we do not maintain and improve the technological strength of our products, demand for them may be reduced.

PLM
solutions are characterized by the use of rapidly changing technologies and frequent new product introductions or enhancements. These solutions must address complex engineering needs in various
areas of product design and manufacturing, and must also meet sophisticated process requirements in the areas of change management, industry collaboration and cross enterprise work.

As
a result, our success is highly dependent upon our ability:

We
commit substantial resources to the development of new offerings, but we continue to face the challenge of increasingly complex integration of our products' different functionalities to address our
customers' PLM requirements. As a result, longer and more difficult industrialization work is required for new releases and offerings. In addition, if we are not successful in anticipating
technological leaps and developing new solutions and services that address our customers' increasingly sophisticated expectations, demand for our products could decline, and our results of operations
and financial condition could be negatively affected.

DASSAULT SYSTÈMESForm 20-F
200611

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Errors or defects in our products could cause us to incur additional costs, lose revenue and business opportunities and expose us to potential
liability.

Sophisticated
software often contains errors, defects or other performance problems when first introduced or when new versions or enhancements are released. If errors or defects are discovered in our
current or future products, we may not be able to correct them in a timely manner, or provide an adequate response to our customers. We may therefore need to expend significant financial, technical
and management resources, or divert some of our development resources, in order to resolve or work around those defects. We may also experience an increase in our service and warranty costs.

Errors,
defects or other performance problems in our products may also result in the loss of, or delay in, the market acceptance of our products or postponement of customer deployment. Such
difficulties could also cause us to lose customers and, particularly in the case of our largest customers, the potentially substantial associated revenues which would have been generated by our sales
to companies participating in the customer's supply chain. Technical problems, or the loss of a customer with a particularly important global reputation, could also damage our own business reputation
and cause us to lose new business opportunities.

Because
errors, defects or other performance problems in our software could result in significant financial or other damage to our customers, our customers could pursue claims against us. A product
liability claim brought against us, even if not successful, would likely be time consuming for our management and costly to defend and could adversely affect our marketing efforts.

Any
insurance we carry may only partially offset the cost of correcting significant errors.

Currency fluctuations may significantly affect our results of operations.

Our
results of operations have been, and may in the future be, significantly affected by changes in exchange rates. Exchange rate fluctuations can impact the revenues and expenses recorded in our
statement of income upon translation of other currencies into euro. Although we currently benefit from a natural coverage of most of our exposure to U.S. dollars, our revenues denominated in
Japanese Yen, Korean Won and British Pound substantially outweigh our expenditures in these currencies, which exposes our financial results to a potential depreciation in their value relative to
the euro.

Our
net financial revenue can also be significantly affected by changes in exchange rates between the time we recognize revenue and receive cash payments or record and pay an expense. Any such
differences are accounted for in the "Exchange gain/loss" portion of our financial revenue.

See
"Item 11: Quantitative and Qualitative Disclosures About Market Risk  Foreign currency exchange risk."

Since
market growth rates for our software applications and the revenue growth rates of our significant competitors are computed in U.S. dollars, such growth rates from period to period may not
be comparable to our euro-computed revenue growth rates for the same periods.

Claims that our products, or any third-party components embedded in our products, infringe the proprietary rights of others could harm our sales and increase
our costs.

Third
parties, including our competitors, may own or obtain copyrights, patents or other proprietary rights that could restrict our ability to further develop, use, or sell our own product portfolio.
We have received in the past, and may in the future receive, communications alleging that our products infringe the patents and other intellectual property rights of others. Such a claim could cause
us to incur substantial costs to defend ourselves in any litigation which may be brought, regardless of its merits. If we fail to prevail in intellectual property litigation, we may be
required to:

In
addition, we embed in our products an increasing number of third party components selected either by us or by companies which we have acquired. Although we have implemented strict approval
processes to certify the originality of third party components and verify any corresponding licensing terms, the same approval processes may not have been adopted by companies which we acquire. As a
result, the use of third party embedded components in our products exposes us to the risk that a third party will claim that the embedded components infringe their intellectual property rights.

If
any of the above situations were to occur for a significant product, it could have a material adverse impact on our financial condition and results of operations.

12DASSAULT
SYSTÈMESForm 20-F 2006

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The regulatory environments in which we operate have become increasingly complex, including with respect to accounting standards and internal controls.

Due
to the global reach of our operations and our listings on French and U.S. stock exchanges, we are subject to complex, overlapping and rapidly evolving laws, regulations and requirements,
including with respect to our financial statements, which are prepared according to both International Financial Reporting Standards (IFRS) and U.S. GAAP. The laws and regulations to which we
are subject have become increasingly complex and apply to a wide variety of areas, including corporate governance and internal controls. The cost of compliance and the failure or suspected failure to
comply with any of these regulations may result in increased regulatory scrutiny through inquiries or investigations, adverse media attention and the possible distraction of management time as well as
in penalties, fines, disciplinary actions, an increase to our litigation risk or limits on our business operations. A number of these adverse consequences could occur even if it is ultimately
determined that there has been no failure to comply. There can be no assurance that additional regulation in any of the jurisdictions in which we now, or in the future may, operate would not
significantly increase the cost of regulatory compliance.

If we fail to adequately protect our intellectual property, our competitive market position could be harmed.

Our
success is heavily dependent upon our proprietary software technology. We rely on a combination of copyright, patent, trademark, trade secret law and contractual restrictions to protect the
proprietary aspects of our technology. These legal protections afford only limited protection. In addition, effective copyright, patent, trademark and trade secret protection may be unavailable or
limited in certain countries where intellectual property rights are less protected than in the United States or Western Europe, or as a result of the prior rights of third parties.

If
our strategies for protecting our intellectual property fail to achieve adequate protection, third parties may develop similar technology and cause a reduction in our software revenues.
Furthermore, although we enter into confidentiality and license agreements with our employees, distributors, customers and potential customers, and limit access to and carefully control the
distribution of our software, documentation and other proprietary information, the measures we take may not be adequate to deter misappropriation or independent third party development of
our technology.

In
addition, like most of our competitors, we face an increasing level of piracy of our successful products, both by individuals and by groups acting worldwide, which could potentially affect our
growth in specific markets.

Litigation
may be necessary to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Any litigation could result in substantial costs
and diversion of our resources and could seriously harm our operating results. We may not prevail in any such litigation and our intellectual property rights may be found invalid or unenforceable.

We expect our quarterly operating results to continue to fluctuate, which could cause our stock price to fluctuate.

Our
quarterly operating results have varied significantly and are likely to vary significantly in the future, depending on factors such as:

A
substantial portion of our orders and shipments typically occur in the last month of each quarter and therefore, if any delay occurs in the timing of the order, we may experience significant
quarterly fluctuations in our results of operations. Additionally, as is typical in the software applications industry, we have historically experienced our highest licensing activity for the year
during the month of December. Delays in orders and shipments can affect our revenue and income.

The
trading price of our shares and ADSs may be subject to wide fluctuations in response to quarterly variations in our operating results and the operating results of other software applications
developers in our markets. In addition, capital markets around the world experience from time to time extreme price and volume fluctuations, which may particularly affect the market prices for many
high-technology companies which have become highly volatile.

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Because
we rely on IBM to provide us information as to the level of a significant portion of our revenue, we generally are not in a position to know our revenue for any particular period within the
same timeframe as would otherwise be possible. As a result, we may not be able to confirm or adjust expectations as to sales achieved for a particular period as quickly as we otherwise could, or
within the same timeframe as some other companies in our industry.

If we are unable to hire or retain our key personnel and executives, our business activities and operating results may be negatively affected.

Our
success depends to a significant extent upon the continued service of our key managers and highly qualified research and development, technical, support, sales management and other personnel, and
on our ability to continue to attract, retain and motivate qualified personnel. In particular, if we fail to hire on a timely basis, and retain, highly skilled sales forces, we may hinder the
expansion of the sales organization and slow growth in revenues. The competition for such employees is intense, and if we lose the ability to hire and retain key employees and executives with a
diversity and high level of skills in appropriate domains (such as research and development and sales), it could have a material adverse impact on our business activities and operating results. We
generally do not maintain insurance with respect to the loss of our key personnel.

The growth of Dassault Systèmes creates organizational stresses which can adversely affect our business or financial performance.

Dassault
Systèmes has continued to expand through acquisitions and internal development. Our significant growth in revenues, employees, operations and customer contacts creates
organizational stresses as management policies and internal systems must be adapted and integrated to meet the needs of a larger, more complex structure. We must also continue to
re-organize ourselves to maintain efficiency, and remain focused on our strategy while ensuring customer retention. If we do not address these issues effectively and in a timely manner,
our product development, internal processes and commercial operations may experience inefficiencies or fail to satisfy adequately market or customer demands, which could adversely affect our business
performance.

In
addition, in order to realize future acquisitions or investments, we may use significant financial resources, make potentially dilutive issuances of equity securities or incur debt. These
transactions may also cause us to incur amortization expenses related to intangible assets other than goodwill, or generate goodwill subject to annual (or more frequent) impairment tests.
Minority interests or other investments in unaffiliated partners may also have to be written down in our accounts as a result of impairment. Acquired companies may also carry the risk of unanticipated
or contingent liabilities, including litigation risk related to prior events (see above the risk of claims that embedded components violate third-pary intellectual property rights).
Each of these potential consequences of an investment or acquisition could reduce our operating margin or net income. Also, due to local regulatory constraints, a planned acquisition might not be
realized as anticipated or at all.

Our products, business development and sales could be adversely affected if we experience difficulties with our partners.

Our
PLM strategy requires fully integrated solutions of computer-aided-design, simulation and manufacturing and data management products, which are themselves increasingly complex. To implement our
PLM strategy, we have chosen to partner with other companies in such areas as:

We
believe that our partnering strategy allows us to reduce costs while achieving broader market coverage.

Our
broad partnering strategy creates a degree of dependency on such partners. Serious difficulties in our relationships with our partners, or an unfavorable change of control of our partners, may
adversely affect our products, business development and sales. In addition, any failure by our partners to deliver products of the quality or according to the timing expected may cause delays in the
delivery of, or deficiencies in, our own products.

Competitive price pressure and a longer sales cycle could negatively impact our revenue, financial performance and market position.

Over
the last several years prices have declined in the technological market, and this trend could continue or accelerate. This price decline may result from competition, low marginal production costs
and/or rapid technological change. In addition, in the past few years, we have seen a move towards consolidation in our industry, which may lead to increased competitive pressure. Industry
consolidation may also lead to the adoption by competitors of business models fundamentally different than ours, causing a substantial decline in prices and requiring us to adapt to a substantially
different market environment. These competitive price pressures could negatively impact our revenue, financial performance and market position.

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In
parallel, due to the complexity of our PLM products, the sales cycle for PLM products is relatively long. If the sales cycle lengthens further, we could face a slowdown in our
revenue growth.

Our research and development facilities are subject to risks of damage or temporary unavailability.

Our
research and development facilities are computer-based and rely on the proper functioning of complex software and integrated hardware systems. However, it is not possible to guarantee the
uninterrupted operation and security of these systems. For example, the invasion of our computer-based systems by either computer hackers or industrial pirates could interfere with their proper
functioning and cause substantial damage, loss of data or delays in on-going research and production activities. Computer viruses, whether deliberately or unintentionally introduced, could
also cause similar damage, loss or delays. As many of our systems include advanced or state-of-the-art functionalities, computer "bugs" or design errors could cause
malfunctions.

In
addition, because our research and production facilities are located in a limited number of principal sites, including our headquarters outside Paris in a possible flood zone, our facilities in
Japan and California which may be exposed to earthquakes and our site in Israel, substantial physical damage to any one of our sites, by natural causes or by attack or local violence, could materially
reduce our ability to continue our normal business operations.

If
any of these circumstances were to arise, the resulting damage, loss or delays could have a material negative impact on our business, results of operations and financial condition.

We are subject to the risks inherent in international operations.

As
a global participant in the software industry, our business is subject to certain risks inherent in international operations that are beyond our control. These risks include tariffs, duties, export
controls and other trade barriers; unexpected changes in regulatory
requirements and applicable laws; and political and economic instability in certain countries. Any of these factors could harm our operating results. There can be no assurance that we will not
experience material adverse effects with respect to our international operations and sales.

Groupe Industriel Marcel Dassault owns approximately 44.45% of our outstanding shares, and continues to act as controlling shareholder.

Groupe
Industriel Marcel Dassault (GIMD), which represents the interests of some of our founding shareholders, has maintained its substantial interest in Dassault Systèmes and owned
approximately 44.45% of our outstanding shares and controlled approximately 44.46% of the voting rights as of December 31, 2006. As a result, GIMD continues to act as controlling shareholder
with respect to matters submitted to our shareholders for approval, including the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of
our assets.

Technology-related stock prices have generally been volatile, and this volatility may depress our stock price.

The
market price of our shares and ADSs is likely to be highly volatile, as the market for shares of technology companies has generally been more volatile than the stock market overall.

The price of our ADSs and the U.S. dollar value of any dividends will be affected by fluctuations in the U.S. dollar/euro
exchange rate.

Our
ADSs are quoted in U.S. dollars. Fluctuations in the exchange rate between the euro and the U.S. dollar are likely to affect the market price of the ADSs. For example, because our
financial statements are reported in euro, a decline in the value of the euro against the U.S. dollar would reduce our earnings as reported in U.S. dollars. This could adversely
affect the price at which the ADSs trade on the U.S. securities markets. Our dividends are denominated in euro; a decline in the value of the euro against the U.S. dollar would reduce
the U.S. dollar equivalent of any such dividend.

Holders of ADSs may be subject to additional risks related to holdings ADSs rather than shares.

ADS
holders will generally have the right to instruct the depositary to exercise the voting right for the shares represented by the ADSs. However, because holders of ADSs do not hold their shares
directly, there can be no guarantee that they will receive voting materials in time to instruct the depositary to vote. It is possible that ADS holders, or persons who hold their ADSs through brokers,
dealers or other intermediaries, will not have the opportunity to exercise a right to vote at all.

Preemptive rights may be unavailable to holders of our ADSs.

Under
French law, upon the issuance of new shares or equity-related securities for payment, we may grant preemptive rights to our shareholders to subscribe to such securities on a prorata basis.
However, holders of our ADSs may not be able to exercise these preemptive rights for the shares underlying their ADSs unless both the rights and the shares are registered under the Securities Act of
1933 or an exemption from registration is available. At the time of any rights offering, considering the costs and benefits associated with such an offering to the ADS holders, or other factors, we
may elect not to file such a registration statement or an exemption from registration may not be available. If preemptive rights cannot be exercised by an ADS holder, the depositary of our ADS program
may sell such holder's preemptive rights and distribute the proceeds to the holder. If the sale of such rights is not lawful or reasonably practicable or is not possible for any other reason, the ADS
depositary may allow the rights to lapse, in which case the ADS holders will receive no value for these rights.

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Item 4: Information on the Company

A. History and Development of the Company

1981 THROUGH 2005

Dassault Systèmes was established in 1981 through the spin-off of a team of engineers from Dassault Aviation, which was developing
software to design products in three dimensions (3D). We entered into a distribution agreement with IBM the same year and started to sell our software under the CATIA brand to automotive and aerospace
customers. Through our work with large industrial customers, we learned how important it was for them to have a software solution that would support their product development processes. With this in
mind, we enriched our solution to enable the design of "digital mock-ups" (DMU) which helped our customers reduce the number of physical prototypes and realize substantial savings in
product development cycle times. The first significant project realized with this new approach was the Boeing 777. We also broadened our targeted industry segments to fabrication and assembly,
consumer goods, electrical and electronics, shipbuilding and plant design.

In
1997, we organized our business in two segments: the "process-centric" segment (which we refer to as "PLM"), which supports our customers' end-to-end product development
process, and the "design-centric" segment (which we refer to as "Mainstream 3D"), dedicated to customers seeking to design products in 3D. In conjunction with this decision, we acquired SolidWorks
Corporation, with the goal of targeting the significant market of companies designing their products in two dimensions (2D) and interested in taking advantage of the power of 3D design.

In
order to fulfill the mission to provide a robust, integrated PLM solution supporting the entire product lifecycle, and in conjunction with our internal development, we undertook a series of
targeted acquisitions and developed a new software platform, Version 5, for the process-centric segment. In 1998, we acquired the "Product Manager" software and development laboratory from IBM, which
we merged with our virtual product data management application to create the ENOVIA product line. In 1999, following our acquisition of SmarTeam Corporation, we developed a portfolio of applications
to manage product data configurations, product lifecycle integration and collaboration. In 1999, we also introduced Version 5 (V5), an innovative software platform to develop integrated Product
Lifecycle Management solutions. In 2000, DELMIA was launched in order to address the digital manufacturing domain following a series of three acquisitions, including (i) Deneb, a
U.S. company specialized in robotic simulation which we acquired in 1997, (ii) Safework, a Canadian company specialized in human modeling technology, in 2000, and (iii) Delta, a
German company specialized in manufacturing process management software, also in 2000. In 2000, we acquired Spatial Corp., a U.S. company, to develop and sell its software components,
including ACIS.

In
2004 we created DELMIA Automation and entered the automation market using technology developed both internally and through the acquisition in 2003 of Athys, a French company specialized in the
development of workcell control software.

In
2005 we introduced a new PLM brand, SIMULIA, for realistic simulation. Our SIMULIA brand includes the business of Abaqus, Inc., which we acquired in October 2005 (and renamed Dassault
Systèmes Simulia Corp. in May 2007), as the core of our realistic simulation offerings, in combination with our existing Dassault Systèmes simulation activities. Abaqus
has advanced expertise in software for finite element analysis, a computer simulation technique used in engineering analysis to simulate the real world behavior of a product. In connection with the
introduction of SIMULIA, we unveiled plans to develop an open, multi-physics platform designed to enable the integration of many types of simulation applications.

Contributing
to our 3D For ALL initiatives, in 2005 we acquired Virtools, a company with significant expertise in interactive Web applications which give life-like behavior to 3D content.
Our objective is to bring the power and value of such 3D representations to a broad audience of potential users.

2006

We expanded our collaborative product offerings and broadened our vertical industry focus from seven to eleven industries with the acquisition of
MatrixOne, Inc., a publicly held company, in May 2006 for a total cost of €324 million (including transaction costs). MatrixOne is a global provider of
collaborative PLM software and services to medium-to-large organizations including companies across the high-tech, consumer products and medical devices industries.
MatrixOne's customers included more than 850 companies, such as Alcatel, Celestica, GAP, General Electric, IBM, Intel, Johnson & Johnson, Nokia, Philips, Procter & Gamble,
Qualcomm, Sony Ericsson, STMicroelectronics and Toshiba. At the date of the acquisition, MatrixOne had 488 employees and offices in North America, Europe and

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Asia
Pacific. Following completion of the acquisition, MatrixOne became one of our three product lines under the ENOVIA brand. For more information on our ENOVIA portfolio, see "Item 4B:
Business Overview  Market Structure and Brands". For information on the impact of the acquisition on our operating results for 2006, see "Item 5A:
Operating Results". For other financial information related to our acquisition of MatrixOne, including pro forma information, see Note 5 to our consolidated financial statements.

In
2006, we acquired Dynasim AB, a Swedish company specializing in modeling and simulation solutions for embedded systems in connection with the development of our CATIA Systems strategy. For more
information on our CATIA Systems strategy, see "Item 4B: Business Overview  Technology, Research and Product Development". In 2006, SolidWorks acquired
GCS Scandinavia AB, a Swedish company with a product data management product which is now distributed by SolidWorks as PDMWorks Enterprise.

PRINCIPAL INVESTMENTS

Our principal acquisitions of companies over the last three years include:

Company

Year

Purchase PriceMatrixOne, Inc.

2006

€324 million (including transaction costs)Abaqus, Inc.(1)

2005

€346 million (including transaction costs)


Acquisitions of companies, or equity interests in companies, and intangible assets offering strategic technology represent our main capital expenditures. See
"Item 5A: Operating Results  Executive Overview for 2006  MatrixOne and Abaqus Acquisitions" and "Item 5B:
Liquidity and Capital Resources".

CORPORATE INFORMATION

Dassault Systèmes S.A. is asociété anonyme, a form of
limited liability company, incorporated under the laws of France. Our Company was created on June 9, 1981 for a duration of 99 years and is governed by French company law and related
regulations. Our registered office is located in Suresnes, France, at 9, quai Marcel-Dassault, B.P. 310, 92156, and the telephone number is:
33 (0) 1 40 99 40 99. For a list of our subsidiaries, see "Item 4C: Organizational Structure" below. Dassault Systèmes is registered in
the Nanterre Commercial Register under No. 322 306 440.

We
have been a publicly listed company since 1996, and our shares are listed in France on the Paris Stock Exchange (Eurolist  Compartment A) and in the
United States on the NASDAQ Global Market.

B. Business Overview

SUMMARY

We are the world leader, based on global market share, of Product Lifecycle Management (PLM) software solutions. We also provide our expertise in 3D technology
to businesses of all sizes and in many industries.

Our
strategic mission is to provide software solutions and consulting services that enable our customers to:

Our
software applications address a wide range of products, from apparel, consumer goods, machine parts and semiconductors to automobiles, aircraft, ships and factories. Our global customer base
includes companies primarily in eleven sectors: automotive; aerospace; industrial equipment; consumer goods; high-tech; power, process and petroleum; shipbuilding; and our four newest
industry verticals  consumer packaged goods, life sciences, architecture and construction, and services.

Our
five brands are SolidWorks, in the Mainstream 3D market, and CATIA, DELMIA, SIMULIA and ENOVIA in the PLM market. Each brand has its own clearly defined mission, as explained under "Market
Structure and Brands" below.

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PRODUCT LIFECYCLE MANAGEMENT (PLM)  81% OF CONSOLIDATED REVENUE IN 2006

PLM software and services enable companies to simulate, in a 3D collaborative environment, the entire lifecycle of a product, from its conceptual stage through development,
manufacturing and maintenance. This fundamental transformation to the management of product and process development through digital technology creates important new opportunities for innovation.
Moreover, our PLM solutions help companies reduce both time to market and costs, as well as better integrate their design and production processes with market needs. Using advanced and breakthrough
modeling technologies, including highly sophisticated 3D visualization and collaborative internet technology, our products allow engineers, manufacturing planners, financial planners and other
participants to simulate product behavior and manufacturing operations through virtual prototypes rather than actual physical mock-ups, thereby saving significant time and resources, while
increasing innovation and quality. Data about the product and its production, use and maintenance can be shared, modified, managed and archived on an integrated information platform.

MAINSTREAM 3D  19% OF CONSOLIDATED REVENUE IN 2006

Our Mainstream 3D solutions focus principally on product design rather than the entire product lifecycle. These 3D products, which are marketed under our SolidWorks brand,
complement our PLM offering by reaching a far larger number of potential users, and they are designed to capitalize on the significant migration opportunity of 2D users to 3D design. Our goal is to
set the global standard for Mainstream 3D mechanical design software.

EMERGING INITIATIVES

During 2006, we continued to develop our initiatives in "3D For ALL" and DELMIA Automation. We do not expect our emerging initiatives to be meaningful
contributors to our financial results for the time being, as we have only recently begun to record sales.

3D For ALL

Over the last several years we have been directing a portion of our research and development and investment resources on expanding vertically to make 3D technology more broadly
available to multiple levels of users, from content creators to professionals to consumers. We call this broadly expanded application of 3D technology "3D For ALL". Our
initiatives to date have focused on two axes: first to help develop a standard for the exchange of 3D content among a wide array of users with 3D XML; and second, to help customers simulate the
experience of a product in use in a 3D environment with our Virtools technology. More broadly, Virtools 3D real-time technologies and solutions are used in a wide variety of applications
such as simulation of product usage, ergonomic testing, creating the shopping experience, training scenarios and Web marketing applications.

DELMIA Automation

We believe the automation market is potentially a large market with long-term opportunity for growth. Automated systems are used in all industries and their
controlling systems have been, until recently, tested and adjusted using the physical equipment on the shop floor.

We
are developing our DELMIA Automation software to enable control engineers in all automation industries to digitally define, control and monitor automated systems entirely in a 3D virtual
environment and link them with manufacturing processes defined using DELMIA
PLM. The key benefits of our automation solutions are to enable customers to: (i) simulate production resources before production begins; (ii) reduce time to design, program, test and
optimize automated systems; and (iii) gain a complete view of their manufacturing operations by digitally exploring and optimizing both their engineering process and controls.

We
believe our strategy of partnering with different automation industry leaders has enabled us to develop virtual programming solutions that work in a variety of industries and in a multi/diverse
programmable logic controller (PLC) hardware environment.

KEY BUSINESS STRENGTHS

We believe that our leadership and increasing share of the global PLM market is due to our key business strengths.

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PLM:

Mainstream 3D design:

For
the geographic breakdown of our revenues for the past three years and information on the seasonality of our business, see "Item 5A. Operating
Results  Consolidated Information" and " Trends in Quarterly Results", respectively.

GROWTH STRATEGY

We believe there are a number of opportunities to continue to grow our business. We have outlined below our most significant current growth opportunities.

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For
a description of the challenges which must be met to maintain growth, see "Item 3D: Risk Factors".

MARKET STRUCTURE AND BRANDS

We currently organize our business and market our products and services principally according to two types of applications: the PLM, or "process-centric",
market, to support product development, production, maintenance and lifecycle management; and the Mainstream 3D, or "design-centric", market, which is primarily focused on product design.

PLM SOLUTIONS

Our PLM software and services enable customers to simulate, in a 3D collaborative environment, the entire lifecycle of a product, from its conceptual stage through development,
manufacturing and usage in service. PLM solutions facilitate the simultaneous collaboration of the many different functions involved in PLM: engineering, strategy, marketing and sales, planning and
production, procurement, finance and human resources, as well as throughout the supply chain. Our products allow engineers, manufacturing teams and financial planners within a company, as well as
throughout the supply chain, to collaborate simultaneously. Based upon customer experience, our PLM solutions can bring significant, measurable benefits.

CATIA Virtual product design for product excellence

Overview:CATIA is our largest software product line as our PLM solution for digital product definition. CATIA is a fully integrated system
that allows users to tailor their product development functionalities to their particular needs. In addition, we have introduced many CATIA products that address the specific needs of each of our
target markets. We believe that CATIA is among the most powerful virtual product design systems, as illustrated by the market's adoption of the digital mock-up (DMU) process.

We believe some of the key benefits of our CATIA solutions are:

The
primary domains addressed by CATIA include: mechanical design, shape design and styling, product synthesis, equipment and systems engineering and machining analysis.

Opportunities for growth:CATIA is an important contributor to our growth. In 2006, CATIA revenues grew at almost twice the estimated
growth of the 3D CAD market due to strategic wins in our largest industries, among others, and increased penetration of the supply chain and target verticals. Our current CATIA Version
5 software, as well as new product packaging, is designed to address the needs of a wide
range of users, from entry-level to the most sophisticated. In addition, we are expanding the number of applications within CATIA, which then broadens its potential usage.

DELMIA Virtual production for manufacturing performance

Overview:DELMIA is our brand covering both our PLM digital manufacturing solutions and our automation solutions. DELMIA PLM allows
manufacturers to virtually define, plan, create, monitor and control production processes before actual production takes place. From early process planning and assembly simulation to modeling welding
lines, or robot and cell programming to a complete definition of the production facility and equipment, DELMIA PLM assists companies in achieving maximum production efficiency, lower cost, improved
quality and reduced time to market.

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The
primary domains addressed by DELMIA PLM digital manufacturing solutions include: process planning (such as layout planning, time measurement, cost analysis, factory line balancing), process
detailing and validation (such as assembly sequences, factory/cell layouts and machining operations) and resource modeling and simulation (such as robots, tooling, fixtures, automation components and
operations' ergonomics).

Opportunities for growth:The digital manufacturing market is an emerging domain within the overall PLM market. We have been successfully
implementing DELMIA digital manufacturing at some of our largest customers in the automotive and aerospace industries. We believe that the adoption of our digital manufacturing solutions by our
largest customers demonstrate the potential of our solutions to enable global and flexible production systems. During 2006, DELMIA PLM had a number of wins with companies in the automotive and
aerospace industries and their supply chain, as well as in other industries, such as shipbuilding, industrial equipment and consumer goods.

SIMULIA Virtual testing for engineering quality

Overview:SIMULIA provides realistic simulation designed to enable manufacturing companies to improve product performance, reduce the
number of physical prototypes and drive innovation. This suite of software for finite element analysis (FEA) allows engineering organizations to create and test virtual prototypes of complex products
and processes. Our SIMULIA portfolio is designed to meet companies' growing need for realistic product and process simulation products, to make realistic simulation more readily accessible through
integrated and collaborative simulation best practices and to help our customers and partners by providing an open, multi-physics framework for simulation applications. Our SIMULIA brand includes
Abaqus and other Dassault Systèmes simulation offerings.

We believe some of the key benefits of our SIMULIA solutions are:

Our principal SIMULIA products include:

Abaqus
for CATIA V5: enables users to leverage nonlinear capabilities of Abaqus to analyze product performance within CATIA V5 and share advanced analysis workflows throughout the enterprise.

Abaqus/CAE:
an interactive environment, providing a complete modeling and visualization environment for Abaqus analysis products.

Abaqus/Standard:
enables a wide range of linear and nonlinear engineering simulations using Abaqus analysis technology to solve traditional implicit finite element analyses, such as static, dynamics
and thermal.

Abaqus/Explicit:
provides finite element solution techniques to simulate a wide variety of dynamic and quasi-static events, such as drop test, crushing and many manufacturing processes in an accurate,
robust and efficient manner.

Opportunities for growth:SIMULIA's growth reflects expanding relationships with its largest customers and a broad level of interest across
a diversified set of verticals. We believe there is a growing need for simulation, as well as a significant opportunity to transform how companies use simulation in product lifecycle management.
Companies continue to spend substantial human and financial resources on real world product testing which could be done at lower cost and earlier in the product design process using virtual testing.
In addition, many companies have their own applications in the field of simulating product behavior which are expensive to develop and maintain. We therefore believe there is a large opportunity for
customers to realize performance improvement and substantial savings in this domain.

ENOVIA A global collaborative environment for business process
optimization

Overview:ENOVIA provides a complete set of integrated solutions to help customers create a collaborative digital enterprise. By providing
unique workspaces for enterprise-wide integration of design, engineering and manufacturing, ENOVIA solutions enable customers to manage their digital products at each stage of the
lifecycle and simulate specific processes. Benefiting from the open V5 platform and internet technologies, ENOVIA forms the PLM backbone for the entire company, providing a gateway into the
digital enterprise for collaboration, visualization, analysis and decision support.

During
2006, we introduced a new PLM Collaborative Environment Portfolio under the ENOVIA brand name to address customers' requirements across the full spectrum of product and business processes, from
small-scale teams to extended enterprises. ENOVIA offers a new level of collaboration, from the most simple to highly engineered complex products and is positioned to address a broad range of industry
needs. Our three product lines within the ENOVIA brand include:

ENOVIA VPLM:3D Collaborative Virtual Product Lifecycle Management of highly complex product, resources and manufacturing processes in medium and large
extended enterprises is the focus of ENOVIA VPLM. It enables configured digital mock-ups and design in context to accelerate innovation and improve productivity when developing complex
products.

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ENOVIA MatrixOne:Collaborative Business Process for enterprises across a wide range of industries is the focus of ENOVIA MatrixOne. It enables
large-scale collaboration with industry specific solutions.

ENOVIA SmarTeam:Collaborative Product Data Management for small- and mid-sized enterprises, engineering departments of larger organizations
and across supply chains is supplied by ENOVIA SmarTeam. It offers strong integration with CATIA, multi-CAD design data management and fast return on investment.

We believe some of the key benefits of our ENOVIA software solutions are:

Opportunities for growth:The PDM market offers good growth potential as companies continue to increase their resources devoted to
collaborative product data management, both within engineering departments and across enterprises and extended supply chains. With the acquisition of MatrixOne, we have significantly broadened our
product portfolio to manage both product complexity and business process complexity. We believe there are attractive opportunities to grow our PDM presence both within our current customer base and
across a number of industry verticals, where companies need to manage complex business processes.

MAINSTREAM 3D SOLUTIONS  Productive and easy-to-use 3D mechanical design

We address the Mainstream 3D market with our SolidWorks brand. Targeting the mechanical design market, SolidWorks products are used by companies in the machinery, medical,
consumer, mold, tool and die, electrical and power industries and by suppliers to the aerospace and automotive industries. Since the introduction of the first SolidWorks mechanical design software
solution in 1995, SolidWorks software products have been shipped to more than 600,000 product designers, engineers and engineering students worldwide.

SolidWorks
products span 3D mechanical design solutions, design validation tools, product data management, design communication and collaboration, and 3D online catalog solutions and are generally
sold to customers as a suite of products, scaled to their needs.

SolidWorks 3D mechanical design solutions.The SolidWorks Office suite of products combines ease of use with advanced 2D and 3D design tools, enabling
companies to unleash design creativity while completing more work in less time. SolidWorks software reduces CAD overhead because it is easy to deploy, use, and maintain, and it lets engineers spend
more time creating new designs. The SolidWorks suite includes the products described below.

PDMWorks Enterpriseis a product data management software product that helps design teams manage and share product data across multiple locations. For
geographically dispersed teams that need to share and manage engineering documents in a secure environment, PDMWorks Enterprise manages the design process by providing Windows-based, secure data
access and automated engineering process control.

We believe some of the key benefits of our SolidWorks software solutions are:

Opportunities for growth:Design-centric revenue increased 19% in 2006, benefiting from the trend of mechanical designers adopting
Mainstream 3D solutions. We believe the 2D to 3D migration trend presents significant, long-term opportunities for growth.

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TECHNOLOGY, RESEARCH AND PRODUCT DEVELOPMENT

OVERVIEW

The development of breakthrough technologies has been a core component of our business strategy since our inception. We have devoted significant resources each year to research
and development, with 2006 investments totaling €299.9 million and representing 26% of total revenue. Our research and product development teams include over
3,100 engineers in our research laboratories in France, the United States, Canada, Germany, the United Kingdom, Israel and India.

Our
research and development is two-fold in nature, focusing on further advancing our current portfolio of software applications and, at the same time, on the development of technologies
and applications which we expect to bring to market over the medium- to longer-term.

Our
technology, research and product development efforts span key domains including: introducing new PLM and 3D MCAD applications, advancing our V5 platform, developing a multi-physics
simulation platform, and further expanding our addressable markets with the introduction of new, emerging technologies and application domains, including 3D For ALL, CATIA Systems and DELMIA
Automation.

During
2006, we unveiled our long-term roadmap to deliver PLM online through our V5 service-oriented architecture ("V5 SOA"). Our V5 SOA strategy demonstrates our
commitment to extend the benefits of PLM solutions to new markets and, importantly, to new types of users and communities. V5 SOA is the cornerstone for delivering fully collaborative PLM
services on demand. Our goal is for V5 SOA to be the technical foundation for our PLM and our partners' solutions moving forward, designed to bridge the gap between PLM solutions and existing
enterprise middleware. For further information, see "Version 5 technology, V5 SOA" below.

In
connection with the unveiling of our V5 SOA strategy, we introduced ENOVIA 3DLive beta version, our first 3D Collaborative Intelligence solution, based upon our V5 SOA for
online applications. Via an intuitive interface, ENOVIA 3DLive is being designed to enable any individual to instantly search and navigate any PLM information, regardless of location, source
or format.

In
2006 we also unveiled our long-term product development roadmap for CATIA Systems, designed to offer end-to-end open PLM solutions for embedded systems modeling
and simulation. Our goal is to offer an open V5 embedded systems platform, based upon unique mathematical foundations, enabling customers to model, simulate and manage the lifecycle of 100% of
the behavior of their products. We believe there is strong demand for embedded systems innovation across all industries where safety and security are key. Due to the complexity and variety of embedded
systems we believe it is important to base our platform upon an open language that is able to manage the complexity and behavior of embedded systems.

OPENNESS OF OUR SOFTWARE SOLUTIONS

Our current software applications underscore the openness of our software solutions. In the PLM market, CAA V5 is our robust, powerful, open and comprehensive
development platform. Our CAA V5 partners develop, sell and support innovative applications that integrate seamlessly with our PLM solutions through CAA V5. Our partners may also choose to
benefit from the V5 platform possibilities to connect with other applications, such as customers' applications or applications developed by other software companies. Our CAA V5 program
has been very successful with more than 400 products based on CAA V5 introduced on the PLM market with V5 R17 by 150 CAA
V5 partners as of January 2007. (For a description of V5 R17, see "New product releases and major product development announcements during 2006" below.)

New
product development is based upon core technologies that are widely accepted by the markets we address. During 2006 we unveiled our strategy for providing end-to-end PLM
solutions for embedded systems. At the foundation of our CATIA Systems strategy is Modelica, which we believe is becoming the emerging de facto standard for embedded systems modeling. In connection
with this decision we acquired Dynasim, a company with strong Modelica based modeling and simulation solutions.

Our
3D XML (Extensible Markup Language) technology, which was first introduced in 2004, is a universal, lightweight XML-based format enabling many types of users to capture, share and
collaborate around 3D data. 3D XML technology compresses highly complex data, with file sizes up to 99 percent smaller than those of existing formats. This format was designed to greatly
enhance collaboration around 3D information. Our 3D XML technology is used across our software applications, including PLM and Mainstream 3D applications.

In
the Mainstream 3D market, our SolidWorks software is also an open system that allows independent software developers to create complementary products that can be integrated with SolidWorks, thereby
significantly increasing our products' range of functions and capabilities. Under SolidWorks partnership programs, we estimate that over 280 complementary products have been developed.

We
also supply software components that are based on industry standards and increase software interoperability. Software developers in more than 14 industries around the world use our 3D ACIS
Modeler (ACIS), a well-known, 3D modeling engine. ACIS features an open, object-oriented C++ architecture. We also offer InterOp Translators that allow software developers to easily
integrate advanced 3D data interoperability capabilities with 3D software. For example, our InterOp CATIA V5 Reader and Writer translator enables data to be translated to and from other
3D formats.

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VERSION 5 TECHNOLOGY

Our V5 Platform

Since 1999 we have developed a unique, common platform for our PLM applications. Combining our technological capabilities with our understanding of market needs, we developed
an innovative and open software architecture, Version 5, or V5, which was first released in 1999. V5 is the technological platform for the development of new products for the PLM market and
makes possible a tight integration of CATIA, DELMIA, SIMULIA and ENOVIA solutions.

A
major component of V5 is its unique object model allowing multi-disciplinary collaboration by enabling simultaneous definition of product, process and resources (PPR). V5 enables
knowledge-based product creation, engineering and manufacturing processes management within a dynamic environment (enabling multiple actions to occur simultaneously) to drive optimized product
definition, manufacturing preparation, production and service.

V5 technology
also provides our PLM products with scalability. Scalability allows enterprises of different sizes, and users with diverse profiles, from occasional use to highly sophisticated
engineering, to benefit from a fully integrated PLM solution.

The
following five fundamental principles provide the underlying strength of our V5 products:

V5 SOA

V5 SOA is the evolution of our V5 platform, developed as the cornerstone to deliver fully collaborative PLM services on demand by DS and our partners. Our
V5 SOA strategy extends current CAA V5 architecture with best-in-class Web technologies and introduces the unique power of 3D collaborative applications for
networked innovation. Our objective is to secure and leverage customers' investments while continuously delivering breakthrough applications and services in order to help customers accelerate and
extend their PLM business transformation.

V5 SOA
bridges the gap between PLM solutions and existing enterprise middleware, by providing services in five key domains:

We
plan to leverage our strategic technological partnerships with IBM and Microsoft to optimize V5 SOA on their respective platforms.

MAINSTREAM 3D TECHNOLOGY

Designed specifically for Windows, our SolidWorks technology for the Mainstream 3D market is intended to enable designers and engineers to make an easy transition from 2D
drafting to a 3D environment. Its intuitive Windows user interface enables users to productively employ SolidWorks' software without extensive training. SolidWorks applications provide users with a 3D
design process, for which a fully detailed solid model is used to quickly produce drawings and perform downstream design functions. SolidWorks focuses on three core capabilities: design, analysis and
product data management.

SolidWorks
2007 was introduced in June 2006 with key enhancements including a new technology to help users design like experts, blocks for sketching, harnessing existing 2D expertise to power
3D design and more powerful scanning capabilities. More specifically, new features of the SolidWorks 2007 release include: (i) SWIFT, which for the first time puts expert-level techniques for
3D CAD's most challenging design operations in the hands of every user; (ii) Sketch Blocks enable 2D sketches of belts, chains, pulleys, and gears to now automatically exhibit multipart
interaction and motion, helping teams refine designs at all stages of their work; (iii) the SolidWorks Design Checker includes powerful new features to ensure that drawings meet the defined
standards of each user's organization, including auto-correction and the ability to "learn" from a finished drawing; (iv) the ability to save any file in Adobe PDF; and
(v) the new ScanTo3D

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capability,
enables users to automatically extract design data from real-world artifacts  such as broken parts that need replacement or concept foam
models  and move it into the SolidWorks design environment.

NEW PRODUCT RELEASES AND MAJOR PRODUCT DEVELOPMENT ANNOUNCEMENTS DURING 2006

During 2006, we announced new product releases and major product development initiatives including:

In
March 2006 we introduced ENOVIA V5 Collaborative Enterprise Sourcing (CES), a new product suite designed to bring together engineering and sourcing functions into one collaborative
environment. The CES product suite covers four functional areas to enable companies' engineering and sourcing departments to collaborate when choosing, introducing or managing components, suppliers
and manufacturers. By uniting engineering and sourcing functions earlier in the product development cycle, we believe companies using this software should be able to reduce product costs, improve
time-to-market and increase product quality.

Announced
in April 2006, the release of Abaqus Version 6.6 achieves a new standard for performance, usability and simulation fidelity, while upholding a reputation for flexibility and
reliability. Abaqus Version 6.6 contains many technical innovations to help customers achieve more realistic simulation of product behavior, including new capabilities in vibration analysis,
material failure characterization, tire modeling, and computing performance.

In
June 2006, we introduced several new technology initiatives, including Version 5 SOA, ENOVIA 3DLive and CATIA Systems. For more information, see above, "Technology, Research
and Product Development  Overview". We also introduced our latest SolidWorks release, as described above under "Mainstream 3D technology".

In
September 2006, we announced our latest Version 5 Release 17 (V5 R17) of our Product Lifecycle Management portfolio. This release provides further enhancements for business
process optimization, value chain innovation, engineering to manufacturing cycle streamlining, intellectual capital growth, and standards adoption. V5 R17 is comprised of CATIA for
collaborative product development, ENOVIA VPLM and ENOVIA SmarTeam for collaborative lifecycle management and DELMIA for virtual product manufacturing and automation.

In
October 2006, we announced key enhancements to ENOVIA MatrixOne PLM solutions with extended Business Process coverage across multiple industries. ENOVIA MatrixOne Matrix 10 updates
include enhanced support for environmental/material compliance; improved industry-specific solutions for the apparel, medical device and automotive industries and solutions enabling concurrent printed
circuit board development and for distributing product development data throughout the extended enterprise, including non-traditional PLM users. By helping companies reduce development
costs, gain access to real-time data and speed product introductions, ENOVIA MatrixOne PLM is enabling companies to increase the potential return on their new product innovations.

Also
in October 2006, we launched CATIA PLM Express, a scalable solution package which provides CATIA design excellence at an affordable price, for companies of all sizes. With CATIA PLM
Express, companies have a single entry point which evolves with their needs and job requirements of their staff. CATIA Team PLM is the core configuration of CATIA PLM Express, giving customers the
CATIA modeler for product design, knowledge capture and re-use in a collaborative environment. It also delivers core collaborative PDM functionality via ENOVIA SmarTeam, providing
optimized CATIA design management and collaboration, and a solid foundation primed for PLM solution scaling.

In
December 2006, we introduced Virtools 4, a live platform bringing the power of 3D to all communities. This new Virtools solution is dedicated to game title development for "PSP®"
(PlayStation®Portable). Benefiting from the versatility of the Virtools platform, this complete solution for "PSP®" (PlayStation®Portable) with dedicated support
and consulting throughout the game creation, will allow faster and easier developments.

For
information on the most recent product developments, see "Item 5D: Trend Information  Additional Business Highlights".

CUSTOMERS AND INDUSTRIAL SECTORS

Our customer base includes companies in 11 sectors: automotive; aerospace; industrial equipment; consumer goods; high-tech; power, process
and petroleum; shipbuilding; and our four newest industry verticals  consumer packaged goods, life sciences, architecture and construction, and services. At the
end of 2006, our customer base totaled approximately 100,000 customers. Some entities which we count as individual customers, because they make their own decision regarding whether or not to
use our products and services, belong to the same corporate group.

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The
pie chart below sets forth our revenue split by geographic region for the year ended December 31, 2006.

GRAPHIC

We
have built a strong presence in the automotive, aerospace and industrial equipment industries. Customers include:

|Aisin Seiko Co.   |  | Framatome              |  | Nissan           | 
|----------------- |  | ---------------------- |  | ---------------- | 
|Alstom Power      |  | General Motors         |  | Northrop Grumman | 
|AVIC              |  | Goodyear               |  | PSA              | 
|BAE Systems       |  | Honda                  |  | Raytheon         | 
|Bobst             |  | Honeywell              |  | Renault          | 
|Boeing            |  | Hyundai Kia Motor Corp |  | Safran           | 
|Bombardier        |  | Kobelco                |  | Schuler          | 
|Claas             |  | Lockheed Martin        |  | Tata Motors      | 
|DaimlerChrysler   |  | Metso                  |  | Toyota Motor     | 
|Dassault Aviation |  | Michelin               |  | Volkswagen Group | 
|EADS              |  | Mitsubishi Motors      |  | Volvo Group      | 
|Ford              |  | Nikon                  |  |                  | 

In recent years, we have expanded our target markets to include seven industries, adding consumer goods; high-tech; power, process and petroleum;
and shipbuilding. Our presence in these markets has been reinforced by our recent acquisitions. Customers include:

|Adidas                           |  | Guess                         |  | Pioneer                  | 
|-------------------------------- |  | ----------------------------- |  | ------------------------ | 
|Agere                            |  | Hitachi                       |  | Philips                  | 
|Areva                            |  | Hydro Quebec                  |  | Qualcomm                 | 
|Avon                             |  | Kodak                         |  | Samsonite                | 
|Bénéteau                         |  | Luxottica                     |  | Samsung Heavy Industries | 
|Celestica                        |  | Matsushita Panasonic          |  | Shell                    | 
|Clarion                          |  | MeyerWerft                    |  | Sony Ericsson            | 
|Coca-Cola                        |  | New Balance                   |  | STMicroelectronics       | 
|Gap                              |  | Nokia                         |  | Yantai Raffles           | 
|General Dynamics Bath Iron Works |  | Northrop Grumman Newport News |  |                          | 

During 2006, we broadened our vertical market focus to eleven industries, with the additions of consumer packaged goods, life sciences, architecture and
construction, and more broadly service industries. Customers include:

|Abbott          |  | GE Healthcare  |  | Musée Quai Branly | 
|--------------- |  | -------------- |  | ----------------- | 
|Barilla         |  | Gehry Partners |  | Procter & Gamble  | 
|Electronic Arts |  | Medrad         |  | 3M                | 

We estimate that our largest customer represented approximately 5% of total revenue in 2006, and our five, ten and twenty largest customers accounted,
respectively, for approximately 16%, 21% and 25% of total revenue in 2006.

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OUR EXTENDED ENTERPRISE PARTNERSHIPS

A core component of our strategy since the inception of our company has been the development of an extended enterprise. This ecosystem, with our customers at
the center, encompasses partners across technology, product development and distribution as well as cooperation agreements with computer hardware manufacturers. This broad network of partners
contributes to the enhancement of our product offerings and the technologies used to optimize the use of our products.

IBM relationship.The extended enterprise concept emerged from our relationship with IBM for the distribution of our products. We maintain
a long-standing relationship with IBM that has provided us with deep technical expertise and commercial strength beyond the distribution agreement described more fully below under "Sales
and Marketing". In the hardware, middleware and consulting services domains, IBM has been a key partner to us. Furthermore, collaboration in several areas of research and development has been the
cornerstone of our and IBM's commitment to technical leadership for the digital enterprise.

Customer partners.We establish an on-going dialogue between our research and development teams and our customers, thereby
ensuring product developments that are responsive to market needs. Principally due to the openness of our software applications, we offer our customers the opportunity to develop complementary
seamless software applications for internal use. We believe that thousands of applications have been thus developed by our customers to meet their specific needs. In addition, we have competency
centers based on specialized industrial segments to gather information on our customers' processes and thus help develop additional applications tailored to the needs of each industry.

During
2006, we continued active development of customer partnerships to specify, evaluate and test process-oriented applications. We also organized user groups and forums in the United States,
Europe, Asia and Australia to enable customers to share their experiences with our software products and solutions.

Hardware and technology partners.We work closely with a network of leading technology partners to bring innovative and comprehensive
software solutions to our markets. We have established long-standing, technical collaborations with key partners in order to maximize the benefits from available technology and to increase
the value for our common customers. Our hardware and technology alliances are established with three objectives: to ensure compatibility between the IT infrastructure and our solutions; to expand our
global network of value partners sharing the same interests within a "competitively cooperative" model; and to integrate the latest features of these technologies into our solutions.

Since
2004 we have had a multi-year, global strategic alliance with Microsoft Corporation to deliver our V5 PLM and 3D design solutions to companies of all sizes taking advantage of
the Microsoft software platform. By capitalizing on the Microsoft platform, we are committed to delivering greater customer value through solutions that are easy to use, deploy and maintain with
reduced cost of
ownership and ease of integration. As part of this strategic alliance, we and Microsoft announced several value-creating agreements for customers during 2006, including agreements to make 3D XML and
Microsoft's XAML formats deeply compatible for easy exchange of 3D data and full support of Windows Vista and Windows office system, across our portfolio. SolidWorks 2007 is the first 3D CAD product
available and certified by Microsoft for Windows Vista.

Product development partners.We have product development partners working with our PLM and Mainstream 3D software solutions. Our
largest program is our CAA V5 program, which was established in July 2001 to enable software developers to create and market their own software applications that are fully integrated and
complementary to our PLM software solutions using the Version 5 architecture, an open, next-generation platform. By using V5, these partners have a single development platform that
facilitates delivery of seamless, integrated software solutions composed of both our products and theirs. Our CAA V5 program has been very successful with more than 400 products based on
CAA V5 introduced on the PLM market with V5 R17 by 150 CAA V5 partners as of January 2007. We also hold an annual CAA V5 Developer Conference focused on
expanding the network of companies using our CAA V5 PLM development platform.

SolidWorks
operates a two-tier development partnership program bringing together companies supplying products that are either compatible with or entirely integrated with SolidWorks.
Through this program, over 280 compatible products are available to customers in many areas, including machining, analysis, simulation and rapid prototyping.

Consulting and service partners.Our ecosystem of industry alliances also includes a community of consulting firms and systems integrators,
led by our integrated services organization. These Consulting and Services Partners are able to complete our own services offerings to customers to optimize their business processes as well as
integrate global PLM solutions in line with best-of-class implementation practices.

We
have had a long-standing relationship with IBM PLM in the marketing and sales of our PLM solutions. In addition, we continue to expand our relationship with IBM in services.
Specifically, since January 2002, IBM's Global Service Business Consulting Group (BCS), the IBM global services organization, has been a Premier consulting partner to us. Through our services
teams, IBM BCS now provides complementary consulting and implementation services to customers in order to drive adoption of our PLM solutions. IBM BCS collaborates with our integrated services teams
to develop services offerings related to our PLM solutions. During 2005 we signed an agreement in services with IBM BCS and our services group designed to help customers accelerate their business
transformations, of

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which
PLM is a key component. We believe clients will benefit from the combination of IBM's consulting and project management skills and our software technology and technical expertise.

The
Consulting and Service partners program provides a network of skilled partners with business expertise and in-depth knowledge of our offerings in order to optimize product usage. We
also work closely with our consulting and service partners to ensure that they are well-positioned to deliver best-of-class PLM implementations. More specifically,
the focus is on providing technical and business collaboration to design solutions that combine best-in-class PLM applications with IT and PLM services focused on customers'
individual needs. In connection with this objective, we offer three enablement programs to our partners in the areas of (i) consulting and systems integration, (ii) training and
education and (iii) application development. Our most active/major partners include, in addition to IBM, Casolute, Cenit, CSC, Elsag, EXA, Fasotec, Geometric Software Solutions, Hitachi Zosen
(HZS), IASC, KSI, Larsen & Toubro Infotech, MDTVision, MSC Software, Nihon Unisys, NS Solutions, PCO Technologies, Processia, PROSTEP, Ryoyu Systems Co., Satyam, Toyota Communications
Systems, TechniGraphics, T-Systems, Tata Consulting Services, Tata Technologies Limited, Volvo IT and Wipro.

DELMIA Automation partners.We have a business partnership with Schneider Electric, a world leader in Power and Control, to sell DELMIA
solutions and develop consulting and services for the Automation and Production Engineering markets.

We
are working with OMRON Corp., a leading Japanese manufacturer of control equipment for factory automation. OMRON is a DELMIA business partner, in charge of sales and support for DELMIA Automation
in Japan.

Academic relationships.We have established a number of relationships with research centers, universities and schools throughout the world
over the years.

SALES AND MARKETING

Overview.We largely market and sell our software solutions through indirect channels. With respect to most of our PLM solutions our
primary partner is IBM, with whom we have a long-standing strategic relationship (described below). Revenue generated through our agreements with IBM represented approximately 45%, 52% and
56% of our total revenue in 2006, 2005 and 2004, respectively. In the Mainstream 3D market, SolidWorks software is distributed through a network of 300 value-added resellers and distributors
worldwide.

Amended distribution agreement with IBM:In January 2007, our distribution agreement with IBM continued to evolve with respect to
the marketing and sales of our PLM software. Under the terms of the amended agreement, both IBM and DS will increase the scope of their responsibilities, with IBM selling an expanded portfolio of our
PLM solutions to large enterprises, and Dassault Systèmes progressively assuming full responsibility for the PLM indirect sales channels. Pursuant to the amended agreement:

Our
rationale for this evolution is straightforward: We estimate that the PLM mid-market represents about 35% of the PLM market. We believe it is important to have a lean and efficient
channel to benefit from mid-market growth opportunities and we believe that distribution partners require more support and a new business model to address these new opportunities. In
connection with these changes we reorganized our marketing and sales organization, effective January 2007.

See
"Item 3D: Risk Factors  Risks Related to Our Business" for risks related to our historical and evolving approach to the marketing and sales of our
PLM products.

Marketing and Sales of our PLM solutions.We market and sell our PLM software solutions through (i) IBM PLM; (ii) our
indirect PLM channels; and (iii) our direct sales force for SIMULIA, DELMIA and ENOVIA MatrixOne PLM software applications.

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Marketing and Sales of Our Mainstream 3D solutions.In the Mainstream 3D market, SolidWorks software is distributed through a network of
more than 300 value-added resellers and distributors worldwide. We support their activities through industry trade shows, seminars, online educational activities, advertisements and marketing
materials.

COMPETITION

Markets for our products are highly competitive and characterized by rapidly changing technology and evolving standards. Our main competitors in the PLM market
include PTC (Parametrics Technology Corporation) and UGS (Unigraphics, recently acquired by Siemens). For our Mainstream 3D products, our main competitors include Autodesk, Inc., PTC and
others. We also compete with several supply-chain management, computer-aided engineering (CAE) and other enterprise software providers, including ANSYS, Agile Software Corporation, MSC Software,
Oracle and SAP. In addition, numerous specialist software developers, both large and small, compete with us in specific applications, including Adobe. In general, our competitors compete with us on a
worldwide basis.

We
compete in our various product lines on the basis of product features, product coverage and optimization, price, openness, customized design, marketing, sales, services and technical support. Our
ability to compete successfully depends on elements both within and outside our control, including successful and timely development of new products, product performance and quality, pricing, customer
service, and industry trends.

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C. Organizational Structure

Dassault Systèmes S.A., which owns directly or indirectly all the companies which make up the Dassault Systèmes group, has
two primary functions: First, it is the largest DS operating company, responsible for the development of our CATIA solutions, a part of our ENOVIA solutions and the CAA V5 platform. Second,
Dassault Systèmes S.A. operates in a fashion similar to a holding company and provides certain centralized services to all the DS companies.

Dassault
Systèmes S.A. defines our overall strategy and operating plans. The executive management team is located at Dassault Systèmes' principal office in
Suresnes, France, which is also the headquarters for Dassault Systèmes. Dassault Systèmes S.A. directs the following activities from its principal office: finance,
investor relations, communications, legal, human resources, and information technology, as well as our global research and development strategies and management of our strategic partnership with IBM.
The costs of providing centralized services are billed back at their actual costs to the respective subsidiaries using these services. The total amount charged back to subsidiaries was
€4.1 million in 2006, €1.7 million in 2005 and €1.5 million in 2004. With respect to our assets, they largely rest with the
respective subsidiaries using such assets for the development of software and services.

At
December 31, 2006, Dassault Systèmes included Dassault Systèmes S.A. and 70 operational subsidiaries located in 26 countries. The list
below sets forth our main subsidiaries by geographic area. The list also indicates the percentage equity interest and of voting rights directly or indirectly held by Dassault
Systèmes S.A.

|EUROPE                                         |  | NORTH AMERICA                                                                | 
|---------------------------------------------- |  | ---------------------------------------------------------------------------- | 
|Dassault Data Services SA (France) (94.99%)    |  | Dassault Systemes Americas Corp. (US) (100%)                                 | 
|Dassault Systèmes SAS (France) (100%)          |  | Dassault Systèmes LLC (US) (100%)                                            | 
|Dassault Systèmes Provence SAS (France) (100%) |  | SolidWorks Corporation (US) (100%)                                           | 
|Virtools SA (France) (96%)                     |  | MatrixOne, Inc. (US) (100%)                                                  | 
|Athys SAS (France) (100%)                      |  | Delmia Corp. (US) (100%)                                                     | 
|                                               |  | Spatial Corp. (US) (100%)                                                    | 
|Dassault Systemes AG (Germany) (100%)          |  | Dassault Systèmes Simulia Corp. (formerly, Abaqus, Inc.) (US) (100%)         | 
|Transcat Verwaltungs GmbH (Germany) (100%)     |  | Dassault Systemes Canada Inc. (Canada) (100%)                                | 
|Delmia GmbH (Germany) (100%)                   |  |                                                                              | 
|Dassault Systèmes GmbH (Austria) (100%)        |  | ASIA                                                                         | 
|Dassault Systemes Ltd (UK) (100%)              |  | Dassault Systèmes K.K. (Japan) (100%)                                        | 
|Dassault Systemes Srl (Italy) (100%)           |  | Nihon Delmia K.K. (Japan) (100%)                                             | 
|Dassault Systemes S.L. (Spain) (100%)          |  | Dassault Systèmes (Shanghai) Information Technology Co., Ltd. (China) (100%) | 
|Dassault Systèmes AB (Sweden) (100%)           |  | Delmia Solutions Private Ltd. (India) (82.7%)                                | 
|Dynasim AB (Sweden) (80%)                      |  |                                                                              | 
|SmarTeam Corporation Ltd (Israel) (100%)       |  | LATIN AMERICA                                                                | 
|                                               |  | Dassault Systèmes do Brazil (100%)                                           | 
|                                               |  | Dassault Systèmes de Mexico (100%)                                           | 

Dassault Systèmes S.A. accounted for 41% of total consolidated revenue in 2006. SolidWorks Corporation (substantially represented by our
Mainstream 3D segment) was our only subsidiary that accounted for more than 10% of total consolidated revenue in 2006.

See
also Note 18 to our consolidated financial statements.

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D. Property, Plant and Equipment

We partially lease and partially own our current principal executive offices (a total of approximately 30,000 square meters) in Suresnes outside
Paris, France. We lease most of our other administrative, research, production and distribution facilities, which are located principally in France, the United States, Germany, India, Israel,
Japan, Canada, Sweden, the United Kingdom and China. In early 2006, we entered into a built-to-suit lease agreement for new headquarters facilities, under which we have
committed to lease approximately 55,000 square meters of office space located in Vélizy, outside Paris, France, for a non-cancelable initial term of
12 years. The lease is to begin when construction is completed, which is expected to be in mid-2008. We believe that our existing office facilities and, once we move to our new
headquarters, our future facilities will be adequate for our foreseeable needs, and that suitable additional or alternative space should be available in the future on commercially reasonable terms
as needed.

We
believe that we are not exposed to substantial risks relating to the environment due to the nature of our business. On the contrary, our products contribute to the protection of the environment
since they are designed to replace the construction of physical mock-ups and to reduce the environmental issues that are common to all industries.

We
are insured under various global insurance policies, managed centrally. These policies provide coverage for significant risks and activities related to our operations, including damage to property,
product liability, intellectual property, directors' and officers' liability, and global electronic errors or omissions. We believe that the guarantees provided for by these insurance policies amount
to sums proportionate to the risks involved.

Item 4A: Unresolved Staff Comments

Not
applicable.

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Item 5: Operating and Financial Review and Prospects

A. Operating Results

The executive overview below highlights selected aspects of our financial results for 2006. The executive overview, the supplemental
non-GAAP financial information and the more detailed discussion that follows should be read together with our consolidated financial statements and the related notes included elsewhere in
this Annual Report.

In discussing and analyzing our results of operations, we consider supplemental non-GAAP financial information which excludes (i) the effect of adjusting the
carrying value of acquired companies' deferred revenue, for the years ended December 31, 2006 and 2005, (ii) the amortization of acquired intangibles, for the years ended
December 31, 2006, 2005 and 2004, and (iii) stock-based compensation expense and one-time tax restructuring effects, for the year ended December 31, 2006. A
reconciliation of this supplementary non-GAAP financial information with information set forth in our financial statements and the notes thereto is presented below under "Supplemental
Non-GAAP Financial Information".

When we believe it would be helpful for understanding trends in our business, we restate percentage increases or decreases in our revenue to eliminate the effect of changes in
currency values, particularly the U.S. dollar and the Japanese yen, relative to the euro. When trend information is expressed below "in constant currencies", the results of the "current" year
have first been recalculated using the average exchange rates of the preceding year, and then compared with the results of the preceding year. Unless otherwise indicated, the impact of exchange rate
fluctuations is approximately the same for both our GAAP and supplemental non-GAAP revenue for the three years discussed below.

Market share information presented below is based on data published by Daratech.

EXECUTIVE OVERVIEW FOR 2006

Based upon our performance in 2006, we extended our market leadership and reached an important milestone with an estimated PLM global market share of 25%,
having achieved a 2 percentage point gain in 2006 and a 10-point gain over the last five years. We are investing in our sales and marketing, in particular as we are redesigning the
management of our PLM distribution channels. In connection with this strategic initiative, we announced jointly with IBM in January 2007 an expansion of our strategic partnership in which we
progressively assume full management of the PLM indirect sales and marketing channel by 2008 and IBM sells an expanded portfolio of our PLM products to large enterprises. See "Item 4B: Business
Overview  Sales and Marketing".









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|Key Financial Data                             |  | Year ended December 31, |        
|---------------------------------------------- |  | ----------------------- | -------
|
|Total revenue                                  |  | €                       | 1,157.8
|Operating income                               |  |                         | 245.9  
|As a percentage of total revenue               |  |                         | 21.2%  
|Net income                                     |  |                         | 179.8  
|Diluted net income per share                   |  |                         | 1.51   
|Supplemental non-GAAP financial information(1) |  |                         |        
|Total revenue                                  |  | €                       | 1,177.5
|Operating income                               |  |                         | 316.2  
|As a percentage of total revenue               |  |                         | 26.9%  
|Net income                                     |  |                         | 217.5  
|Diluted net income per share                   |  |                         | 1.83   





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MatrixOne and Abaqus acquisitions

On May 11, 2006, we completed the acquisition of MatrixOne, Inc., for a total cost, including transaction costs, of approximately
€324 million, before deduction of cash acquired. On October 4, 2005, we completed the acquisition of Abaqus, Inc. (renamed Dassault Systèmes Simulia Corp.
in May 2007) for a total cost, including transaction costs, of approximately €346 million, before deduction of cash acquired. For information on MatrixOne and Abaqus products,
see "Item 4B: Business Overview  Market Structure and Brands". For information on the impact of the acquisitions on our operating results for 2006, see
the discussion below on operating results for 2006 compared to 2005. For other financial information related to our acquisitionsof MatrixOne, including pro forma information, see also
Note 5 to our consolidated financial statements.

PRINCIPAL ELEMENTS OF OUR REVENUE AND EXPENSES

Revenue

Our total revenue is comprised of (i) software revenue, which is our primary source of revenue, and (ii) services and other revenue.

Software revenue.Software revenue accounted for 83%, 84% and 84% of our total revenue in 2006, 2005 and 2004, respectively. Software
revenue is comprised of new licenses revenue as well as periodic licenses, maintenance and product development revenue. In 2006, 2005 and 2004, approximately 53%, 50% and 51%, respectively, of our
software revenue consisted of recurring revenue comprised of periodic fees for rental licenses and maintenance as described herein. Our PLM products are mainly licensed pursuant to one of two payment
structures: (i) "rental" licenses, for which the customer pays equal periodic fees to keep the license active, and (ii) "primary fee" licenses, for which the customer pays an initial fee
for a perpetual license and subsequently pays periodic fees for maintenance, generally on an annual basis. For both forms of license, these periodic fees entitle the customer to corrective maintenance
and product updates without additional charge. Product updates include improvements to existing products but do not cover new products. Our product development revenue relates to the development of
additional functionalities of standard products requested by customers.

Software
licenses offered by SolidWorks require the payment of a one-time fee. Access to upgrades and maintenance require payment of an annual subscription fee.

For
a breakdown of revenue between new license revenue, periodic licenses, maintenance and product development revenue, see Note 7 to our consolidated financial statements.

Services and other revenue.Services and other revenue are generated mainly from consulting services in methodology for design, deployment
and support, training services and engineering services. In addition, we generate services revenue from the commissions we receive as a result of our sales activities as an IBM Business Partner and,
since mid-2005, from fees paid by IBM for our management of indirect PLM sales channels. We also resell a limited amount of computer hardware, for which we record only the gross margin
from these sales as service revenue. In 2006, 2005 and 2004, our services and other revenue was generated principally by the Process-centric (PLM) segment.

A
substantial portion of our revenue is generated through our marketing and distribution agreements with IBM. For further information on our relationship with IBM, see "Item 3D: Risk Factors"
and "Item 4B: Business Overview  Sales and Marketing".

Expenses

Cost of revenue for software and services.

The cost of revenue for software amounted to 4%, 3% and 3% of total revenue in 2006, 2005 and 2004, respectively. The cost of revenue for software includes principally software
licensing fees paid for third-party components integrated into our own products, maintenance costs, the cost of reproducing compact disks, preparation costs for user manuals and delivery costs.

The
cost of revenue for services amounted to 12%, 12% and 13% of total revenue in 2006, 2005 and 2004, respectively. The cost of revenue for services includes principally personnel and other costs
related to organizing and providing professional services.

Research and development.Research and development expenses represented 26%, 27% and 28% of total revenue in 2006, 2005 and 2004,
respectively. Research and development expenses include primarily personnel costs for specialists in software architecture and

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various
application fields such as mechanical design, manufacturing, mechanical engineering and computer graphics, as well as for specialists with significant experience and knowledge of our target
industrial sectors. Research and development expenses also include computer rental expenses, the depreciation and cost of maintenance related to computer hardware used in research and development,
development tools, networking and communication expenses. Expenses for research and development are recorded net of grants received from various governmental authorities to finance certain research
and development activities (including tax research credits in France, which would be paid by the French tax authorities if our income tax due were insufficient to enable the credits to
be deducted).

Costs
for research and development of software are expensed when incurred, if the analysis of technical criteria does not qualify them as a capital asset. Since our founding in 1981, implementation of
this accounting policy has resulted in all such costs being expensed in the period in which they were incurred.

Marketing and sales.Marketing and sales expenses represented 26%, 24% and 22% of total revenue in 2006, 2005 and 2004, respectively.
Marketing and sales expenses consist primarily of personnel costs, travel expenses, marketing infrastructure costs, such as computer and office rental expenses, as well as sales commissions and
advertising expenses. Marketing and sales expenses are derived principally from our sales activities and from activities in support of our indirect PLM sales channels.

Amortization of acquired intangibles.Amortization of acquired intangibles includes amortization of acquired technology and amortization of
intangible assets recognized in connection with business combinations (primarily customer relationships and technology). In 2006, 2005 and 2004, amortization of acquired intangibles amounted to
€39.0 million, €9.8 million and €1.4 million, respectively. See the discussion below under "Supplemental Non-GAAP
financial information".

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make certain assumptions and judgments. Actual results may differ from these estimates under different assumptions or conditions.

We
believe the following critical accounting policies, among others, affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition

We recognize revenue in accordance with American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, "Software Revenue Recognition,"
as amended by SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions," Securities and Exchange Commission (SEC)
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB-104") and other authoritative guidance. Although we believe that we are currently in
compliance with SOP 97-2, SOP 98-9 and SAB-104, the accounting profession continues to discuss various provisions of these guidelines with the
objective of providing additional guidance on their future application. These discussions and the issuance of new interpretations could lead to changes in our revenue recognition policies. Our
operating results and financial position may be impacted by changes in these policies. See Note 1 to our consolidated financial statements and the discussion of the complexity of our
regulatory environment under "Item 3D: Risk Factors".

Under
our arrangement with IBM, royalties from products distributed by IBM are recognized when IBM recognizes revenue and reports such revenue to us.

Purchase Price Allocation for Business Combinations

We allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed, based on their estimated fair values.
The fair value of in-process research and development projects, if any, is immediately
expensed. The excess purchase price over those fair values is recorded as goodwill, which is not amortized but subject to annual impairment review.

A
significant portion of the price paid for our recent acquisitions has been assigned to goodwill and identifiable intangible assets, primarily developed technology and contractual customer
relationships, amortized over their estimated useful life of up to 12 years. We typically perform valuation studies to determine the fair value of identifiable intangible assets, generally
using a discounted cash flow approach. This requires us to make assumptions about the acquired entity's future operating cash flows, the attrition rate of existing customers, the useful life of
existing technology, and the applicable discount rate. We also use judgment to determine the fair value of post-contract customer support obligations or the acquired entity. Different
assumptions may result in different IPR&D write-offs, intangible amortization or goodwill impairment charges recorded in our income statement.

Income taxes

We account for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires that
deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences

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between
the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not
that some portion or all of the deferred tax asset will not be realized.

We
evaluate regularly the realizability of our deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the
likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. We have used tax planning
strategies to realize or renew net deferred tax assets in order to avoid the potential loss of future tax benefits.

In
addition, we operate within multiple tax jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to
resolve. Actual results and amounts could differ from those used in accounting for income taxes, since such accounting encompasses the use of judgements and estimates. Such differences could have a
material impact on our future operating results.

Investments

We hold minority interests in and also grant loans to companies having operations or technology in areas within our strategic focus. We record an impairment charge when we
believe an investment or a loan has experienced a decline in value that is other than temporary. This determination requires significant judgments, including our assessment of the financial health of
and near-term business outlook for the investee or creditor. Future adverse changes in market conditions or poor operating results of these companies could result in losses or an inability
to recover the carrying value of the investments or loans that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

Goodwill and other intangible assets

We account for goodwill and other intangible assets in accordance with SFAS 142, which requires that goodwill be tested for impairment at the reporting unit level
(operating segment or one level below an operating segment) on an annual basis and between annual tests in
certain circumstances. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning
goodwill to reporting units, and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows,
determining appropriate discount rates, and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each
reporting unit, and consequently our results of operations.

In
addition, we review our intangible assets, including acquired technology, whenever changes in circumstances or new events indicate that the carrying value may not be recoverable and we make
assumptions about future cash flows expected to be generated by these assets.

Should
different operating conditions prevail, including changes in our perception of competition and market demand for any of our reporting units or acquired technologies, this could materially
affect our determination of their fair values and useful life, and lead us to record impairment charges or increased amortization expense.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 1 to our consolidated financial statements included in this Annual Report.

SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION

Readers are cautioned that the supplemental non-GAAP financial information is subject to inherent limitations. It is not
based on any comprehensive set of accounting rules or principles and should not be considered in isolation from or as a substitute for U.S. GAAP measurements. The supplemental
non-GAAP financial information should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. Furthermore, our supplemental
non-GAAP financial information may not be comparable to similarly titled non-GAAP measures used by other companies. Specific limitations for individual non-GAAP
measures are set forth below.

In
evaluating and communicating our results of operations, we supplement our financial results reported on a GAAP basis with non-GAAP financial data, including non-GAAP
revenue, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share. As further explained
below, the supplemental non-GAAP financial information excludes certain income statement elements: deferred revenue adjustments for acquired companies, amortization of acquired intangibles
(which arise from our acquisitions of companies and some technology-related intangible assets), stock-based compensation expense and one-time tax restructuring effects. For this reason,
and subject to the limitations set forth above and below, we believe that the supplemental non-GAAP financial information provides a consistent basis for
period-to-period comparisons which can improve investors' understanding of our financial performance.

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Our
management uses the supplemental non-GAAP financial information, together with our GAAP financial information, to evaluate our operating performance, to make operating decisions and to
plan and set objectives for future periods. Compensation of our executive officers is based in part on the performance of our business measured with the supplemental non-GAAP information.
We believe that the supplemental non-GAAP data also provides meaningful information to investors and financial analysts that use them for comparing our operating performance to our
historical trends and to other companies in our industry, as well as for valuation purposes.

The
supplemental non-GAAP financial information adjusts our GAAP financial information to exclude:









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The
following tables set forth our supplemental non-GAAP revenue, operating income, operating margin, net income and diluted net income per share, which exclude the effect of adjusting the
carrying value of acquired companies' deferred revenue, the expense for the amortization of acquired intangible assets, stock-based compensation expense and one-time tax restructuring
effects (as explained above). The tables also set forth the most comparable GAAP financial measure and a reconciliation of the GAAP and non-GAAP information.

|                                     |                                        | Twelve months ended December 31, |         | Increase (Decrease) |  
|------------------------------------ | -------------------------------------- | -------------------------------- | ------- | ------------------- | -
|
|TOTAL REVENUE                        |                                        | €                                | 1,157.8 |                     | €
|Total Revenue by activity            |                                        |                                  |         |                     |  
|Software revenue                     |                                        |                                  | 963.1   |                     |  
|Services and other revenue           |                                        |                                  | 194.7   |                     |  
|                                     |                                        |                                  |         |                     |  
|Total Revenue by segment             |                                        |                                  |         |                     |  
|PLM revenue                          |                                        |                                  | 943.3   |                     |  
|                                     | of which ENOVIA revenue                |                                  |         | 190.4               |  
|Design-centric revenue               |                                        |                                  | 214.5   |                     |  
|                                     |                                        |                                  |         |                     |  
|Total Revenue by geography           |                                        |                                  |         |                     |  
|Americas                             |                                        |                                  | 356.0   |                     |  
|Europe                               |                                        |                                  | 541.9   |                     |  
|Asia                                 |                                        |                                  | 259.9   |                     |  
|                                     |                                        |                                  |         |                     |  
|Total Operating Expenses             |                                        | €                                | 911.9   |                     | €
|Stock-based compensation expense     |                                        |                                  | 11.6    |                     |  
|Amortization of acquired intangibles |                                        |                                  | 39.0    |                     |  
|Operating Income                     |                                        | €                                | 245.9   |                     | €
|PLM Operating income                 |                                        |                                  | 176.5   |                     |  
|Design-centric Operating income      |                                        |                                  | 69.4    |                     |  
|Operating Margin                     |                                        |                                  | 21.2%   |                     |  
|PLM Operating margin                 |                                        |                                  | 18.7%   |                     |  
|Design-centric Operating margin      |                                        |                                  | 32.4%   |                     |  
|Income before Income Taxes           |                                        | €                                | 250.5   |                     | €
|Income tax expense                   |                                        |                                  | (70.8   | )                   |  
|                                     | Income tax effect of adjustments above |                                  |         | 21.1                |  
|                                     | One-time tax restructuring effects     |                                  |         | 11.5                |  
|Minority interest                    |                                        |                                  | 0.1     |                     |  
|Net Income                           |                                        | €                                | 179.8   |                     | €
|Diluted Net Income Per Share(3)      |                                        | €                                | 1.51    |                     | €
|                                     |                                        |                                  |         |                     |  

Twelve months ended December 31,(in millions)

2006 GAAP

Adjustment

2006 non-GAAP

2005 GAAPCost of services and other revenue

€
143.7

€
(0.4
)
€
143.3

€
115.3Research and development


299.9


(6.8
)

293.1


250.0Marketing and sales


296.0


(2.5
)

293.5


223.0General and administrative


83.7


(1.9
)

81.8


58.6Total stock-based compensation expense





(11.6
)


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|                                     |                                        | Twelve months ended December 31, |       | Increase |  
|------------------------------------ | -------------------------------------- | -------------------------------- | ----- | -------- | -
|
|TOTAL REVENUE                        |                                        | €                                | 934.5 |          | €
|Total Revenue by activity            |                                        |                                  |       |          |  
|Software revenue                     |                                        |                                  | 783.6 |          |  
|Services and other revenue           |                                        |                                  | 150.9 |          |  
|Total Revenue by segment             |                                        |                                  |       |          |  
|PLM revenue                          |                                        |                                  | 753.6 |          |  
|                                     | of which ENOVIA revenue                |                                  |       | 121.9    |  
|Design-centric revenue               |                                        |                                  | 180.9 |          |  
|Total Revenue by geography           |                                        |                                  |       |          |  
|Americas                             |                                        |                                  | 283.0 |          |  
|Europe                               |                                        |                                  | 438.2 |          |  
|Asia                                 |                                        |                                  | 213.3 |          |  
|                                     |                                        |                                  |       |          |  
|Total Operating Expenses             |                                        | €                                | 683.5 |          | €
|Stock-based compensation expense     |                                        |                                  |      |          |  
|Amortization of acquired intangibles |                                        |                                  | 9.8   |          |  
|Operating Income                     |                                        | €                                | 251.0 |          | €
|PLM Operating income                 |                                        |                                  | 187.6 |          |  
|Design-centric Operating income      |                                        |                                  | 63.4  |          |  
|Operating Margin                     |                                        |                                  | 26.9% |          |  
|PLM Operating margin                 |                                        |                                  | 24.9% |          |  
|Design-centric Operating margin      |                                        |                                  | 35.1% |          |  
|Income before Income Taxes           |                                        | €                                | 266.9 |          | €
|Income tax expense                   |                                        |                                  | (90.8 | )        |  
|                                     | Income tax effect of adjustments above |                                  |       | 7.2      |  
|One-time tax restructuring effects   |                                        |                                  |      |          |  
|Minority interest                    |                                        |                                  | (0.6  | )        |  
|Net Income                           |                                        | €                                | 175.5 |          | €
|Diluted Net Income Per Share(3)      |                                        | €                                | 1.49  |          | €
|                                     |                                        |                                  |       |          |  

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CONSOLIDATED INFORMATION

Revenue

The tables below set forth our revenue by activity and by geographic region, and the year-to-year growth rate, for the years ended December 31,
2006, 2005 and 2004.

|                              |  | Year ended December 31, |        
|----------------------------- |  | ----------------------- | -------
|
|Revenue by activity           |  |                         |        
|Software revenue              |  | €                       | 963.1  
|Services and other revenue(1) |  |                         | 194.7  
|                              |  |                         |        
|Total                         |  | €                       | 1,157.8
|                              |  |                         |        

|                                |  | Year ended December 31, |        
|------------------------------- |  | ----------------------- | -------
|
|Revenue by geographic region(2) |  |                         |        
|Europe(3)                       |  | €                       | 541.9  
|Americas(3)                     |  |                         | 356.0  
|Asia(3)                         |  |                         | 259.9  
|                                |  |                         |        
|Total                           |  | €                       | 1,157.8
|                                |  |                         |        

2006 compared to 2005:Total revenue increased 23.9% (26% in constant currencies) to €1.16 billion
in 2006 from €934.5 million in 2005, reflecting additional PLM revenue from the inclusion of our two major acquisitions, Abaqus, which was completed in October 2005 (and
renamed Dassault Systèmes Simulia Corp. in May 2007), and MatrixOne, which was completed in May 2006, and strong internal growth from both our business segments. On a
non-GAAP basis, revenue increased 24.8% (27% in constant currencies) to €1.18 billion in 2006 from €943.6 million in 2005. Excluding MatrixOne
and Abaqus, revenue increased 10% in 2006 compared to 2005 (12% on a non-GAAP basis and in constant currencies). All geographic regions contributed to the growth in total revenue in 2006,
with revenue in Europe increasing by 23.7%, revenue in the Americas increasing by 25.8% (27% in constant currencies) and revenue in Asia increasing by 21.8% (29% in constant currencies). As a
percentage of total revenue in 2006, Europe represented 47% (unchanged from 2005), the Americas accounted for 31% (compared to 30% in 2005) and Asia represented 22% (compared to 23% in 2005).

2005 compared to 2004:Total revenue increased 17.3% to €934.5 million in 2005 from
€796.6 million in 2004 on strong growth in both software and services and in both business segments. On a non-GAAP basis, revenue increased 18.5% (19% in constant
currencies) to €943.6 million in 2005 from €796.6 million in 2004. All geographic regions contributed to the growth in total revenue in 2005, with the
Americas region reporting the strongest growth. All regions benefited from the inclusion of Abaqus for the fourth quarter of 2005. In Europe revenue increased 18.1% in 2005, in the Americas revenue
increased 22.6%, and in Asia revenue increased 9.6%. As a percentage of 2005 total revenue, Europe represented 47%, the Americas accounted for 30% and Asia represented 23%.

Software Revenue

|                          |  | Year ended December 31, |      
|------------------------- |  | ----------------------- | -----
|
|Software revenue          |  | €                       | 963.1
|(as a % of total revenue) |  |                         | 83.2%

2006 compared to 2005:In 2006 software revenue (comprised of new licenses, periodic licenses, maintenance and product
development revenue) increased 22.9% or €179.5 million to €963.1 million on a 15% increase in new licenses revenue and a 30% increase in periodic
licenses, maintenance and product development revenue. On a non-GAAP basis, software revenue increased 24.0% (26% in constant currencies) to €982.8 million from
€792.7 million in 2005. Recurring revenue increased 31.5% to €512.1 million in 2006 compared to €389.3 million in 2005, and
represented 53% and 50% of software revenue in 2006 and 2005, respectively. Recurring revenue growth

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reflected
the additional recurring revenue from the Abaqus and MatrixOne acquisitions, increases in the installed base of the PLM business segment and growth in maintenance fees in the Mainstream
3D segment.

We
experienced solid growth in CATIA and SolidWorks seat licensing activity in 2006, accompanied by stable to slightly increasing average pricing in constant currencies for the year. In the aggregate
CATIA and SolidWorks seats licensed during 2006 totaled 78,684 seats, representing an increase of 9.2% in comparison to 2005. CATIA seats licensed increased 1.6% to 35,343 seats for
2006, and SolidWorks seats licensed increased 16.3% to 43,341 seats for 2006. The average CATIA Version 5 end-user price per seat decreased 1%, but was unchanged in constant
currencies in 2006. The average SolidWorks end-user price per seat increased 3% and 5% in constant currencies in 2006.

2005 compared to 2004:In 2005 software revenue increased 16.8% to €783.6 million on the strong growth of our PLM
and Mainstream 3D software applications. On a non-GAAP basis, software revenue increased 18.2% (19% in constant currencies) to €792.7 million from
€670.9 million in 2004. Recurring software revenue increased 13.4% to €389.3 million in 2005, compared to €343.2 million in 2004,
and represented 50% and 51% of software revenue in 2005 and 2004, respectively. Approximately two-thirds of the increase in recurring software revenue reflected growth in the installed
base of the PLM business segment, as well as growth in maintenance fees in the Mainstream 3D segment. The remainder of the year-over-year increase reflected principally the
addition of recurring software revenue recorded by Abaqus, which was consolidated beginning with the last quarter of 2005.

We
experienced strong growth in seat licensing activity in 2005, accompanied by stable to slightly increasing pricing on average for the year. In the aggregate CATIA and SolidWorks seats licensed
during 2005 totaled 72,078 seats, representing an increase of 15.2% in comparison to 2004. CATIA seats licensed increased 6.4% to 34,798 seats for 2005, and SolidWorks seats licensed
increased 24.8% to 37,280 seats for 2005.

Services and other revenue

|                           |  | Year ended December 31, |      
|-------------------------- |  | ----------------------- | -----
|
|Services and other revenue |  | €                       | 194.7
|(as a % of total revenue)  |  |                         | 16.8%

2006 compared to 2005:Services and other revenue increased 29.0% (31% in constant currencies) to
€194.7 million in 2006 from €150.9 million in 2005. Growth in services and other revenue reflected several factors: (i) service revenue recorded by
Abaqus and MatrixOne, (ii) higher fees received by us as an IBM Business Partner in certain geographies and in our role as Channel Management Provider for IBM and (iii) growth in PLM
service engagements.

2005 compared to 2004:Services and other revenue increased 20.1% (20% in constant currencies) to €150.9 million in
2005, compared to €125.7 million in 2004. Growth in services and other revenue reflected several factors: (i) growth in PLM service engagements, (ii) increased
fees received by us as an IBM Business Partner in certain geographies, (iii) fees received by us in our role beginning in mid-2005 as Channel Management Provider for IBM PLM's
Business Partners sales and marketing network, and (iv) service revenue recorded by Abaqus, which was consolidated beginning in the fourth quarter of 2005.

For
each of the years 2006, 2005 and 2004, nearly all our service revenue was generated by the PLM segment.

OPERATING EXPENSES

Growth in operating expenses reflected principally the effect of the acquisitions of MatrixOne in May 2006 and of Abaqus in October 2005 and the increase in the
number of our employees. In addition, amortization of acquired intangibles increased substantially in 2006, principally as a result of these two acquisitions.

|                               |  | Year ended December 31, |      
|------------------------------ |  | ----------------------- | -----
|
|Operating expenses             |  | €                       | 911.9
|Non-GAAP adjustments(1)        |  |                         | 50.6 
|                               |  |                         |      
|Non-GAAP operating expenses(1) |  | €                       | 861.3
|                               |  |                         |      

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Cost of Revenue expenses

|                                   |  | Year ended December 31, |      
|---------------------------------- |  | ----------------------- | -----
|
|Cost of Software revenue           |  | €                       | 49.6 
|Cost of Services and other revenue |  |                         | 143.7
|                                   |  |                         |      
|Total Cost of Revenue              |  | €                       | 193.3
|                                   |  |                         |      

2006 compared to 2005:Total cost of revenue increased 36.0% in 2006 to €193.3 million from
€142.1 million in 2005. Cost of software revenue increased 85.0% to €49.6 million in 2006 compared to €26.8 million in 2005,
primarily reflecting the acquisitions of Abaqus and MatrixOne. Cost of services and other revenue increased 24.6% to €143.7 million in 2006 compared to
€115.3 million in 2005, reflecting the inclusion of the Abaqus and MatrixOne acquisitions as well as an increase in activity. The services and other revenue gross margin was
26.2% in 2006, an improvement from 23.6% in 2005, primarily reflecting an increase in fees received for our support of PLM sales (see "Item 4B. Business
Overview  Sales and Marketing").

2005 compared to 2004:Total cost of revenue increased 15.8% in 2005 to €142.1 million from
€122.7 million in 2004. Cost of software revenue increased €5.1 million or 23.5% in 2005 compared to 2004 primarily reflecting an increase in software
sales. Cost of services and other revenue increased €14.3 million or 14.2% in 2005 compared to 2004, primarily reflecting higher activity. The gross profit margin for services
and other revenue increased to
23.6% in 2005 from 19.6% in 2004. The significant improvement in the gross profit margin for services and other revenue was primarily attributable to a more favorable mix of higher margin PLM
consulting engagements.

Research and development expenses

|                                  |  | Year ended December 31, |      
|--------------------------------- |  | ----------------------- | -----
|
|Research and development expenses |  | €                       | 299.9
|(as a % of total revenue)         |  |                         | 25.9%

2006 compared to 2005:Research and development expenses increased 20.0% to €299.9 million in 2006
compared to €250.0 million in 2005. Growth in research and development expenses closely tracked growth in average research and development headcount of 18.7% with the
acquisitions of Abaqus and MatrixOne representing a large majority of this increase. Internal growth also contributed to the increase in headcount. As a percentage of revenue, research and development
expenses decreased to 25.9% in 2006 from 26.8% in 2005, reflecting principally the application of an increased tax credit for research and development costs. At December 31, 2006, the total
headcount in research and development and maintenance was 3,164 employees, compared to 2,678 at December 31, 2005. See the discussion under "Item 5C: Research and
Development, Patents and Licenses  Research and Development" below.

2005 compared to 2004:Research and development expenses increased 12.7% to €250.0 million in 2005, compared to
€221.9 million in 2004. The increase in research and development expenses reflected primarily an average headcount growth for the year of 14.0% due to internal growth and the
acquisitions of Abaqus and Virtools, as well as our partnership with i2 in sourcing. In addition, we had higher expenses related to our research and development work on PLM, automation and 3D
XML technologies. At December 31, 2005, the total headcount in research and development and maintenance was 2,678 employees, compared to 2,171 at December 31, 2004. See the
discussion under "Item 5C: Research and Development, Patents and Licenses  Research and Development" below.

Marketing and sales expenses

|                             |  | Year ended December 31, |      
|---------------------------- |  | ----------------------- | -----
|
|Marketing and sales expenses |  | €                       | 296.0
|(as a % of total revenue)    |  |                         | 25.6%

2006 compared to 2005:Marketing and sales expenses increased 32.7% in 2006 compared to 2005. Higher expenses reflected
principally the inclusion of Abaqus and MatrixOne (with both companies primarily marketing and selling their products through direct sales forces), additional staffing related to our PLM indirect
sales channel initiative as well as growth in our PLM direct sales resources and higher marketing and sales investments in our design-centric segment. Average headcount in marketing, sales and
services increased 19.6% in 2006, principally reflecting the acquisitions of Abaqus and MatrixOne, internal growth related to our marketing and sales initiatives and other acquisitions. At
December 31, 2006, the total headcount in marketing, sales and services was 3,166 employees,compared to 2,614 employees at December 31, 2005.

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2005 compared to 2004:Marketing and sales expenses increased 28.4% to €223.0 million in 2005, compared to
€173.7 million in 2004. Higher expenses reflected principally the inclusion of our Rand North America Inc. joint venture for a full year (set up in
mid-2004), the acquisitions of certain Rand subsidiaries in Europe in early 2005 and Abaqus in October 2005, as well as additional investments related to the ramp-up of
our Channel Management Provider organization to support the IBM PLM Business Partners sales and marketing network. At December 31, 2005, the total headcount in marketing, sales and services was
2,614 employees, compared to 1,954 employees at December 31, 2004.

General and administrative expenses

|                                    |  | Year ended December 31, |     
|----------------------------------- |  | ----------------------- | ----
|
|General and administrative expenses |  | €                       | 83.7
|(as a % of total revenue)           |  |                         | 7.2%

2006 compared to 2005:General and administrative expenses increased 42.8% in 2006 compared to 2005. The increase in
general and administrative expenses reflected principally the inclusion of Abaqus and MatrixOne, increased administrative staffing related to our PLM indirect sales channel initiative and higher
expenses related to the implementation of our ERP (Enterprise Resource Planning) systems and Sarbanes-Oxley internal controls. Average general and administrative headcount increased 30.5% in 2006,
largely reflecting the acquisitions of Abaqus and MatrixOne and increased staffing related to our PLM indirect sales channel initiative. At December 31, 2006, the total general and
administrative headcount was 510, compared to 401 at December 31, 2005.

2005 compared to 2004:General and administrative expenses increased 24.4% to €58.6 million in 2005, compared to
€47.1 million in 2004. The increase in general and administrative expenses reflected principally an increase in average headcount of 18.3% primarily arising from the impact of
acquisitions in 2004 and 2005, and higher expenses related to the implementation of our new ERP systems and Sarbanes-Oxley internal controls. At December 31, 2005, the total general and
administrative headcount was 401, compared to 331 at December 31, 2004.

Amortization of acquired intangibles

|                                     |  | Year ended December 31, |     
|------------------------------------ |  | ----------------------- | ----
|
|Amortization of acquired intangibles |  | €                       | 39.0

2006 compared to 2005:Amortization of acquired intangibles increased €29.2 million in 2006 compared
to 2005. This increase reflected principally the amortization of acquired intangibles arising primarily from our acquisitions of MatrixOne in May 2006 and Abaqus in October 2005.

2005 compared to 2004:Amortization of acquired intangibles increased to €9.8 million in 2005, compared to
€1.4 million in 2004. This increase reflected principally the amortization of acquired intangibles arising primarily from our acquisition of Abaqus in October 2005.

OPERATING INCOME

|                 |  | Year ended December 31, |      
|---------------- |  | ----------------------- | -----
|
|Operating income |  | €                       | 245.9

2006 compared to 2005:Operating income decreased 2.0% to €245.9 million in 2006 from
€251.0 million in 2005, and our operating margin decreased to 21.2% from 26.9% in 2005. The decrease in operating income and operating margin reflected higher revenue which was
partially offset by higher operating expenses and further offset principally by amortization of acquired intangibles arising from our acquisitions of MatrixOne and Abaqus, as well as the recently
adopted requirement to recognize in our income statement all share-based payments to employees (pursuant to FAS 123(R)). On a non-GAAP basis, operating income increased 17.1% to
€316.2 million in 2006 from €269.9 million in 2005 on strong revenue growth, offset in part by higher expenses. On a non-GAAP basis, our
operating margin decreased to 26.9% in 2006 compared to 28.6% in 2005. The decrease in the non-GAAP operating margin reflected principally approximately 1.5 points of dilution from
the acquisition of MatrixOne and a negative impact from the weakening of the yen, partially offset by increased profitability from our existing businesses.

2005 compared to 2004:Operating income increased 9.8% to €251.0 million in 2005, compared to
€229.8 million in 2004 reflecting higher revenue offset in part by higher operating expenses as well as amortization of acquired intangibles arising principally from our
acquisition of Abaqus. On a non-GAAP basis, operating income increased 16.7% to €269.9 million in 2005 from €231.2 million in 2004,

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closely
tracking our growth in total revenue. Our operating margin in 2005 decreased to 26.9% compared to 28.8% in 2004. On a non-GAAP basis, our operating margin was 28.6% in 2005,
relatively stable compared to 29.0% in 2004, since increased profitability from our existing businesses largely offset the growth in operating expenses arising principally from acquisitions in 2005
and 2004.

FINANCIAL REVENUE AND OTHER, NET

|                                 |  | Year ended December 31, |    
|-------------------------------- |  | ----------------------- | ---
|
|Financial revenue and other, net |  | €                       | 3.6

2006 compared to 2005:Financial revenue and other, net amounted to €3.6 million in 2006 compared to
€14.9 million in 2005. Financial revenue and other, net in 2006 was comprised of net interest income of €11.1 million, exchange losses of
€(6.9) million and other revenue of €(0.6) million. The decrease in financial revenue and other, net primarily reflected a 20.1% decrease in net interest income due to
a lower average balance of cash and short-term investments, as well as higher interest expense (due to the drawdown on our credit line in connection with the acquisition of
MatrixOne) and higher exchange losses incurred in connection with some intercompany loans denominated in U.S. dollars. See Note 12 to our consolidated financial statements. At
December 31, 2006, cash and short-term investments totaled €459.2 million, compared to €379.9 million at December 31, 2005. See
also "Liquidity and Capital Resources" below and Notes 2 and 12 to our consolidated financial statements.

2005 compared to 2004:Financial revenue and other, net totaled €14.9 million in 2005, compared to
€7.0 million in 2004. The increase in financial revenue and other primarily reflected a 20.6% increase in net financial revenue due to a higher average balance of cash and
short-term investments for the first three quarters of 2005 as well as more favorable interest rates. Specifically, financial revenue and other in 2005 was comprised of net financial
revenue of €13.9 million, exchange losses on accounts receivable of €(1.5) million and other revenue of €2.5 million. Other revenue was
comprised primarily of gain on sales of one of our equity investments. See Note 12 to our consolidated financial statements. At December 31, 2005, cash and short-term
investments totaled €379.9 million, compared to €552.8 million at December 31, 2004, with the decrease reflecting principally acquisitions
completed during the year, offset in part by net cash provided by operations. See Notes 2 and 12 to our consolidated financial statements.

INCOME TAX EXPENSE

|                                |  | Year ended December 31, |      
|------------------------------- |  | ----------------------- | -----
|
|Income tax expense              |  | €                       | 70.8 
|Effective consolidated tax rate |  |                         | 28.3%

2006 compared to 2005:Income tax expense amounted to €70.8 million in 2006, and our effective
consolidated tax rate decreased to 28.3%, principally due to a tax restructuring effected during 2006 in the United States that generated one-time tax restructuring benefits
totaling €11.5 million. See Note 13 to our consolidated financial statements. On a non-GAAP basis, our effective consolidated tax rate was 32.2% for
2006 compared to 34.4% for 2005.

2005 compared to 2004:Income tax expense totaled €90.8 million in 2005, compared to
€80.9 million in 2004, representing an effective consolidated tax rate in 2005 of 34.1%, compared to 34.1% in 2004. See Note 13 to our consolidated financial
statements.

NET INCOME AND DILUTED NET INCOME PER SHARE

|                                            |  | Year ended December 31, |      
|------------------------------------------- |  | ----------------------- | -----
|
|Net income                                  |  | €                       | 179.8
|Diluted net income per share                |  | €                       | 1.51 
|Diluted weighted average shares outstanding |  |                         | 119.1

2006 compared to 2005:Net income increased 2.4% to €179.8 million in 2006, compared to
€175.5 million in 2005. On a non-GAAP basis, net income increased 16.2% to €217.5 million in 2006, compared to
€187.2 million in 2005, principally reflecting growth in operating income, as well as a lower effective consolidated tax rate, partially offset by a lower level of financial
revenue and other, net. Diluted net income per share increased 1.3% in 2006 to €1.51, compared to €1.49 in 2005. On a non-GAAP basis, diluted net
income per share increased 15.1% to €1.83 in 2006, compared to €1.59 in 2005.

2005 compared to 2004:Net income increased 12.2% to €175.5 million in 2005, compared to
€156.4 million in 2004. On a non-GAAP basis, net income increased 18.8% to €187.2 million in 2005, compared to
€157.6 million in 2004. Growth in net income largely reflected the

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increase
in operating income as well as higher financial revenue and other, net. Diluted net income per share increased 10.4% to €1.49 in 2005, compared to
€1.35 in 2004. On a non-GAAP basis, diluted net income per share increased 16.9% to €1.59 in 2005, compared to
€1.36 in 2004. Growth in diluted net income per share tracked closely the increase in total revenue.

REVENUE AND OPERATING INCOME BY SEGMENT

The table below sets forth the contribution of the process-centric (PLM) and design-centric (Mainstream 3D) segments to our revenue and operating income
(see Notes 1 and 17 to our consolidated financial statements).

|                                        |  | Year ended December 31, |        
|--------------------------------------- |  | ----------------------- | -------
|
|Revenue (excluding inter-segment sales) |  |                         |        
|PLM                                     |  | €                       | 943.3  
|Design-centric                          |  |                         | 214.5  
|                                        |  |                         |        
|Total                                   |  |                         | 1,157.8
|                                        |  |                         |        
|Operating income                        |  |                         |        
|PLM                                     |  |                         | 176.5  
|Design-centric                          |  |                         | 69.4   
|                                        |  |                         |        
|Total                                   |  |                         | 245.9  
|                                        |  |                         |        

|                                               |  | Year ended December 31, |        
|---------------------------------------------- |  | ----------------------- | -------
|
|Supplemental Non-GAAP Financial Information(1) |  |                         |        
|                                               |  |                         |        
|Revenue (excluding inter-segment sales)        |  |                         |        
|PLM                                            |  | €                       | 959.4  
|Design-centric                                 |  |                         | 218.1  
|                                               |  |                         |        
|Total                                          |  |                         | 1,177.5
|                                               |  |                         |        
|Operating income                               |  |                         |        
|PLM                                            |  |                         | 238.4  
|Design-centric                                 |  |                         | 77.8   
|                                               |  |                         |        
|Total                                          |  |                         | 316.2  
|                                               |  |                         |        

Process-centric (PLM)

Revenue

2006 compared to 2005:Revenue for the PLM segment, including ENOVIA revenue, increased 24.8% (27% in constant currencies) in 2006 to
€943.3 million, representing 81.5% of total revenue (excluding €3.9 million of inter-segment sales). On a non-GAAP basis and excluding
inter-segment sales, PLM revenue increased 25.6% (28% in constant currencies) in 2006 to €959.4 million, including ENOVIA revenue which increased 63.8% to
€199.7 million. The increase in revenue in 2006 reflected principally the inclusion of MatrixOne and Abaqus, as well as solid revenue growth for CATIA and contributions from our
other product lines. While overall CATIA licenses grew relatively modestly, as discussed below, CATIA revenue growth was strong as a result of increases in recurring revenue and services revenue.

Overall
CATIA licenses increased 1.6% in 2006. A total of 35,343 CATIA seats were licensed for 2006 compared to 34,798 seats for 2005. Pricing for CATIA V5 decreased 1% on average
(stable on a constant currency basis) for 2006 compared to 2005.

2005 compared to 2004:Revenue for the PLM segment, including ENOVIA revenue, increased 15.8% in 2005 to
€753.6 million, representing 80.6% of total revenue (excluding €2.1 million of inter-segment sales) compared with €650.7 million in
2004 (excluding €1.5 million of inter-segment sales). On a non-GAAP basis and excluding inter-segment sales, PLM revenue increased 17.1% (17% in constant currencies)
in 2005 to €761.8 million from €650.7 million in 2004. The increase in revenue in 2005 reflected principally strong year-over-year
performances by our PLM brands, with solid revenue growth for CATIA, a 19.9% increase in our ENOVIA revenue and

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strong
growth of our DELMIA applications. We also benefited from the inclusion of Abaqus for the 2005 fourth quarter. For 2005 Abaqus accounted for approximately 2 percentage points of growth
in revenue, and 3 percentage points of growth in revenue on a non-GAAP basis. ENOVIA revenue increased 19.9% to €121.9 million in 2005, compared to
€101.7 million in 2004.

CATIA
licenses increased 6.4% in 2005 to a total of 34,798 seats for 2005 compared to 32,695 seats for 2004, with pricing for CATIA V5 increasing 2% on average for the year (3% on
a constant currency basis) due to a richer product configuration per seat.

Operating income

2006 compared to 2005:Operating income for the PLM segment decreased 5.9% with higher revenue more than offset by dilution from our
MatrixOne acquisition including amortization of intangibles related to the acquisition, increased expenses related to our PLM indirect channel initiatives and other investments in marketing and sales
and research and development. On a non-GAAP basis, operating income increased €34.4 million or 16.9% in 2006 compared to 2005, reflecting higher revenue partially
offset by dilution from the MatrixOne acquisition, increased expenses related to our PLM indirect channel initiatives and the negative impact of the yen.

2005 compared to 2004:Operating income for the process-centric segment increased 2.7% to €187.6 million in 2005,
compared with €182.7 million in 2004. On a non-GAAP basis, operating income increased 11.0% to €204.0 million in 2005, compared with
€183.8 million in 2004, and represented 26.8% of segment revenue in 2005, compared to 28.2% in 2004.

Design-centric (Mainstream 3D)

Revenue

2006 compared to 2005:Revenue in the design-centric segment increased 18.6% in 2006 to €214.5 million, representing
18.5% of total revenue (excluding €0.7 million of inter-segment sales). On a non-GAAP basis and excluding inter-segment sales, revenue in the design-centric segment
increased 19.6% (22% in constant currencies) in 2006 to €218.1 million on strong growth in new seats licensed, an increase in the average end-user revenue per seat
and growth in maintenance renewals. Specifically, SolidWorks seats licensed increased 16.3% to a total of 43,341 seats for 2006, compared to 37,280 for 2005, on strong demand across all
major geographic markets. SolidWorks average end-user revenue per seat increased 3% (increase of 5% in constant currencies) for 2006 in comparison to 2005, benefiting from the addition of
PDMWorks Enterprise. The sales mix of higher-end products, with SolidWorks Office Premium and Office Professional representing a majority of the total seats licensed during 2006, was
similar to 2005.

2005 compared to 2004:Revenue in the design-centric segment increased 24.0% in 2005 to €180.9 million, representing
19.4% of total revenue (excluding €0.5 million of inter-segment sales), compared with €145.9 million in 2004 (excluding
€0.2 million of inter-segment sales). On a non-GAAP basis and excluding inter-segment sales, revenue in the design-centric segment increased 24.6% (25% in constant
currencies) in 2005 to €181.8 million compared with €145.9 million in 2004. SolidWorks seats licensed increased 24.8% to a total of 37,280 seats
for 2005, compared to 29,882 for 2004, on strong demand across all major geographic markets and stable pricing on average. SolidWorks average end-user revenue per seat was unchanged
(increase of 1% in constant currencies) for 2005 in comparison to 2004, reflecting a generally similar mix of higher-end products with SolidWorks Office Premium and Office Professional
representing a majority of the total seats licensed during 2005.

Operating income

2006 compared to 2005:Operating income for the design-centric segment increased €6.0 million or 9.5% in 2006
compared to 2005. On a non-GAAP basis, operating income increased €11.9 million or 18.1% in 2006 compared to 2005, tracking closely revenue growth as the operating
margin was generally stable in 2006 in comparison to 2005. On a non-GAAP basis, the design-centric segment's operating income represented 35.7% of segment revenue in 2006, compared with
36.2% in 2005.

2005 compared to 2004:Operating income for the design-centric segment increased 34.6% to €63.4 million in 2005,
compared to €47.1 million in 2004. On a non-GAAP basis, operating income increased 39.0% to €65.9 million in 2005, compared with
€47.4 million in 2004, and represented 36.2% of total segment revenue in 2005, compared with 32.5% in 2004.

TRENDS IN QUARTERLY RESULTS

Our quarterly revenues have varied significantly and are likely to vary significantly in the future. Our net income also varies considerably each quarter,
reflecting the change in revenues, since our expenses tend to be relatively stable. A significant portion of sales typically occurs in the last month of each quarter, and, as is typical in the
software market, we normally experience our highest licensing activity for the year in December. Software revenue, total revenue, operating income and net income have generally been highest in the
fourth quarter of each year.

In
2006, revenue for the fourth, third, second and first quarters represented, respectively, 30.2%, 23.8%, 24.2% and 21.8% of our total revenue for the year. In 2005, our revenue for the fourth,
third, second and first quarters represented, respectively, 32.6%, 22.9%, 23.3% and 21.2% of our total revenue for the year. See "Item 3D  Risk Factors"
for a discussion of the principal causes of variations in our quarterly results.

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B. Liquidity and Capital Resources

Our principal source of liquidity is cash from operations. Cash obtained from operations has been used primarily for working capital, short-term
investments, dividend payments and the financing of business acquisitions.

Working
capital at December 31, 2006, increased by €10.8 million, compared to a decrease in 2005 of €11.6 million and an increase of
€27.3 million in 2004. The most important change in 2006 concerned an increase in unearned revenue, reflecting primarily unearned revenue recorded in connection with the
acquisition of MatrixOne, as well as unearned revenue generated in connection with our increasing PLM and Mainstream 3D businesses. See the consolidated statements of cash flows included in this
annual report. Customers' days of sales outstanding as of December 31, 2006 were 77 days, compared to 83 days as of December 31, 2005. Under our marketing and distribution
agreement, IBM is required to pay us a cash settlement one month after it records its revenue for licensing activity. However, due to holidays and other factors, such payments are not always received
precisely within the one-month period. Delays that cause a payment to be made in a subsequent accounting period can lead to noticeable variations in the balance of accounts receivable on
any given balance sheet date. See Note 1 to our consolidated financial statements.

Cash
and cash equivalents and short-term investments totaled €459.2 million as of December 31, 2006, compared with €379.9 million and
€552.8 million as of December 31, 2005, and December 31, 2004, respectively. During 2006, net cash provided by operating activities increased to
€259.8 million compared with €196.7 million during 2005. Cash flows used in investing activities amounted to €268.6 million,
reflecting primarily acquisitions of businesses, net of cash, compared to €355.8 million in 2005. In 2006, net cash provided by financing activities totaled
€124.9 million, primarily comprised of borrowings of €200 million, cash dividends paid of €48.2 million, net cash disbursed for the
repurchase of SolidWorks shares of €63.2 million and proceeds from stock option exercise, net of €23.8 million. In 2005, net cash used in financing
activities totaled €44.9 million. Exchange rate fluctuations had a negative translation effect of €20.5 million on our December 31, 2006 cash
balance compared to a positive effect of €26.8 million in 2005.

Our
expenditures and investments in 2006 consisted principally of acquisitions, which were financed from operating cash flows and a revolving credit facility. During 2006 we drew down all of the
€200 million provided by our five-year revolving credit facility in connection with the acquisition of MatrixOne, Inc. See Note 8 to our
consolidated financial statements. Pursuant to the terms of this credit facility, we are required to comply with limitations on our ability to grant liens on, or sell, our assets or the assets of our
principal subsidiaries, or to carry out a restructuring. In the event of a change of control of the Company, the lenders could require immediate repayment. We currently have no significant capital
expenditures or investments in progress, except with respect to the anticipated acquisition of ICEM (see "Item 5D: Trend Information" below).

At
the end of 2006, our financial indebtedness included long-term debt in the amount of €200 million, as well as a financial lease relating to our offices. Our net
financial position at December 31, 2006, was €254.9 million, representing cash and short-term investments, net of long-term debt. Management
believes that our currently available sources of liquidity will provide sufficient resources for continuing our operations for the foreseeable future.

C. Research and Development, Patents and Licenses

RESEARCH AND DEVELOPMENT

We believe that research and development is one of the most important elements of our success. We operate research laboratories in France, the
United States, Canada, Germany, the United Kingdom, Israel and India. In 2006, research and development expenses increased 20.0% to €299.9 million, compared to
2005, reflecting internal growth and the acquisitions of MatrixOne in May 2006 and Abaqus in October 2005 (renamed Dassault Systèmes Simulia Corp. in May 2007). Total
research and development and maintenance headcount increased 18.1% in 2006 to 3,164 at December 31, 2006.

Research
and development investments over the past three years have been devoted principally to: introducing new PLM and 3D MCAD applications, advancing our V5 platform, developing a
multi-physics simulation platform, and further expanding our addressable markets with the introduction of new, emerging technologies and application domains, including 3D For ALL, CATIA Systems and
DELMIA Automation.

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The
table below sets forth information with respect to our research and development expenses for 2006, 2005 and 2004.

|                                                                   |  | Year ended December 31, |      
|------------------------------------------------------------------ |  | ----------------------- | -----
|
|Research and development expenses (in millions)                    |  | €                       | 299.9
|As a percentage of total revenue(1)                                |  |                         | 25.9%
|Research and development and maintenance personnel (at period end) |  |                         | 3,164

Our expenses for research and development include primarily the personnel cost for specialists in software architecture and various application fields such as
mechanical design, manufacturing, mechanical engineering, and linear and non-linear finite element analysis, interactive 3D applications, computer graphics, as well as for specialists with
significant experience and knowledge of our target industrial sectors. Research and development expenses also include computer rental expenses, the depreciation and cost of maintenance related to
computer hardware used in research and development, development tools, networking and communication expenses. For a discussion of the variation in research and development expenses between the periods
indicated, see the discussion under "Item 5A: Operating Results  Consolidated Information  Research and Development
Expenses" above.

INTELLECTUAL PROPERTY

We rely on a combination of copyrights, trade secret, trademark and patents to establish and protect our intellectual property in our technology. We distribute
our products under software licenses, which grant customers, rather than ownership of, licenses to our products which contain various provisions protecting our ownership and the confidentiality of the
licensed technology.

The
source code of our products is protected as a trade secret and as a copyrighted work. In addition, some of the key capabilities of our software products are protected through patents when
possible. However, no assurance can be given that others will not copy or otherwise obtain and use our products or technology without authorization. In addition, effective copyright, trade secret,
trademark and patent protection or enforcement may be unavailable or limited in certain countries.

In
other respects, we believe that, due to the rapid technological advances within the industry, factors such as the technological and creative skills of our personnel are also very important to
establish and maintain a technology leadership position within the industry.

With
regard to trademarks, our policy is to register trademarks for our main lines of products in the countries where we do business. Such registrations are a combination of international trademark
registrations, community trademarks and national registrations. When companies are acquired, a review and an assessment of their main trademarks is made, and when necessary, complementary applications
for registrations are made in order to establish coverage of such trademarks compliant with our trademark policy.

We
generally file patent applications in regions where our main customers and competitors are located. Our portfolio includes more than 60 patents already granted in the United States
and approximately 200 patent applications pending in various geographic areas. In 2006, we filed 13 new patent applications.

We
are also engaged in an active policy against piracy and take systematic measures agains the illegal use and distribution of our products.

See
"Item 3D: Risk Factors" for risks concerning possible third-party allegations of unauthorized use of their intellectual property, and the difficulties in ensuring adequate protection for
our own intellectual property.

D. Trend Information

ADDITIONAL BUSINESS HIGHLIGHTS

On April 26, 2007, we entered into an agreement pursuant to which we would acquire ICEM, a specialist in styling and high quality surface modeling,
headquartered in the UK, for an estimated purchase price of €51.4 million in cash. ICEM customers include original equipment manufacturers (such as Ford, Volkswagen Group, BMW,
Porsche, PSA, Renault and Nissan); design companies (such as Guigiaro/ITALDesign, Pininfarina and Bertone); and consumer goods companies (such as Polaris and Electrolux). ICEM complements our current
solutions, extending our surface capabilities with its high quality surfacing and styling solutions. We expect to fund the proposed acquisition from cash on hand. Subject to satisfying the closing
conditions, the acquisition is anticipated to be completed in June 2007. In 2006, ICEM's

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revenues
totaled about €20 million and, based upon its recent operating results, we do not anticipate that ICEM will be dilutive to our non-GAAP earnings.

In
May 2007, we introduced 3DLive, offering collaborative intelligence solutions designed to enhance interaction, improve decision-making and accelerate innovation among all participants
involved in PLM. 3DLive is also the first illustration of our online portfolio, labeled Version 6, which will supplement our Version 5 desktop-based application portfolio and will be
focused on using our technology to provide further on-line services.

2007 UNAUDITED FIRST QUARTER FINANCIAL RESULTS

See below for a reconciliation of all first quarter non-GAAP information to the corresponding GAAP
information.

For
the first quarter of 2007, total revenue increased 15% to €290.9 million (up 21% in constant currencies), on a 15% increase in software revenue to
€245.8 million and a 16% increase in services and other revenue to €45.1 million. The first quarter reflected a good dynamic with large companies and our
indirect channels. In the 2006 first quarter total revenue was €252.1 million. On a non-GAAP basis, total revenue for the first quarter of 2007 increased 15% to
€294.7 million and increased 21% in constant currencies, driven by a 15% increase (21% in constant currencies) in non-GAAP software revenue to
€249.6 million and a 16% increase (22% in constant currencies) in services and other revenue.

From
a regional perspective all geographic regions contributed to the increase in total revenue, with Europe up 10%, the Americas up 27% (38% in constant currencies) and Asia increasing 11% (22% in
constant currencies).

From
a segment perspective, both PLM and Mainstream 3D posted strong year-over-year growth. PLM revenue increased 17% (23% in constant currencies) to
€235.0 million, compared to €200.9 million in the 2006 first quarter. On a non-GAAP basis, PLM revenue increased 16% to
€237.3 million and increased 23% in constant currencies in the 2007 first quarter. ENOVIA helped drive the year-over-year growth in PLM, with ENOVIA
revenue increasing 118% to €57.4 million. On a non-GAAP basis, ENOVIA revenue increased 139% in constant currencies and, excluding MatrixOne, ENOVIA
non-GAAP revenue increased 29% in constant currencies. First quarter PLM results also benefited from a good performance by CATIA and SIMULIA. Both CATIA and SolidWorks contributed to the
9% growth in new licenses which totaled 19,625 in the 2007 first quarter, compared to 17,944 in the 2006 first quarter.

Mainstream
3D revenue increased 9% (15% in constant currencies) to €55.9 million from €51.2 million in the year-ago quarter. On a
non-GAAP basis, Mainstream 3D revenue increased 10% (16% in constant currencies) to €57.4 million, compared to €52.3 million in the
year-ago quarter. New SolidWorks licenses increased 15% to 11,813 principally reflecting strong SolidWorks results in Europe and the Americas. SolidWorks average
end-user revenue per seat decreased 3% in constant currencies in comparison to the year-ago quarter, but was generally stable in comparison to the fourth quarter
of 2006.

Operating
income decreased 2.3% to €46.1 million in the 2007 first quarter, compared to €47.2 million in the 2006 first quarter. On a non-GAAP
basis, operating income increased 7.6% to €65.1 million in the 2007 first quarter, up from €60.5 million in the 2006 first quarter. The operating margin
was 15.8% in the 2007 first quarter, compared to 18.7% in the year-ago period, primarily reflecting the impact of non-GAAP adjustments. On a non-GAAP basis, the
operating margin decreased to 22.1% in the 2007 first quarter, from 23.6% for the 2006 first quarter, principally reflecting dilution in connection with the acquisition of MatrixOne in May 2006
and investments as we ramp up our PLM mid-market sales channel.

Diluted
net income per share decreased 7.7% to €0.28 in the 2007 first quarter, compared to €0.26 in the first quarter of 2006. On a non-GAAP
basis, diluted net income per share increased 14.7% to €0.39, principally reflecting higher operating income, despite absorbing an estimated nine point negative currency impact. In the
2007 first quarter the US dollar and Japanese yen weakened versus the euro on average approximately 9% and 11%, respectively, compared to the 2006 first quarter. We also benefited from a decrease in
our effective income tax rate from 33.6% in the 2006 first quarter to 32.0% in the 2007 first quarter.

At
March 31, 2007, cash and short-term investments totaled €562.1 million, compared to €459.2 million at December 31, 2006,
principally reflecting higher cash receipts. Long-term debt totaled €204.1 million, compared to €204.3 million at December 31, 2006.
Net operating cash flow was €108.4 million for the 2007 first quarter, increasing from €101.2 million in the 2006 first quarter primarily reflecting
changes in working capital and non-cash income statement items.

The
following table sets forth a reconciliation with GAAP financial information of our supplemental non-GAAP revenue, non-GAAP operating income, non-GAAP operating
margin, non-GAAP net income and non-GAAP diluted earnings per share for the first quarters of 2007 and 2006, which exclude the effect of adjusting the carrying value of
acquired companies' deferred revenue, the expenses for the

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amortization
of acquired intangible assets and stock-based compensation expense (as explained above under Item 5A: Operating Results  Supplemental
Non-GAAP Financial Information). The table also sets forth the most comparable GAAP financial measures.

|                                       |                         | Three months ended March 31, |       | Variation |  
|-------------------------------------- | ----------------------- | ---------------------------- | ----- | --------- | -
|
|Total Revenue                          |                         | €                            | 290.9 |           | €
|                                       |                         |                              |       |           |  
|Total Revenue breakdown by activity    |                         |                              |       |           |  
|Software revenue                       |                         |                              | 245.8 |           |  
|Services and other revenue             |                         |                              | 45.1  |           |  
|Total Revenue breakdown by segment     |                         |                              |       |           |  
|PLM revenue                            |                         |                              | 235.0 |           |  
|                                       | of which ENOVIA revenue |                              |       | 57.4      |  
|Mainstream 3D revenue                  |                         |                              | 55.9  |           |  
|Total Revenue breakdown by geography   |                         |                              |       |           |  
|Americas                               |                         |                              | 96.1  |           |  
|Europe                                 |                         |                              | 122.8 |           |  
|Asia                                   |                         |                              | 72.0  |           |  
|Total Operating Expenses               |                         | €                            | 244.8 |           | €
|Stock-based compensation expense       |                         |                              | 4.3   |           |  
|Amortization of acquired intangibles   |                         |                              | 10.9  |           |  
|Operating Income                       |                         | €                            | 46.1  |           | €
|Operating Margin                       |                         |                              | 15.8% |           |  
|Income before Income Taxes             |                         |                              | 49.1  |           |  
|Income tax expense                     |                         |                              | (16.2 | )         |  
|Income tax effect of adjustments above |                         |                              | 5.6   |           |  
|Minority interest                      |                         |                              | 0.0   |           |  
|Net Income                             |                         | €                            | 32.9  |           | €
|Diluted Net Income Per Share(3)        |                         | €                            | 0.28  |           | €

Three months ended March 31,(in millions)

2007 GAAP

Adjustment

2007 Non-GAAP

2006 GAAP

Adjustment

2006 Non-GAAPCost of services and other revenue

€
40.2

€
(0.1
)
€
40.1

€
31.7

€
(0.3
)
€
31.4Research and development


76.5


(2.5
)

74.0


72.5


(1.5
)

71.0Marketing and sales


83.1


(0.9
)

82.2


65.5


(0.3
)

65.2General and administrative


21.4


(0.8
)

20.6


17.1


(0.1
)

17.0Total stock-based compensation expense





(4.3
)







(2.2
)


OBJECTIVES

We set forth below our financial objectives, which are presented only on a non-GAAP basis. The non-GAAP objectives set forth below do
not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €8 million for 2007; stock-based compensation expense estimated
at approximately €13 million for 2007; and amortization expense for acquired intangibles estimated at approximately €44 million for 2007. These objectives
do not include any new stock option or share grants, or any new acquisitions which may be completed during 2007, including the proposed acquisition of ICEM described above.

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The information above under "Trend Information", and in particular under "Objectives", includes statements that express objectives for our future financial performance. Such
forward-looking statements are based on our management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results or performances may differ materially from
those in such statements due to a range of factors. In preparing such forward-looking statements, we have in particular assumed an average U.S. dollar per euro exchange rate of $1.35 per
€1.00 and an average Japanese yen per euro exchange rate of JPY160 per €1.00 for the last three quarters of 2007; however, currency values fluctuate, and
our results of operations may be significantly affected by changes in exchange rates. We have also assumed that there will be no substantial decline in general levels of corporate spending on
information technology, and that our increased responsibility for both indirect and direct PLM sales channels, and the resulting commercial and management challenges, will not prevent us from
maintaining growth in revenues or cause us to incur substantial unanticipated costs and inefficiencies. Our actual results or performance may also be materially negatively affected by difficulties or
adverse changes affecting our partners or our relationships with our partners, including our longstanding, strategic partner, IBM; new product developments and technological changes; errors or defects
in our products; growth in market share by our competitors; and the realization of any risks related to the integration of MatrixOne or any other newly acquired company and internal reorganizations.
For more information regarding the risks facing our business, see "Item 3D  Risk Factors".

E. Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

F. Tabular Disclosure of Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2006:

|                              |  | Payments due by period |        
|----------------------------- |  | ---------------------- | -------
|
|Employee profit-sharing       |  | €                      | 28,758 
|Built-to-suit lease agreement |  |                        | 177,957
|Operating lease obligations   |  |                        | 106,800
|Capital lease obligations     |  |                        | 460    
|                              |  |                        |        
|Total                         |  | €                      | 313,975
|                              |  |                        |        

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Item 6: Directors, Senior Management and Employees

A. Directors and Senior Management

In accordance with our by-laws(statuts)and French company law, our affairs are managed by our
Board of Directors and our Chief Executive Officer(Directeur Général). As permitted under French law and our
by-laws, the functions of Chairman of the Board of Directors(Président)and of Chief Executive Officer have been separated
between two different persons by decision of the Board of Directors.

BOARD OF DIRECTORS

Our Board of Directors determines our business strategy and oversees its implementation. Under French law, the Board of Directors is also responsible for, among
other things, the presentation of the annual and consolidated accounts to the shareholders and for convening the general meeting of shareholders to approve such accounts. In addition, the Board of
Directors must give prior authorization for any security, pledge or guarantee granted by the Company. Under French law, directors are liable for violation of French legal or regulatory requirements
applicable tosociétés anonymes, for the violation of our by-laws or for mismanagement. A director may be held
liable for such actions both individually and jointly with the other directors.

Our
by-laws provide that, generally, the Board of Directors must consist of three to fifteen directors at any time. Only the shareholders can increase the size of the Board of Directors.
Members of the Board are elected by the shareholders at a general meeting of shareholders to serve six-year terms and may be reelected for consecutive terms. Directors serve until the
expiration of their respective terms, or until their resignation, death or removal, with or without cause by the shareholders. Under certain conditions, the Board of Directors may fill its vacancies
until the subsequent shareholders' meeting. At no time may the number of directors exceeding the age of 70 years constitute more than one-half of the Board of Directors. The
Chairman may not be more than 75 years old.

The
following table sets forth the names, ages and election dates of our directors, as well as their occupations and directorships. As of the date hereof, five of the nine members of our Board of
Directors are independent, as determined according to the applicable standards and requirements for independence. Pursuant to ourstatuts, each director
must hold at least one share of Dassault Systèmes for the duration of his mandate.

Our
Board of Directors generally complies with all French rules and recommendations, and all applicable U.S. regulations, regarding corporate governance.

|Name               | Age |  | Current position within our Company |  | Director since |  | Term expires |  | Other occupation and Directorships(1)                                                                                                                                                                                                                                                                                                                                        |  | Other mandates (outside DS) expired during the last five years | Company shares
owned at March 31, 2007 | 
|------------------ | --- |  | ----------------------------------- |  | -------------- |  | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------- | -------------------------------------- | 
|Charles Edelstenne | 69  |  | Chairman                            |  | 1993           |  | 2011         |  | Chairman and Chief Executive Officer of Dassault Aviation.
Member of the Supervisory Board of: Groupe Industriel Marcel Dassault SAS.
Director of: Thales Systèmes Aéroportés; Société Anonyme Belge de Constructions Aéronautiques; and Sogitec Industries
Chairman of Dassault Falcon Jet Corporation.
President of Dassault International, Inc.
Manager of Arie and Nili. |  | Director of Dassault Réassurance                               | 7,656,580                              | 
|                   |     |  |                                     |  |                |  |              |  |                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                |                                        | 

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|Paul R. Brown    | 56 |  | Director                                                    |  | 2000 |  | 2011 |  | Professor in the Accounting, Taxation and Business Law Department of the Leonard N. Stern Business School at New York University.
Academic Director, TRIUM Executive MBA program. Director and member of the audit committee of Dictaphone, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | None.                                                                                                                                                                                                                                                                                                                                                                     | 2     | 
|---------------- | -- |  | ----------------------------------------------------------- |  | ---- |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | 
|Bernard Charlès  | 50 |  | President and Chief Executive Officer ("Directeur Général") |  | 1993 |  | 2011 |  | President of Dassault Systèmes Canada Inc.; Dassault Systèmes Corp.; Dassault Systèmes K.K.;
Chairman of: Delmia Corp.; Abaqus, Inc.; SolidWorks Corporation;
Director of: Business Objects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | None.                                                                                                                                                                                                                                                                                                                                                                     | 1,740 | 
|Laurent Dassault | 53 |  | Director                                                    |  | 1993 |  | 2011 |  | Vice-President of Groupe Industriel Marcel Dassault;
Chairman and Chief Executive of Immobilière Dassault and Dassault Belgique Aviation;
President of Midway Aircraft Corporation, Dassault Investment Fund Inc., Vina Dassault San Pedro, Château Dassault and Château La Fleur Mérissac;
Chairman of CATALYST INVESTMENTS II L.P.;
Director of Generali France, Generali Assicurazioni SpA, Sogitec Industries, Power Corporation du Canada, Kudelski SA, Banque Privée Edmond de Rothschild Luxembourg, Terramaris, Industrial Procurement Services, Société de
Véhicules Electriques SAS, Organisation pour la Prévention de la Cécité, and Fauchier Partners Management Ltd.;
Member of the Supervisory Board of ARQANA and Lepercq, de Neuflize and Co. Inc.;
Chairman of the Development Committee of Groupe Artcurial;
Member of the Advisory Committee of 21 Central Partners and Sagard Private Equity Partners;
Member of the du Comité de suivi of Pechel Industries. SAS |  | Chairman of Dassault Falcon Jet do Brazil.
Director of: Fingen SA; Compagnie Nationale à Portefeuille; BSS Investment SA; Chenfeng Machinery; Aero Precision Repair and Overhal Company "A-pro"; and NAFCO National Aerospace StenerCo.
Member of the Supervisory Board of Eurazeo.
Member of the Advisory Committee of Power Private Equity Fund; and Syntek Capital SA. | 10    | 
|                 |    |  |                                                             |  |      |  |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                           |       | 

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|Bernard Dufau             | 64 |  | Director                                                    |  | 2001 |  | 2007(2) |  | Strategic counsel and general manager of B. Dufau Conseil.
Director and chairman of the audit committee of France Telecom; director and member of the audit committee of Kesa Electricals.                                                                          |  | Director of: Team Partner Group and Mood Media. | 1,000 | 
|------------------------- | -- |  | ----------------------------------------------------------- |  | ---- |  | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ----- | 
|André Kudelski            | 45 |  | Director                                                    |  | 2001 |  | 2007(2) |  | President and Chief Executive Officer of the Kudelski Group.
Chairman and Chief Executive Officer of Nagra +. Director of: Nestlé and Edipresse.
Member of the Advisory Board of: Crédit Suisse and Swiss American Chamber of Commerce.                             |  | None.                                           | 10    | 
|Thibault de Tersant       | 49 |  | Senior Executive Vice President and Chief Financial Officer |  | 1993 |  | 2011    |  | Chairman of Dassault Systèmes Europe SAS, Dassault Systèmes HoldCo SAS and Spatial Corp.
Director of: SolidWorks Corporation; Delmia Corp.; Dassault Systèmes Corp.; SmarTeam Corporation Ltd.; SmarTeam Americas Inc.; and Abaqus Inc.                             |  | None.                                           | 939   | 
|Jean-Pierre Chahid-Nouraï | 67 |  | Director                                                    |  | 2005 |  | 2011    |  | Managing Director of Finanval Conseil, Director of Stanislas SA.                                                                                                                                                                                                    |  | None.                                           | 1,010 | 
|Arnoud De Meyer           | 52 |  | Director                                                    |  | 2005 |  | 2011    |  | Professor of Technology Management at INSEAD and Deputy Dean of INSEAD, in charge of Administration and External Relations.
Director of: Option International; SR&DM; Kylian Technology Management Pte. Ltd.; INSEAD (Singapore), INSEAD-EURO Asia Centre Pte. Ltd. |  | Director of Ancorabel.                          | 251   | 

Meetings of the Board of Directors are normally convened by the Chairman of the Board of Directors and are to be held as often as required in the corporate
interest. A quorum consists of at least one half of the members of the Board of Directors. Decisions are made by majority vote of the members present, deemed to be present or duly represented by other
members of the Board of Directors. A director may not vote on an arrangement or contract in which he is materially interested; if he does vote, the decision will be void. Our by-laws
permit any director to attend, participate in and vote at any meeting by videoconference for certain decisions as provided by French law. The Board of Directors met four times in 2006, with an
attendance rate of 89%. An amendment to ourstatus(by-laws) will be proposed for shareholder approval at the shareholders' meeting
scheduled for June 6, 2007, which would permit the members of the Board of Directors to participate in meetings of the Board using any means of telecommunications, as permitted under the new
FrenchCode de Commerce, and to vote on any Board resolution, except for the approval of our annual financial statements or of the management report.

In
2006, the Board performed its annual assessment of the independence of the independent directors, using information provided in reponse to the director questionnaire. The independent directors are
Bernard Dufau, André Kudelski, Paul R. Brown, Jean-Pierre Chahid-Nourai and Arnoud De Meyer.

Audit Committee.The Audit Committee was established in 1996 to assist our Board of Directors in overseeing the quality and integrity of
our financial statements and the financial reporting process, our internal accounting and financial control systems, and our compliance with

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legal
and regulatory requirements. Only independent directors are on our Audit Committee, in compliance with French and U.S. corporate governance rules. The Committee is composed of four of our
directors: Paul R. Brown, Bernard Dufau, André Kudelski, and Jean-Pierre Chahid-Nouraï. The Chairman of the Audit Committee is Bernard Dufau.

The
primary responsibility of the Audit Committee is to oversee our financial reporting process on behalf of the Board of Directors and report the results of its activities to the Board. The Audit
Committee assesses the independence of our external auditors and recommends to the Board of Directors their appointment, compensation and termination (subject to shareholders' approval under French
law). The Audit Committee discusses with the external auditors the scope of the audit, pre-approves all audit-related and non-audit related services provided by the external
auditors, and discusses with them the critical accounting policies used in connection with the preparation of the financial statements. At the end of each fiscal year, the Audit Committee reviews the
audited annual consolidated financial statements before giving its report to the Board of Directors. The Audit Committee is responsible for pre-approving all related-party transactions
pursuant to Nasdaq corporate governance requirements.

The
Audit Committee discusses with management, the internal auditors and the external auditors the adequacy and effectiveness of our accounting and financial controls, including our policies and
procedures to assess, monitor and manage business and financial risk.

The
Audit Committee also oversees the work of our internal audit department, and approves its annual audit plan. Our internal audit director reports to the Audit Committee conclusions resulting from
the audit engagements.

The
Audit Committee met seven times in 2006, including three times in person and four times by telephone, with an attendance rate of 100%. In addition to their on-going responsibilities,
the members of the Audit Committee reviewed drafts of all quarterly financial releases prior to their publication. They also received an update regarding progress in DS's internal control project in
compliance with French and U.S. regulatory requirements, particularly as regards the evaluation of internal control on financial reporting.

Compensation and Nomination Committee.In compliance with applicable U.S. and French corporate governance rules, the Board of Directors
formed a Compensation and Nomination Committee in 2005. The Committee is comprised of two independent directors, Bernard Dufau and André Kudelski.

The
principal objectives of the Committee are to: (i) propose to the Board the compensation of the Chairman and CEO; (ii) define the calculation bases and the determination rules of the
variable portion of the compensation of the Chairman and CEO and verify compliance with the determination rules; (iii) propose succession planning in the event of vacancies of the Chairman and
CEO positions; (iv) examine the nomination and compensation policies for our executive officers; (v) examine our policy and make recommendations on stock option grants and other forms of
stock-based incentives; (vi) review the directors fees and the method for allocating those fees among directors; and (vii) make proposals to the Board on the appointment of new directors
or reappointment of current directors.

The
Nasdaq rules stipulate that the compensation of all executive officers (other than the Chairman of the Board and the CEO) must be determined, or recommended to the Board for determination, by a
majority of our independent directors or by a compensation and nomination committee comprised solely of independent directors. However, under French law, the Board determines only the compensation of
the Chairman, the CEO and, if any, the deputy CEO, the compensation of the other executive officers being determined by the Company's management in accordance with their employment terms and market
practices. As a result, the Company continues to follow its home country practice and has informed Nasdaq in this respect.

In
2006, the Compensation and Nomination Committee met three times in person, with an attendance rate of 100%. Based on the information provided by each director in response to a questionnaire, the
Compensation and Nomination Committee confirmed to the
Board that five out of the nine directors are independent. The Committee proposed to the Board the allocation of Directors' fees, stock grants for the CEO and stock options for the benefit of certain
of our executive officers and employees. The Committee also advised on the compensation structure for executive officers for 2006, and the process for granting stock options.

Based
on the assessment of the implementation by the CEO in 2005 of the strategic plan adopted previously by the Board, the Committee confirmed in 2006 that the total bonus target for 2005 could be
paid to the CEO; the Committee also proposed to the Board the total on-target earning of the CEO, as well as the compensation of the Chairman, for 2006.

In
2007, it is anticipated that the Compensation and Nomination Committee will meet a minimum of two times.

Scientific Committee.The Scientific Committee was established by our Board of Directors on April 15, 2005, and is comprised of two
directors, Bernard Charlès and Arnoud De Meyer, and one executive officer, Dominique Florack, our Senior Executive Vice President,
Products  Research and Development, and meets at least once a year. All members of the Committee were appointed on the date of its establishment. The Committee
reviews the axes for research and development, examines our technological advances and makes recommendations in relation thereto. The Scientific Committee can request the participation at its meetings
of DS employees who have the appropriate expertise in research and development or with respect to the questions being discussed.

The
Scientific Committee met three times in 2006. It considered research and development priorities, particularly as regards the new industrial markets on which we have focused our efforts; management
procedures for our technology portfolio; and the development of our

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technological
and scientific partner ecosystem. It also reviewed our strategy in terms of the management of intellectual property through the development of standards and patent applications. It is
anticipated that the Scientific Committee will meet at least two times in 2007.

Board of Directors' Internal Regulation.An Internal Regulation of the Board of Directors was adopted on March 29, 2005. This
Internal Regulation sets forth the policies and obligations of the Board related to corporate governance. In particular, it sets forth, among others: the rules for timely notification of the Board of
Directors with respect to events that may materially impact our prospects, forecasts or implementation of our strategy as presented to the Board; the functioning rules of the Compensation and
Nomination Committee and Scientific Committee; the principles of limitations on the powers of our CEO; of review of the independence qualifications for Board members on an annual basis; and of
performance of an annual self-assessment, with, upon request of the majority of the Board members, engagement of an external party to provide a more detailed evaluation and
recommendations. The Internal Regulation reconfirms the confidentiality obligation incumbing on all Board members. Board members must comply with the insider rules established by Dassault
Systèmes which prevent them from trading on any Dassault Systèmes securities when they are aware of sensitive non-public information and unless they are
specifically authorized to do so by the Dassault Systèmes Insider Committee.

The
Internal Regulation provides that the independent directors shall meet, in conjunction with regularly scheduled Board meetings, in executive sessions at least twice a year to enhance communication
among independent directors. Two executive sessions of independent directors were held in 2006.

Director Biographies

Charles Edelstennefounded Dassault Systèmes in 1981 and was our Managing Director until we were transformed into
asociété anonymein 1993. From 1993 to 2002, Mr. Edelstenne was our Chairman and Chief Executive Officer and since
2002, Mr. Edelstenne has served as our Chairman. Mr. Edelstenne also serves the positions mentioned under "Directors and Senior
Management  Principal Occupation or Employment." Mr. Edelstenne devotes the majority of his time to his duties at Dassault Aviation.

Bernard Charlèshas been our Chief Executive Officer since 2002, our President since 1995 and one of our directors since 1993.
Mr. Charlès also serves the positions mentioned under "Directors and Senior Management  Principal Occupation or Employment." Prior to
becoming our President, Mr. Charlès served as our President of Research and Development from 1988 to 1995 and as President of Research and Strategy from 1985 to 1988.

Thibault de Tersanthas been our Senior Executive Vice President since 2003, and our Chief Financial Officer since 1988. Mr. de Tersant is also a
member of the Board of Directors of the DFCG (French National Association of Chief Financial Officers and Financial Planning & Analysis). Prior to joining us, Mr. de Tersant served as a
finance executive at Dassault International.

Paul R. Brownhas been a certified public accountant in Pennsylvania since 1974. He is a professor in the Accounting, Taxation and Business Law
Department of the Leonard N. Stern Business School at New York University. He chaired this Department from 1997 to 2002. Professor Brown is the Academic Director of TRIUM Executive MBA program.
He has also worked at the Yale School of Management, INSEAD and the International University of Japan. Mr. Brown has also worked for Arthur Andersen & Co. and for the Financial
Accounting Standards Boards (FASB). He is also a consultant for numerous financial enterprises.

Laurent Dassaulthas served in management positions in the Dassault group since 1991. Mr. Dassault is Vice President of GIMD, Chairman of the
Supervisory Board of Immobilière Dassault and President of Château Dassault and Château La Fleur Mérissac. Prior to holding these positions,
Mr. Dassault worked for 14 years in banking at Banque Vernes, Banque Parisienne Internationale and Banque Industrielle et Commerciale du Marais.

Bernard Dufauhas been strategic counsel at B. Dufau Conseil since 2001. Mr. Dufau served as Chairman and Chief Executive Officer of IBM France
from 1996 to 2001 and Chairman of the Management Board of IBM France from 1995 to 1996, Managing Director of the Distribution Division of IBM Europe in 1994, Chief Operating Officer of IBM France from
1992 to 1994 and Sales Director of IBM France from 1989 to 1992. Mr. Dufau first joined IBM France in 1966 as a commercial engineer and then served in various management positions.

André Kudelskihas been President and Chief Executive Officer of the Kudelski Group since 1991 and Chairman of Nagra +, a joint-venture
of Kudelski SA and Canal +, since 1992. Mr. Kudelski was Managing Director of Nagravision, the pay-TV division of Kudelski SA from 1989 to 1990 and Product Manager for
pay-TV products, Kudelski SA. He first joined Kudelski SA in 1984 as an R&D engineer.

Jean-Pierre Chahid-Nouraïwas a member of the Executive Group of Michelin and Chief Financial Officer of the Michelin group
from 1977 to 1990 and has also worked as an investment banker for MM. Lazard Frères et Cie., Banque Morin-Pons, Financière Indosuez and S.G. Warburg. A former
management consultant with McKinsey & Co. Inc., Mr. Chahid-Nouraï continues to exercise this activity as Managing Director of Finanval Conseil.
Mr. Chahid-Nouraï has also taught finance at ESSEC, theCentre de formation à l'analyse financière,INSEAD and until recently at CEDEP (theCentre européen d'éducation permanente).

Arnoud De Meyeris Director of Judge Business School and Professor in Management Studies (University of Cambridge, UK). Mr. De Meyer is a
specialist in the Management of Innovation, a subject on which he has published numerous articles and books. He was

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previously
a Professor of Technology Management at INSEAD and Deputy Dean of INSEAD in charge of Administration and External Relations. He has also taught at Waseda University and Keio Business School
in Japan and created the INSEAD Campus in Singapore.

EXECUTIVE OFFICERS

The Chief Executive Officer has full executive authority to manage our affairs and has broad powers to act on our behalf within our corporate purpose and to
represent us in dealings with third parties. These powers of the Chief Executive Officer are subject only to the powers expressly reserved to the Board of Directors or shareholders by law or by our
by-laws, and are subject to prior authorization of the Board of Directors or the general meeting of shareholders for the decisions specified by French law. In addition, the Internal
Regulation of our Board of Directors provides that our Board of Directors shall determine, on a yearly basis, which categories of material transactions will be subject to its prior approval.

The
Board of Directors, at its meeting of March 30, 2007, authorized the Chief Executive Officer to take decisions without the prior approval of the Board of Directors except for (i) any
significant transaction which would not come within the Company's strategy, as presented to the Board of Directors, and (ii) the following transactions, if they involved amounts beyond a
specified ceiling:

The
Chief Executive Officer is elected by the Board of Directors and may be removed by the Board of Directors at any time. According to our by-laws, the Chief Executive Officer may not be
more than 65 years old.

The
following table sets forth the names and birth dates of our executive officers in 2006 and their current positions with us:

|Name                | Date of Birth     |  | Position                                                             | 
|------------------- | ----------------- |  | -------------------------------------------------------------------- | 
|Charles Edelstenne  | January 9, 1938   |  | Chairman of the Board                                                | 
|Bernard Charlès     | March 30, 1957    |  | President and Chief Executive Officer                                | 
|Dominique Florack   | June 26, 1959     |  | Senior Executive Vice President, Products  Research and Development | 
|Thibault de Tersant | July 22, 1957     |  | Senior Executive Vice President and Chief Financial Officer          | 
|Étienne Droit       | September 3, 1959 |  | Executive Vice President, PLM Value Channel                          | 
|Philippe Forestier  | May 16, 1950      |  | Executive Vice President, Network Selling                            | 
|Bruno Latchague     | January 28, 1957  |  | Executive Vice President, PLM Business Transformation                | 
|Muriel Pénicaud     | March 31, 1955    |  | Executive Vice President, Chief People Officer                       | 
|Joel Lemke          | January 12, 1956  |  | Chief Executive Officer of ENOVIA                                    | 
|John McEleney       | April 29, 1962    |  | Chief Executive Officer of SolidWorks                                | 

Beginning in 2007, Pascal Daloz (born: March 6, 1969) has been appointed as Executive Vice President, Strategy & Marketing.

Executive Officer Biographies

Dominique Florackhas been our Senior Executive Vice President, Products  R&D since 2007.
Mr. Florack served as our Executive Vice President, Strategy, Research and Development from 2000 to 2006, our Executive Vice President Strategy, Applications, Research and Development from 1995
to 1999. He also served as our Director of Mechanical CAD from 1994 to 1995, as Director of Strategy and Research from 1990 to 1993 and as responsible of Dassault Systèmes data base
solutions from 1986 to 1989.

Étienne Droithas been our Executive Vice President, PLM Value Channel (PLM Sales & Distribution) since 2005, and Executive
Vice President PLM Sales and Services from 2003 to 2004. He also served as our Executive Vice President Sales and Marketing for the Digital Enterprise from 2000 to 2002, as Executive Vice President
Sales and Marketing from 1995 to 1999, as Director of Applications Development Division from 1991 to 1995, as Manager of the Strategy Department from 1987 to 1991 and as a member of our CATIA
Development Team from 1986 to 1987.

Bruno Latchaguehas been our Executive Vice President, PLM Business Transformation since 2007. Mr Latchague served as our Executive Vice
President Development and Support Industry Solutions in 2006, as Executive Vice President PLM R&D Solutions and Support in 2005, as Executive Vice President PLM R&D Solutions, Quality Assurance and
Support in 2004, as Executive Vice President

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Development
and Support from 2000 to 2003, and as Executive Vice President Research and Development, Architecture and Modeling Technology from 1995 to 1999. He also served as our Director of CATIA
Products Infrastructure from 1990 to 1995, as Senior Manager CATIA Software Infrastructure from 1988 to 1990 and as Manager CATIA Software Infrastructure from 1987 to 1988. Prior to joining us,
Mr. Latchague served as Manager CAD/CAM Products Support at Régie Nationale des Usines Renault.

Philippe Forestierhas been our Executive Vice President, Network Selling since 2007. Mr. Forestier served as our Executive Vice President
Alliances, Marketing and Communications from 2003 to 2006, and as our Executive Vice President Sales and Marketing for Small and Medium Businesses (SMB) from 2000 to 2002. Living in the
United States from 1995 to 2001, Mr. Forestier served as Executive Vice President Americas Market Development from 1995 to 1999. He also served as General Manager of Dassault
Systèmes of America from 1996 to 1998, our Director of Worldwide CATIA/CADAM Marketing and Services from 1993 to 1995 and as our Director of Industrialization and Customer Support from
1988 to 1993. From 1984 to 1988, Mr. Forestier was in charge of implementing marketing and technical support for our products and, from 1981 to 1984, was responsible for development of the
CATIA geometric modeller.

Muriel Pénicaudhas been our Executive Vice President, Chief People Officer (Organization & Human Resources) since the end of
2002. Since 2006, Mrs Pénicaud also serves as Chairman of the National Institute of Labour, Employment and Professional Training. Prior to joining us,
Mrs. Pénicaud served as Vice President for Organization Development and Human Resources Policies at Groupe Danone. Previously she held several executive positions at the French
Department of Labor, such as cabinet member, and advisor to the Ministry of Labor.

Joel Lemkehas been the Chief Executive Officer of ENOVIA since 1998 and the Chairman of Dassault Systèmes Americas Corp. since 2006.
Mr. Lemke served as Chief Executive Officer of Enovia Corp. from 1998 to 2005 and General Manager PLM Americas from 2003 to 2006. Prior to 1998, Mr. Lemke served at IBM for nineteen
years, notably as Vice President of Solutions in the Industrial Sector Division of IBM. During the nineteen years of his work for IBM, Mr. Lemke was responsible for strategy, product
development, service, marketing and sales of materials and software.

John McEleneyhas been the Chief Executive Officer of SolidWorks since 2001. Mr. McEleney has been with SolidWorks since 1996 and has served in
several roles, including Chief Operating Officer and Vice President, Americas Sales. Prior to joining SolidWorks, Mr. McEleney held several senior management positions at Computervision.

Pascal Dalozhas been Executive Vice-President Strategy & Marketing since January 2007. He joined the company in 2001 to
develop our presence in PLM markets as Research & Development Director and was nominated Vice President Strategy and Development in 2003. Mr. Daloz brings 10 years of experience
in strategy with investment banking and consulting firms, including four years at Credit Suisse First Boston Technology Group, where he served as a financial analyst, and five years at Arthur D.
Little, where he was a consultant and member of Arthur D. Little's Technology Innovation Management team.

To
our knowledge there is no family relationship between our directors and executive officers("mandataires sociaux")(consisting of members of the
board of directors and deputy executive officers). There are no potential conflicts of interests with regards to the directors and officers responsibilities to us and their private interests and/or
other responsibilities.

Furthermore,
in the past five years and to our knowledge, none of the directors and officers has been (i) convicted of fraud, (ii) declared bankrupt, had their property impounded or
liquidated, or (iii) subject to an official accusation and/or penalty delivered by legal or regulatory authorities.

In
addition, to our knowledge, in the past five years, none of the directors and officers has been prohibited by a tribunal from becoming a member of an administrative, management or supervisory body
of a company, or from being involved in the management or direction of the affairs of such a company.

As
of the date of the present document, none of the directors and officers is party to a service contract with us or one of our subsidiaries conferring any benefit.

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FINANCIAL AND CONTRACTUAL RELATIONS BETWEEN OUR COMPANY
AND ITS DIRECTORS AND EXECUTIVE OFFICERS

The French Commercial Code(Code de commerce)strictly forbids loans by a company (société anonyme)to its directors. No
company may provide overdrafts for directors or guarantee any director's
obligations. This prohibition also applies to the Chief Executive Officer, permanent representatives of companies on the Board of Directors, spouses or heirs of such persons and other intermediaries.

The
French Commercial Code and our by-laws require any director, the Chief Executive Officer and any shareholder who holds more than 10% of the voting rights of our shares, or, if a
corporate shareholder, the company controlling it, that is considering entering into an agreement with the Company, either directly or indirectly, personally or through an intermediary, to inform the
Company's Board of Directors as well as its auditors before the transaction is consummated. This obligation applies also to transactions between the Company and any other entity where a Director of
the Company is owner, manager, director or member of the supervisory board, it being specified that such other entity may be a subsidiary of the Company. French law also requires such an agreement to
be authorized by the Board of Directors, and the director or person concerned may not vote on the issue. French law further requires such an agreement to be submitted to an ordinary shareholders'
meeting for approval once entered into, upon presentation of a special report from the Company's auditors. Any agreement entered into in violation of these requirements may be declared void by the
Commercial Court at the request of the company or that of any shareholder, if such agreement is contrary to the interests of the company. Moreover, French law also states that agreements entered into
in the ordinary course of business and with usual terms and conditions are not subject to the prior authorization of the Board of Directors. Nevertheless, as long as they are material to the company,
such agreements must be disclosed by the interested party to the Chairman of the Board of Directors, who has the responsibility of communicating the list and the purpose of such agreements to the
Board of Directors and to the statutory auditors.

The
following transactions, which were authorized by the Board of Directors pursuant to French law, were still in effect in 2006: (i) the insurance policy relating to the directors' and
officers' liability entered into with AIG Europe on June 28, 1996; (ii) the non-exclusive and free license of the trademark ENOVIA granted to Dassault Systèmes
Americas Corp. (previously, Enovia) on March 11, 1998; (iii) agreements with Bernard Charlès relating to indemnities to be paid in case of dismissal as described below
under "Item 6B: Compensation"; and (iv) the agreement entered into on September 23, 2003, for the benefit of our Directors to support the fees for their defense in case they would
have to prepare a personal defense before a civil, criminal or administrative court in the United States in the context of an investigation against Dassault Systèmes.

B. Compensation

In consideration for their services on the board, directors are entitled to receive director's fees(jetons de
présence).The total annual amount of director's fees has been fixed by the general meeting of shareholders at a maximum of €250,000 for
each of the years 2006 and 2007, but the board determines the rules for the allocation of fees among the directors. In addition, remuneration may be granted to directors on a
case-by-case basis for special assignments. The board may also authorize the reimbursement of travel and accommodation expenses as well as other expenses incurred by directors
in the corporate interest. In 2006, we paid €210,000 in attendance fees to directors, of which €144,000 consisted of Board retainer fees and
€66,000 of attendance fees to members of the Board and of the Board Committees.

The
Chairman and/or the Chief Executive Officer are entitled to receive remuneration in addition to the director's fees as provided for in our by-laws, this additional remuneration being
determined by the Board of Directors, upon recommendation of our Compensation and Nomination Committee.

Our
compensation program is designed to attract, motivate and retain highly qualified individuals needed to achieve our business and financial objectives. It does so by balancing
short-term and long-term financial objectives, building stockholder value and rewarding individual and corporate performance. Consistent with this aim, the annual compensation
of each executive officer includes two portions  a fixed portion and a variable portion  except for the Chairman who
receives only a fixed portion. The amount of the variable portion is contingent upon the executive officer's annual performance against annual personal performance objectives defined to be consistent
with our strategic orientations and with specific individual management targets. The variable portion may represent a significant part of the total compensation if the annual targets are achieved or
overachieved. In addition, the executive officers are given long-term incentives through grants of stock options, intended particularly to encourage them to act in the best interests of
our shareholders. Beyond their fixed and variable compensation, the French executive officers, except for the Chairman of the Board, are eligible for corporate profit-sharing in the same manner as
other employees of the Company.

For
the Chief Executive Officer, the target variable amount is set at 100% of the fixed portion, depending on the achievement of performance objectives according to the strategy presented by the Chief
Executive Officer and adopted by the Board of Directors. The Board evaluates during the following year the extent of realization of the strategy.

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The
table below shows the total amount of gross compensation paid and directors fees and other benefits granted in euro to each director by us and our subsidiaries during the 2006 fiscal year:

|                          |  | Salary and Fees |  |         |     |           |  |       |  |        |  |          
|------------------------- |  | --------------- |  | ------- | --- | --------- |  | ----- |  | ------ |  | ---------
|
|
|Charles Edelstenne(1)     |  | 750,000         |  |        |     | 750,000   |  |      |  | 32,000 |  | 782,000  
|Bernard Charlès           |  | 800,000         |  | 750,000 | (3) | 1,550,000 |  | 8,113 |  | 18,000 |  | 1,576,113
|Thibault de Tersant       |  | 259,000         |  | 102,000 | (3) | 361,000   |  | 3,690 |  | 18,000 |  | 382,690  
|Paul R. Brown             |  |                |  |        |     |          |  |      |  | 22,500 |  | 22,500   
|Jean-Pierre Chahid-Nouraï |  |                |  |        |     |          |  |      |  | 24,500 |  | 24,500   
|Laurent Dassault(2)       |  |                |  |        |     |          |  |      |  | 18,000 |  | 18,000   
|Bernard Dufau             |  |                |  |        |     |          |  |      |  | 30,500 |  | 30,500   
|André Kudelski            |  |                |  |        |     |          |  |      |  | 26,500 |  | 26,500   
|Arnoud De Meyer           |  |                |  |        |     |          |  |      |  | 20,000 |  | 20,000   

The aggregate amount of compensation paid by us and our subsidiaries to our executive officers of 2006 as a group (10 persons, including the three
Directors in the table above who are also executive officers) for services in all capacities in 2006 was €5,797,186 (including under our profit-sharing plans and excluding capital
gains on the resale of SolidWorks shares; see " Options to subscribe SolidWorks' shares" below). As of December 31, 2006, our executive officers and directors as a
group owned stock options to acquire 11,911,083 of Dassault Systèmes' shares. See " Options to Subscribe Securities from Registrant or Subsidiaries" below.

Since
2003, our Chief Executive Officer, Bernard Charlès, would be entitled to an indemnity payment, in the event he is dismissed by us, equivalent to two times his gross annual
compensation received for the 12 months preceding his dismissal, pursuant to his mandate as Chief Executive Officer and under his employment contract. The indemnity payment owed pursuant to
Mr. Charlès mandate would not apply in the event of dismissal due to intentional misconduct aimed at harming the interests of Dassault Systèmes; the indemnity
payment owed under the employment contract, which includes the contractual indemnity payment for severance stipulated by the applicable French Collective Agreement and calculated on the basis of the
seniority acquired, would not apply in the event of dismissal for gross or wilful misconduct(faute grave ou lourde).This arrangement is reflected in
two agreements between the Company and Bernard Charlès entered into on September 23, 2003, and duly authorized by the Board of Directors pursuant to the procedure described
above. None of our other directors have entered into any service contracts with us or any of our subsidiaries providing for benefits upon dismissal. See Exhibit 4(c).1 to this Annual
Report on Form 20-F.

STOCK GRANTS

Pursuant to an authorization granted by our shareholders at shareholders' meeting held on June 8, 2005, the Board of Directors decided on the same day to
grant 150,000 shares to our Chief Executive Officer in accordance with the recommendation of the Compensation and Nomination Committee. Such shares shall be vested at the end of an acquisition
period of 3 years subject to the condition that the CEO shall be a director (mandataire social) of Dassault Systèmes at the
acquisition date. Following the termination of the 3-year acquisition period, the CEO must hold the granted shares until the end of a new 2-year lock-up period and
may not sell or transfer them during that period.

Pursuant
to the same authorization dated June 8, 2005, the Board of Directors decided on June 14, 2006 to grant 150,000 shares to our Chief Executive Officer in accordance with
the recommendation of the Compensation and Nomination Committee. Such shares shall be vested at the end of an acquisition period of 2 years subject to the condition that the CEO shall be a
director (mandataire social) of Dassault Systèmes at the acquisition date. Following the termination of the 2-year
acquisition period, the CEO must hold the granted shares until the end of a new 2-year lock-up period and may not sell or transfer them during that period.

Future
stock grants may be made under recently adopted changes in French law which also permit stock grants to be made with no lock-up period, provided the acquisition (vesting) period is
at least 4 years.

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OPTIONS TO SUBSCRIBE SECURITIES FROM REGISTRANT OR SUBSIDIARIES

Options to subscribe Dassault Systèmes shares

Pursuant to five successive authorizations granted by our shareholders, the Board of Directors implemented nineteen stock option plans for the benefit of certain of our
executive officers and employees. The stock-option plan granted on June 28, 1996 expired on June 27, 2006. The exercise price of stock options granted pursuant to those plans was fixed
by reference to the market value of the Dassault Systèmes shares on the grant date of the stock options in accordance with the rule of minimum exercise price as prescribed by French law
(80% of the average share price during the 20 trading days preceding the grant date).

Our
general meeting of shareholders held on June 8, 2005 authorized the board to grant stock options to subscribe or to purchase our shares for a period of 38 months and with the
limitation that all outstanding stock options for our shares may not at anytime exceed 20% of our share capital, which authorization replaced the May 28, 2002 authorization.

The
following table provides certain information on our stock options plans as of March 31, 2007 (taking into account the stock split of October 14, 1997).

|Stock option plan                                                    |                                        | 1996           |         | 1997          |         | 1998-1        |         | 1998-2        |           | 1998-3        |         | 1998-4         |           | 1998-5         |         | 
|-------------------------------------------------------------------- | -------------------------------------- | -------------- | ------- | ------------- | ------- | ------------- | ------- | ------------- | --------- | ------------- | ------- | -------------- | --------- | -------------- | ------- | 
|Meeting of Board                                                     |                                        | June 28,
1996  |         | Dec. 15,
1997 |         | Jan. 28,
1998 |         | Nov. 09,
1998 |           | Nov. 09,
1998 |         | Sept. 15,
1999 |           | Sept. 15,
1999 |         | 
|Shareholders' Meeting                                                |                                        | April 15,
1996 |         | June 06,
1997 |         | Jan. 26,
1998 |         | Jan. 26,
1998 |           | Jan. 26,
1998 |         | Jan. 26,
1998  |           | Jan. 26,
1998  |         | 
|Number of options granted                                            |                                        | 1,027,780      |         | 1,031,840     |         | 750,000       |         | 2,468,730     |           | 354,750       |         | 3,297,000      |           | 320,000        |         | 
|                                                                     | tomandataires sociaux(1)               |                | 134,000 |               | 160,400 |               | 0       |               | 1,039,050 |               | 0       |                | 1,841,750 |                | 0       | 
|                                                                     | to the top 10 beneficiary employees(1) |                | 230,000 |               | 411,600 |               | 706,000 |               | 838,000   |               | 126,000 |                | 844,000   |                | 103,500 | 
|Maximum number of shares                                             |                                        | 1,027,780      |         | 1,031,840     |         | 750,000       |         | 2,468,730     |           | 354,750       |         | 3,297,000      |           | 320,000        |         | 
|Number of beneficiaries                                              |                                        | 916            |         | 362           |         | 26            |         | 1,018         |           | 296           |         | 556            |           | 290            |         | 
|Exercise price in euro                                               |                                        | 9.00           |         | 25.92         |         | 26.37         |         | 29.58         |           | 29.58         |         | 37.00          |           | 37.00          |         | 
|First exercise date                                                  |                                        | June 28,
1996  |         | Dec. 15,
1999 |         | Jan. 28,
1998 |         | Nov. 09,
2000 |           | Nov. 09,
1998 |         | Sept. 15,
2001 |           | Sept. 15,
1999 |         | 
|Last exercise date                                                   |                                        | June 27,
2006  |         | Dec. 14,
2007 |         | Jan. 27,
2008 |         | Nov. 08,
2008 |           | Nov. 08,
2008 |         | Sept. 14,
2009 |           | Sept. 14,
2009 |         | 
|Number of options exercised in 2006                                  |                                        | 116,651        |         | 129,607       |         | 5,550         |         | 140,952       |           | 52,215        |         | 28,299         |           | 24,270         |         | 
|Number of options cancelled in 2006                                  |                                        | 200            |         | 0             |         | 0             |         | 700           |           | 2,075         |         | 1,520          |           | (2,912         | )*      | 
|Number of options outstanding as of Dec. 31, 2006                    |                                        | 0              |         | 415,131       |         | 3,200         |         | 1,759,925     |           | 70,978        |         | 3,153,251      |           | 116,448        |         | 
|Number of options exercised between Jan. 1, 2007, and March 31, 2007 |                                        | 0              |         | 23,726        |         | 400           |         | 7,120         |           | 1,005         |         | 0              |           | 2,250          |         | 
|Number of options cancelled between Jan. 1, 2007 and March 31, 2007  |                                        | 0              |         | 0             |         | 0             |         | 0             |           | 0             |         | 1,000          |           | 200            |         | 
|Number of outstanding options as of March 31, 2007                   |                                        | 0              |         | 391,405       |         | 2,800         |         | 1,752,805     |           | 69,973        |         | 3,152,251      |           | 113,998        |         | 
|Number of options exercised as of March 31, 2007                     |                                        | 1,021,680      |         | 595,229       |         | 719,400       |         | 658,395       |           | 240,814       |         | 79,709         |           | 155,575        |         | 
|Number of options exercisable as of March 31, 2007                   |                                        | 0              |         | 391,405       |         | 2,800         |         | 1,752,805     |           | 69,973        |         | 3,152,251      |           | 113,998        |         | 
|                                                                     |                                        |                |         |               |         |               |         |               |           |               |         |                |           |                |         | 

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|
|

|Stock option plan                                                    |                                        | 1998-8        |           | 1998-9        |         | 1998-10       |         | 1998-11       |         | 1998-12       |         | 2002-01      |         | 2002-02      |        
|-------------------------------------------------------------------- | -------------------------------------- | ------------- | --------- | ------------- | ------- | ------------- | ------- | ------------- | ------- | ------------- | ------- | ------------ | ------- | ------------ | -------
|Meeting of Board                                                     |                                        | Mar. 29,
2001 |           | Mar. 29,
2001 |         | June 29,
2001 |         | Oct. 05,
2001 |         | Oct. 05,
2001 |         | May 28,
2002 |         | May 28,
2002 |        
|Shareholders' Meeting                                                |                                        | Jan. 26,
1998 |           | Jan. 26,
1998 |         | Jan. 26,
1998 |         | Jan. 26,
1998 |         | Jan. 26,
1998 |         | May 28,
2002 |         | May 28,
2002 |        
|Number of options granted                                            |                                        | 2,909,600     |           | 553,300       |         | 138,000       |         | 1,387,400     |         | 328,650       |         | 1,363,563    |         | 355,300      |        
|                                                                     | tomandataires sociaux(1)               |               | 1,672,250 |               | 0       |               | 0       |               | 655,000 |               | 0       |              | 651,433 |              | 0      
|                                                                     | to the top 10 beneficiary employees(1) |               | 736,000   |               | 176,600 |               | 116,403 |               | 424,100 |               | 101,000 |              | 454,000 |              | 139,000
|Maximum number of shares                                             |                                        | 2,909,600     |           | 553,300       |         | 138,000       |         | 1,387,400     |         | 328,650       |         | 1,363,563    |         | 355,300      |        
|Number of beneficiaries                                              |                                        | 531           |           | 513           |         | 44            |         | 400           |         | 434           |         | 378          |         | 401          |        
|Exercise price in euro                                               |                                        | 52.00         |           | 52.00         |         | 49.00         |         | 35.00         |         | 35.00         |         | 45.50        |         | 45.50        |        
|First exercise date                                                  |                                        | Mar. 29,
2003 |           | Mar. 29,
2001 |         | June 29,
2001 |         | Oct. 05,
2002 |         | Oct. 05,
2002 |         | May 28,
2003 |         | May 28,
2003 |        
|Last exercise date                                                   |                                        | Mar. 28,
2011 |           | Mar. 28,
2011 |         | June 28,
2011 |         | Oct. 04,
2011 |         | Oct. 04,
2011 |         | May 27,
2012 |         | May 27,
2012 |        
|Number of options exercised in 2006                                  |                                        | 0             |           | 47,725        |         | 6,806         |         | 26,359        |         | 28,617        |         | 0            |         | 34,346       |        
|Number of options cancelled in 2006                                  |                                        | 8,730         |           | 31,550        |         | 0             |         | (200)         | *       | 23,550        |         | 3,917        |         | 13,613       |        
|Number of options outstanding as of Dec. 31, 2006                    |                                        | 2,848,000     |           | 340,245       |         | 83,920        |         | 1,294,838     |         | 139,440       |         | 1,331,861    |         | 243,687      |        
|Number of options exercised between Jan. 1, 2007, and March 31, 2007 |                                        | 0             |           | 7,000         |         | 8,500         |         | 2,600         |         | 33,175        |         | 0            |         | 13,863       |        
|Number of options cancelled between Jan. 1, 2007 and March 31, 2007  |                                        | 15,710        |           | 700           |         | 0             |         | 1,000         |         | 188           |         | 7,478        |         | 438          |        
|Number of outstanding options as of March 31, 2007                   |                                        | 2,832,290     |           | 332,545       |         | 75,420        |         | 1,291,238     |         | 106,077       |         | 1,324,383    |         | 229,386      |        
|Number of options exercised as of March 31, 2007                     |                                        | 0             |           | 117,825       |         | 54,677        |         | 60,924        |         | 165,012       |         | 0            |         | 80,168       |        
|Number of options exercisable as of March 31, 2007                   |                                        | 2,832,290     |           | 332,545       |         | 75,420        |         | 1,291,238     |         | 106,077       |         | 1,324,383    |         | 229,386      |        
|                                                                     |                                        |               |           |               |         |               |         |               |         |               |         |              |         |              |        

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|
|

|Stock option plan                                                    |                                        | 2002-03       |           | 2002-04       |         | 2002-05       |         | 2002-06       |         | 2006-01       |         | Total      |          
|-------------------------------------------------------------------- | -------------------------------------- | ------------- | --------- | ------------- | ------- | ------------- | ------- | ------------- | ------- | ------------- | ------- | ---------- | ---------
|Meeting of Board                                                     |                                        | Jan. 20,
2003 |           | Jan. 20,
2003 |         | Mar. 29,
2005 |         | Mar. 29,
2005 |         | Oct. 9,
2006  |         |            |          
|Shareholders' Meeting                                                |                                        | May 28,
2002  |           | May 28,
2002  |         | May 28,
2002  |         | May 28,
2002  |         | June 8,
2005  |         |            |          
|Number of options granted                                            |                                        | 3,325,000     |           | 675,000       |         | 967,150       |         | 232,850       |         | 1,405,700     |         | 22,891,613 |          
|                                                                     | tomandataires sociaux(1)               |               | 1,500,000 |               | 0       |               | 80,000  |               | 0       |               | 150,000 |            | 7,883,883
|                                                                     | to the top 10 beneficiary employees(1) |               | 1,060,000 |               | 219,000 |               | 405,000 |               | 104,000 |               | 410,000 |            | 7,604,203
|Maximum number of shares                                             |                                        | 3,325,000     |           | 675,000       |         | 967,150       |         | 232,850       |         | 1,405,700     |         | 22,891,613 |          
|Number of beneficiaries                                              |                                        | 803           |           | 533           |         | 264           |         | 88            |         | 447           |         |            |          
|Exercise price in euro                                               |                                        | 23.00         |           | 23.00         |         | 39.50         |         | 39.50         |         | 47.00         |         |            |          
|First exercise date                                                  |                                        | Jan. 20,
2004 |           | Dec. 31,
2004 |         | Mar. 30,
2007 |         | Mar. 30,
2006 |         | Oct. 10,
2009 |         |            |          
|Last exercise date                                                   |                                        | Jan. 19,
2013 |           | Jan. 19,
2013 |         | Mar. 28,
2012 |         | Mar. 28,
2012 |         | Oct. 8,
2013  |         |            |          
|Number of options exercised in 2006                                  |                                        | 24,155        |           | 56,360        |         | 5,700         |         | 4,300         |         | 0             |         | 731,912    |          
|Number of options cancelled in 2006                                  |                                        | 1,150         |           | 20,800        |         | 13,400        |         | 23,800        |         | 0             |         | 141,893    |          
|Number of options outstanding as of Dec. 31, 2006                    |                                        | 3,237,795     |           | 244,180       |         | 942,600       |         | 204,750       |         | 1,405,700     |         | 17,835,949 |          
|Number of options exercised between Jan. 1, 2007, and March 31, 2007 |                                        | 98,354        |           | 57,300        |         | 0             |         | 2,350         |         | 0             |         | 257,643    |          
|Number of options cancelled between Jan. 1, 2007 and March 31, 2007  |                                        | 1,695         |           | 0             |         | 10,350        |         | 3,050         |         | 5,500         |         | 47,309     |          
|Number of outstanding options as of March 31, 2007                   |                                        | 3,137,746     |           | 186,880       |         | 932,250       |         | 199,350       |         | 1,400,200     |         | 17,530,997 |          
|Number of options exercised as of March 31, 2007                     |                                        | 170,079       |           | 442,420       |         | 5,700         |         | 6,650         |         | 0             |         | 4,574,257  |          
|Number of options exercisable as of March 31, 2007                   |                                        | 3,137,746     |           | 186,880       |         | 932,250       |         | 199,350       |         | 0             |         | 16,130,797 |          
|                                                                     |                                        |               |           |               |         |               |         |               |         |               |         |            |          

As of December 31, 2006, our directors and executive officers("mandataires sociaux")holding options to
subscribe shares of the Company were Charles Edelstenne, Bernard Charlès and Thibault de Tersant, who held options to acquire, respectively, 1,360,710 shares,
5,019,973 shares and 1,333,200 shares.

As
of December 31, 2006, and since the first stock-option plan granted by the Company, the total number of stock options granted to our executive officers (ten persons including the
three "mandataires sociaux" above) was 12,877,683, of which 475,000 were granted during 2006. Our executive officers had exercised, in the aggregate, 266,000 options of the option plan
of June 28, 1996; 168,600 options of the option plan of December 15, 1997; 447,000 options of the option plan of November 9, 1998 (1998-2);
55,000 options of the option plan of November 9, 1998 (1998-3); 10,000 options of the option plan of January 20, 2003 (2002-03); and
20,000 options of the option plan of January 20, 2003 (2002-04); i.e., a total of 966,600 stock options of Dassault Systèmes. As of
December 31, 2006, our executive officers held options to subscribe 11,911,083 shares of the Company.

The
table below shows the stock options granted by us to each director during the 2006 fiscal year as well as the shares subscribed by each director pursuant to the exercise of Dassault
Systèmes stock options during the 2006 fiscal year.

|Name of the director |  | Number of Dassault
Systèmes stock
options granted |  | Exercise
price |       | Number of Dassault
Systèmes shares
subscribed |        | Price of
the shares
subscribed |   | Expiration
date |  | Stock option
plan
(number) | 
|-------------------- |  | ------------------------------------------------- |  | -------------- | ----- | --------------------------------------------- | ------ | ------------------------------ | - | --------------- |  | -------------------------- | 
|Bernard Charlès      |  | 50,000                                            |  | €              | 47.00 |                                               |       |                                |   |                |  | October 8, 2013            | 
|                     |  |                                                  |  |                |      |                                               | 31,000 |                                | € | 9.00            |  | June 27, 2006              | 
|Thibault de Tersant  |  | 100,000                                           |  | €              | 47.00 |                                               |       |                                |   |                |  | October 8, 2013            | 
|                     |  |                                                   |  |                |       |                                               | 6,000  |                                | € | 25.92           |  | December 14, 2007          | 
|                     |  |                                                   |  |                |       |                                               |        |                                |   |                 |  |                            | 

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The following table shows, on a global basis, (i) the total number and weighted average price of our stock options granted by us to the ten employees of
Dassault Systèmes and its subsidiaries who have received the most significant number of Company stock options during the 2006 fiscal year and who are not members of the Board and
(ii) the total number and weighted average price of our shares subscribed by the ten employees of Dassault Systèmes and its subsidiaries who have exercised the most significant
number of Dassault Systèmes stock options during the 2006 fiscal year and who are not members of the Board:

|                        |  | Total number of Dassault Systèmes stock options |  | Weighted average price of the stock options granted |       | Weighted average price of the shares subscribed |   | Stock
option plan
(number) | 
|----------------------- |  | ----------------------------------------------- |  | --------------------------------------------------- | ----- | ----------------------------------------------- | - | -------------------------- | 
|Stock options granted   |  | 410,000                                         |  | €                                                   | 47.00 |                                                 |   |                           | 
|Stock options exercised |  | 231,700                                         |  |                                                     |      |                                                 | € | 26.70                      | 

Other than the stock options and stock grants granted as described above, we have no other outstanding securities convertible or exchangeable into, or
representing the right to acquire, our shares.

At
March 31, 2007, the outstanding stock options, whether vested or not, if all were exercised, would give rise to the issuance of 17,530,997 shares, representing 15.11% of our share
capital. At March 31, 2007, on the basis of the closing price of our shares and ADSs on such date, €40.67 and $54.67, respectively, the exercise of outstanding vested stock
options with an exercise price lower than this closing price would give rise to the issuance of 10,937,349 shares, representing 9.43% of our share capital. At March 31, 2007, the stock
grants (described above) could result in the issuance of 300,000 new shares, representing 0.26% of our share capital, if the conditions for vesting were fulfilled.

On
July 25, 1997, as part of the SolidWorks acquisition, we issued 2,378,564 shares of the Company to SW Securities L.L.C., our wholly-owned subsidiary that holds such shares solely for
the purpose of distribution to the holders of stock options and warrants previously issued by SolidWorks. Pursuant to the SolidWorks acquisition, the rights to shares of capital stock of SolidWorks
under the stock options and the warrants were converted into rights to receive our shares. The shares held by SW Securities L.L.C. do not have voting rights, nor are they eligible for dividends until
they are distributed. See Note 11 to our consolidated financial statements.

In
2006, 17,813 shares were issued to the SolidWorks holders of stock options and no stock options were cancelled. As of December 31, 2006, SW Securities L.L.C. held 261,578 of our
shares. The number of stock options in circulation and attributed to the employees of SolidWorks amounted to 6,374 options at December 31, 2006, with an average exercise price of
approximately $18.48. On March 31, 2007, SW Securities L.L.C. held 261,011 of our shares.

Options to subscribe SolidWorks shares

Pursuant to a 1998 stock option plan, 6,787,365 stock options giving the right to subscribe to shares of SolidWorks were granted to employees of SolidWorks and its
affiliates, including 2,800,000 stock options granted to certain of our executive officers. Under the terms of the 2002 SolidWorks Corporation Buy-Back Plan, stock option holders
have the right to sell shares resulting from the exercise of such options to SolidWorks within prescribed periods at a price determined periodically by an independent expert. Only shares that have
been held for at least six months and one day can be sold to SolidWorks. In 2006, certain of our executive officers exercised a total of 836,000 options at an exercise price of between $6.00
and $9.50 per option. In 2006, 956,000 SolidWorks shares resulting from the exercise of stock options in 2006 and 2005 were repurchased by SolidWorks at a price of $42.30 per share, the
applicable 2006 independent valuation.

In
2006 as a group, our executive officers realized a gain of $34,271,422 as a result of the exercise of their SolidWorks stock options and subsequent resale of shares to SolidWorks. The table below
sets forth information as of December 31, 2006 with respect to each of our directors who received SolidWorks stock options:

|                       |  | Number of options granted(1) |  | Number of options outstanding at January 1, 2006 |  | Number of shares subscribed in 2006 |  | Exercise
price |  | Number of SolidWorks
shares repurchased
under the Buy-back plan |  | Repurchase
price | 
|---------------------- |  | ---------------------------- |  | ------------------------------------------------ |  | ----------------------------------- |  | -------------- |  | --------------------------------------------------------------- |  | ---------------- | 
|Charles Edelstenne(2)  |  | 900,000                      |  | 300,000                                          |  | 300,000                             |  | $6.00          |  | 300,000                                                         |  | $42.30           | 
|Bernard Charlès(2)     |  | 900,000                      |  | 300,000                                          |  | 300,000                             |  | $6.00          |  | 300,000                                                         |  | $42.30           | 
|Thibault de Tersant(2) |  | 480,000                      |  | 160,000                                          |  | 160,000                             |  | $6.00          |  | 160,000                                                         |  | $42.30           | 

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As of December 31, 2006, our executive officers no longer had any unexercised SolidWorks stock options.

There
is no specific retirement plan or insurance plan(régime complémentaire)put in place for the directors mentioned
above. The companies controlled by Dassault Systèmes have not paid any compensation nor granted any advantages in-kind to the directors mentioned above.

C. Board Practices

See "Item 6A: Directors and Senior Management".

D. Employees

At December 31, 2006, we had 6,840 employees, including independent contractors, representing an increase of 20.1% over 2005.

The
following tables show our employees both by function and geographically for each of the past three years:

|                                         |  | December 31, | 
|---------------------------------------- |  | ------------ | 
|
|Research and Development and Maintenance |  | 3,164        | 
|Marketing, Sales and Services            |  | 3,166        | 
|Administration and Other Functions       |  | 510          | 
|                                         |  |              | 
|Total                                    |  | 6,840        | 
|                                         |  |              | 

|
|

|               |  | December 31, | 
|-------------- |  | ------------ | 
|
|France         |  | 2,246        | 
|Outside France |  | 4,594        | 
|               |  |              | 
|Total          |  | 6,840        | 
|               |  |              | 

In 2006, of the 4,594 employees outside France, 1,034 employees were in Europe outside France, 2,304 employees were in the Americas and
1,256 employees were in the Asia-Pacific region.

Our
employees in France have been free to be members of any trade union. They have been represented by the five national unions Confédération Française
Démocratique du Travail (CFDT), Confédération Française de l'Encadrement-CGC (CFE-CGC),
Confédération Française des Travailleurs Chrétiens (CFTC), Confédération
Générale du Travail (CGT), and Force Ouvrière (FO). The collective bargaining agreements we have entered into with the unions are renegotiated and renewed
or amended at the end of their respective terms, either annually or on a multi-year basis. We believe that relations with our employees and labor unions are satisfactory. Within the past
several years, we have not experienced any strike.

Under
French law, our management is required to hold monthly meetings with a delegation of elected employee representatives, called thecomité
d'entreprise,to discuss employment matters and our economic condition and to provide appropriate information and documents relating to these matters. As required under French
law, two employee representatives are entitled to be present at meetings of our Board of Directors but do not have any voting rights.

E. Share Ownership

See "Item 7A: Major Shareholders" and "Item 6B: Compensation".

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Item 7: Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our shares by each person who is known by us to own beneficially more
than 5% of our outstanding shares and by all of our directors and executive officers as a group.

Beneficial
ownership is determined in accordance with the rules of the U.S. Securities and Exchange Commission, based on factors including voting and investment power with respect to the
shares. Unless otherwise indicated in the footnotes to the table, the following persons have sole voting and sole investment control with respect to the shares they beneficially own, and the address
of each beneficial owner listed below is c/o Dassault Systèmes, 9, quai Marcel-Dassault, B.P. 310, 92156 Suresnes Cedex, France.

The
percent of beneficial ownership for each shareholder is based on 116,027,933 shares as of March 31, 2007.

|Name                                     |  | Shares beneficially owned |  | Capital % |  | Voting % | 
|---------------------------------------- |  | ------------------------- |  | --------- |  | -------- | 
|Groupe Industriel Marcel Dassault (GIMD) |  | 51,566,334                |  | 44.44%    |  | 44.46%   | 
|Charles Edelstenne(1)                    |  | 7,658,122                 |  | 6.60%     |  | 11.82%   | 
|SW Securities L.L.C.(2)                  |  | 261,011                   |  | 0.23%     |  | N/A      | 
|Directors and executive officers(3)      |  | 8,762                     |  | 0.01%     |  | 0.01%    | 
|Public                                   |  | 56,533,704                |  | 48.72%    |  | 43.71%   | 
|                                         |  |                           |  |           |  |          | 
|Total                                    |  | 116,027,933               |  | 100.00%   |  | 100.00%  | 
|                                         |  |                           |  |           |  |          | 

As of March 31, 2007, our share capital was divided into 116,027,933 outstanding shares and represented 129,561,745 voting rights
(excluding, with respect to the number of voting rights, the shares of the Company held by SW Securities LLC). As of December 31, 2006, 59,414,410 outstanding shares were held in
the registered form.

To
our knowledge, there is no agreement between the Dassault Systèmes' shareholders. Dassault Systèmes is not a party to a shareholders' agreement or another agreement
which provisions may have a material impact on the price of Dassault Systèmes shares. In addition, Dassault Systèmes is not party to any agreement or arrangement which
could trigger a change of control of the Company or has no knowledge of such an agreement or arrangement to which it would not be a party.

Our
major shareholders do not have voting rights that are different from the voting rights to which any other shareholder would be entitled.

Fully
paid-up shares held in registered form for at least two consecutive years in the name of the same holder are entitle to double-voting rights. See "Item 10. Memorandum and
Articles of Association  Shareholders' Meetings and Voting Rights".

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CHANGES IN PRINCIPAL SHAREHOLDERS OVER THE PAST THREE FISCAL YEARS

The table below shows the significant changes of which we are aware in the percentage of ownership of our shares by our major shareholders during the past
three years.

|                          |  | December 31, 2006 |  | December 31, 2005 |  | December 31, 2004 | 
|------------------------- |  | ----------------- |  | ----------------- |  | ----------------- | 
|
|GIMD                      |  | 51,460,436        |  | 44.45             |  | 44.46             | 
|Charles Edelstenne(1)     |  | 7,658,122         |  | 6.61              |  | 11.84             | 
|SW Securities LLC(2)      |  | 261,578           |  | 0.23              |  | N/A               | 
|Directors and Officers(3) |  | 18,762            |  | 0.02              |  | 0.01              | 
|Fidelity Investments(4)   |  |                  |  |                  |  |                  | 
|Public                    |  | 56,371,392        |  | 48.69             |  | 43.68             | 
|                          |  |                   |  |                   |  |                   | 
|Total                     |  | 115,770,290       |  | 100.00%           |  | 100.00%           | 
|                          |  |                   |  |                   |  |                   | 

In January 2007, we commissioned a survey on our shares from an external specialized services provider. The survey indicated that approximately
285 institutional investors (including the Caisse des Dépôts, as mentioned below), each holding more than 2,000 shares, held in the aggregate approximately
40% of our share capital as of December 31, 2006. Differences between the percentages of shares held and voting rights in the table above are explained by the fact that since 2002, there is a
double voting right attached to the Dassault Systèmes shares held for more than two years in registered form, and shares held by SW Securities LLC do not have
voting rights.

Based
upon the survey mentioned above, as of December 31, 2006, the proportion of our outstanding shares, including in the form of ADSs, held by institutional investors, each holding more than
2,000 shares or ADSs, whose funds were managed from the United States was approximately 4.7%. At March 31, 2007, the number of record holders of our ADSs in the
United States, who hold either for their own account or for the account of other beneficial owners, was 84 (including The Depository Trust Company), and there were 1,633,260 ADSs
outstanding.

Given
the percentage of capital and of voting rights held by GIMD as of December 31, 2006, GIMD is considered as a controlling shareholder. GIMD is wholly-owned by the members of the Dassault
family. GIMD owns more than one third but less than half of the shares and voting rights in the Company. As a result of French company law, GIMD may therefore not increase their participation by more
than 2% of the total number of shares or voting rights of the Company in less than twelve consecutive months, unless they launch a tender offer on all the equity securities issued by the Company. In
addition, under French law, GIMD is required to inform the French stock exchange authority of any variation in the number of shares or voting rights it holds, and such information is then made public
by the exchange authority.

Only
one of the nine members of the Board of Directors of the Company represents the interests of the controlling shareholder. The quorum for holding board meetings is at least half of the total
number of members, and Board decisions are usually adopted only by at least a majority of the voting directors. The Director representing the interests of GIMD is not a member of the Nomination and
Compensation, Audit or Scientific Committees.

In
June 2006, the Caisse des Dépôts informed us that it had acquired more than 2.5% of our share capital and voting rights. In April 2007, the Caisse des
Dépôts informed us that its voting rights fell below 2.5% of total voting rights. To our knowledge, there are no other
shareholders (except as indicated in the table above) holding more than 2.5% of our share capital or voting rights, alone or in agreement with other shareholders.

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B. Related Party Transactions

We license our products to Dassault Aviation and certain of its subsidiaries, which is under common control with us by GIMD and whose President is our Chairman,
using commercial terms consistent with those used by our other customers of similar size. We recorded software revenue from Dassault Aviation of €12.5 million for the year ended
December 31, 2006 (€7.7 million for 2005 and €5.7 million for 2004).

We
also provide services and support to Dassault Aviation and certain of its subsidiaries. This activity generated revenues of €8.2 million in the year ended December 31,
2006 (€7.5 million for 2005 and €8.7 million for 2004). See Note 15 to our consolidated financial statements.

Most
of our development organizations subcontract software development work to 3D PLM Software Solutions Limited (3D PLM), a joint venture between Dassault Systèmes and Geometric
Software Solutions Co. Ltd., located in India. This joint venture was created in January 2002 and works exclusively for us, and we retain the resulting intellectual property. We
account for 3D PLM as an equity investment and show our share of its results under "Income from equity investees". 3D PLM's total revenue amounted to €12.7 million in 2006
(€10.3 million for 2005 and €7.6 million for 2004).

Transactions
requiring authorization by the Board of Directors under French law may qualify as related party transactions. These transactions are described above under "Item 6A: Directors and
Senior Management  Financial and Contractual Relations between Our Company and its Directors and Executive Officers".

Since
January 15, 2004, the Audit Committee has been responsible for pre-approving all related party transactions pursuant to Nasdaq corporate governance requirements.

C. Interests of Experts and Counsel

Not applicable.

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Item 8: Financial Information

A. Consolidated Statements and Other Financial Information

See "Item 18: Financial Statements" for a list of financial statements contained in this report. The audited financial statements are subject to the
approval of the shareholders at the next shareholders' meeting scheduled for June 6, 2007.

LEGAL PROCEEDINGS

We are involved in litigation from time to time in the ordinary course of business. We believe that there is no outstanding or threatened litigation or
arbitration, including the matter described below, which has recently had or is likely to have a significant impact on our financial standing, our activities, or results.

MatrixOne, Inc.,
a U.S. company that we acquired in May 2006, is one of more than 300 companies named as defendants in coordinated class action litigation pending in federal court in
New York. The consolidated amended complaint in the coordinated action, filed in April 2002, alleges, among other matters, that MatrixOne and the other defendants violated
U.S. securities laws by misrepresenting how their shares would be allocated to investors by banks underwriting initial public offerings of the issuer defendants' shares. A proposed settlement
on behalf of the issuers in the coordinated litigation has been approved by most of the issuer defendants, including MatrixOne, and was preliminarily approved by the trial court in
September 2005. However, in light of a New York federal appeals court ruling in December 2006 on claims substantially similar to those asserted against MatrixOne, it is uncertain
whether final court approval will be granted to the proposed settlement. If the proposed settlement is not approved by the court, MatrixOne intends to continue to defend the litigation vigorously.

DIVIDEND POLICY

We have paid dividends in each year since 1986. The payment and amount of dividends depend on our earnings and financial condition and such other factors as the
Board of Directors deems relevant. Dividends are subject to recommendation by the Board of Directors and a vote by the shareholders at the ordinary general meeting of shareholders. Dividends are paid
in euro.

The
Board of Directors recommends to the shareholders at the next general meeting which shall be held on June 6, 2007, to vote for the distribution of a dividend equal to
€59,938,927.60 with respect to the 2006 financial year. The remainder of the €120,438,429.23 of net profit will be allocated to retained earnings after making
the required allocation to our legal reserve.

Dividends
paid to holders of ADSs or shares who are not residents of France generally will be subject to French withholding tax at a rate of 25%. Holders who qualify for benefits under an applicable
tax treaty and who comply with the procedures for claiming treaty benefits may be entitled to a reduced rate of withholding tax. See "Item 10E:
Taxation  French Taxation  Taxation of Dividends." Prospective purchasers of ADSs or shares should consult their own
advisers with respect to the tax consequences of an investment in ADSs or shares.

The
table below sets forth, in respect of the years indicated, the amount of dividends paid per share excluding the Frenchavoir fiscaland, for
financial years ending on or prior to December 31, 2003, the amount of dividends paid per share including the Frenchavoir fiscal(before

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deduction
of applicable French withholding tax). See "Item 10E: Taxation". Dividends declared in respect of a given year are paid in the following year.

|Year to which dividend relates(1) | Shares outstanding at year end |  | Dividend per share
Excluding avoir fiscal(2) |      | Dividend per Share Including avoir fiscal(2)(3) |      
|--------------------------------- | ------------------------------ |  | -------------------------------------------- | ---- | ----------------------------------------------- | -----
|                                  |                                |  |                                              |      |                                                 |      
|2001                              | 113,943,754                    |  | €                                            | 0.33 |                                                 | $0.31
|2002                              | 114,179,431                    |  | €                                            | 0.33 |                                                 | $0.39
|2003                              | 113,044,227                    |  | €                                            | 0.34 |                                                 | $0.43
|2004                              | 113,786,411                    |  | €                                            | 0.38 |                                                 | $0.46
|2005                              | 115,038,378                    |  | €                                            | 0.42 |                                                 | $0.54
|2006                              | 115,770,290                    |  | €                                            | 0.44 |                                                 | (6)  
|                                  |                                |  |                                              |      |                                                 |      

B. Significant Changes

Except as set forth in "Item 5.D  Trend Information", there has been no significant change to our financial
condition since the date of the annual financial statements included in this report.

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Item 9: The Offer and Listing

A. Listing Details

Our shares have been listed in France on the Paris Stock Exchange (Euronext Paris) since June 28, 1996. In February 2005, Euronext Paris renamed
its markets Eurolist, and we are now listed on Eurolist  Compartment A ("Eurolist"). In the United States, the shares trade in the form of ADSs. The ADSs
are quoted through the NASDAQ Global Market under the symbol "DASTY." Shares issued upon exercise of our stock options during the period from January 1 through the date dividends are paid in a
given year will not have dividend rights with respect to such dividends and during this period will be quoted with a second CUSIP ("DASSY" on the Nasdaq and "DSYNV" on Eurolist). American Depositary
Receipts evidencing the ADSs are issuable by JP Morgan Chase Bank, as Depositary.

The
following table sets forth the high and low prices of our shares on Eurolist and our ADSs on the NASDAQ Global Market since 2002.

Annual High and Low Prices of shares on Eurolist and ADSs on the NASDAQ Global Market

|     |  | Eurolist € |  | Nasdaq U.S.$ | 
|---- |  | ---------- |  | ------------ | 
|
|2002 |  | 59.40      |  | 15.19        | 
|2003 |  | 39.39      |  | 19.10        | 
|2004 |  | 38.81      |  | 30.05        | 
|2005 |  | 48.75      |  | 32.40        | 
|     |  |            |  |              | 
|2006 |  | 49.91      |  | 34.82        | 
|     |  |            |  |              | 

Quarterly High and Low Prices of shares on Eurolist and ADSs on the NASDAQ Global Market

|            |  | Eurolist € |  | Nasdaq U.S.$ | 
|----------- |  | ---------- |  | ------------ | 
|
|2005        |  |            |  |              | 
|1st quarter |  | 38.61      |  | 34.62        | 
|2nd quarter |  | 40.20      |  | 32.40        | 
|3rd quarter |  | 43.20      |  | 37.92        | 
|4th quarter |  | 48.75      |  | 41.20        | 
|2006        |  |            |  |              | 
|1st quarter |  | 49.91      |  | 45.06        | 
|2nd quarter |  | 47.88      |  | 37.74        | 
|3rd quarter |  | 45.55      |  | 34.82        | 
|4th quarter |  | 44.80      |  | 39.53        | 
|2007        |  |            |  |              | 
|1st quarter |  | 42.48      |  | 37.18        | 
|            |  |            |  |              | 

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Monthly High and Low Prices of shares on Eurolist and ADSs on the NASDAQ Global Market

|                          |  | Eurolist € |  | Nasdaq U.S.$ | 
|------------------------- |  | ---------- |  | ------------ | 
|
|December 2006             |  | 41.63      |  | 39.53        | 
|January 2007              |  | 42.40      |  | 37.95        | 
|February 2007             |  | 42.48      |  | 38.22        | 
|March 2007                |  | 40.86      |  | 37.18        | 
|April 2007                |  | 43.83      |  | 40.00        | 
|May 2007 (through May 24) |  | 44.69      |  | 41.72        | 
|                          |  |            |  |              | 

EURONEXT PARIS

All Euronext Paris securities are listed and traded on a single market, Eurolist by Euronext, which is operated by Euronext Paris. In accordance
with Euronext Paris rules, shares issued by domestic and other companies are classified in capitalization compartments. The shares of listed companies are distributed between three capitalization
compartments, according to the criteria set by Euronext Paris:

Compartment
A comprises the companies with market capitalizations above €1 billion;

Compartment
B comprises the companies with market capitalizations from €150 million and up to and including €1 billion;

Compartment
C comprises the companies with capitalizations below €150 million.

Our
common shares are listed on compartment A under the ISIN code FR 00001 30650.

Securities
listed by Euronext Paris are placed in one of the two categories, Continu (continuous trading) or Fixing (call auctions), depending on their trading volume. Our common shares are listed in
the category known as Continu, which includes the most actively traded securities. The minimum yearly trading volume required for a security to be placed in Continu for a company already listed on a
regulated market of Euronext Paris is 2,500 trades.

Securities
listed on Eurolist are officially traded through authorized financial institutions that are members of Euronext Paris. Trading takes place continuously on each business day from
9:00 a.m. to 5:30 p.m. (Paris time), with a pre-opening session from 7:15 a.m. to 9:00 a.m. and a pre-closing session from 5:30 p.m. to
5:35 p.m. during which transactions are recorded but not executed, a closing auction at 5:35 p.m. and a "trading at last" from 5:35 p.m. to 5:40 p.m. during which
transactions are recorded but not executed. Any trade of securities that occurs after a stock exchange session closes is recorded on the next business day at the previous
session's closing price for that security. Euronext Paris publishes a daily official price list that includes among other things, price information on listed securities. Euronext Paris has introduced
continuous electronic trading during trading hours for most actively listed securities.

Euronext
Paris may suspend trading in a security listed on Eurolist if the quoted price of the security exceeds certain price limits defined by the regulations of Euronext Paris. In particular, if the
quoted price of a Continu security, such as the Company's shares, varies by more than 10% from the previous day's closing price (reference price) and once trading has begun, Euronext Paris may suspend
trading in that security for up to 4 minutes. Once trading has recommenced, further suspensions for up to 4 minutes are also possible if the price again varies by more than 10% from a
new reference price equal to the price that caused the first trading suspension. During the continuous trading session, Euronext Paris also may suspend trading for a 4-minute period if
trades are bound to breach the so-called "dynamic" thresholds, set at 2% plus or minus the last traded price. Euronext Paris also may suspend trading of a security listed on the
Eurolist  Compartment A market in certain other limited circumstances, including, for example, the occurrence of unusual trading activity in the security. In
addition, in certain exceptional cases, theAutorité des marchés financiers("AMF"), the self-regulatory
organization that has general regulatory authority over the French stock exchanges, may also suspend trading.

Trades
of securities listed on Eurolist are settled on a cash basis on the third day following the trade. However, market intermediaries are also permitted to offer investors a deferred settlement
service(service de réglement différéor "SRD") for a fee. The SRD allows investors who elect this service
to benefit from leverage and other special features of the monthly settlement market. The SRD is only available for trades in securities which have both a total market capitalization of at least
€1 billion and a daily average volume of trades aggregating at least €1 million and which are cited on the list published by Euronext Paris. Our shares
are eligible for the deferred settlement service. Investors in shares eligible for SRD can elect on the determination date(date de liquidation),which
is, at the latest, the fifth trading day before the end of the month, either to settle the trade by the last trading day of the month or to pay an additional fee and postpone the settlement to the
determination date of the following month.

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Ownership
of equity securities traded on a deferred settlement basis is considered to have been transferred only after such securities have been registered in the purchaser's account. Under French
securities regulations, any sale of securities executed on a deferred settlement basis during the month the dividend is paid is deemed to occur after the dividend has been paid. If the sale takes
place before, but during the month of, a dividend payment date, the purchaser's account will be credited with an amount equal to the dividend paid, and the seller's account will be debited by the
same amount.

Prior
to any transfer of securities held in registered form on Eurolist by Euronext, the securities must be converted into bearer form and accordingly placed in an account maintained by
an accredited intermediary with Euroclear France S.A., a registered clearing agency. Transactions in securities are initiated by the owner giving instructions (through an agent, if appropriate)
to the relevant accredited intermediary. Trades of securities listed on Eurolist are cleared through "clearing 21," a common Euronext platform, and settled through Euroclear France S.A. using a
continuous net settlement system. A fee or a commission is payable to the broker-dealer or other agent involved in the transaction.

B. Plan of Distribution

Not applicable.

C. Markets

See "Item 9A: Listing Details".

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

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Item 10: Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The information required for this Item 10B is specifically incorporated by reference to the relevant information in the
Form F-1 filed by us with the Securities and Exchange Commission on June 4, 1996 ("Registration Statement on Form F-1"). The information provided below
supplements the information provided in the Registration Statement on Form F-1 or, to the extent inconsistent with such information,
supersedes it.

In
this section, we summarize material information concerning our share capital, together with material provisions of applicable French law and our statuts(by-laws). An unofficial English translation of
our by-laws as of the date of filing of this 20-F is
included as an exhibit to this report. You may obtain copies of our by-laws in French from the Registry of Commerce and Companies of Nanterre, France where we are registered under
number 322 306 440. Please refer to the complete by-laws or the unofficial English translation thereof for additional details.

BOARD OF DIRECTORS

For a complete description of the powers of the directors under French law and our by-laws, see "Item 6: Directors, Senior Management
and Employees."

SHARE CAPITAL

As of March 31, 2007, our share capital was €116,027,933 divided into 116,027,933 shares with a nominal value of
€1.00 per share, including 261,011 treasury shares which under French law have no voting rights. All the shares are fully paid.

PURPOSES OF THE COMPANY

As set forth in Article 2 of our by-laws, the purposes of our Company, in France as well as abroad, are (1) to develop, produce,
market, purchase, sell, rent and provide after-sale service of computer hardware and/or software, (2) to supply and sell services to users specifically in the area of training,
demonstration, methodology, display and utilization, and (3) to supply and sell computer resources, together or separate from software or service, in the areas of computer-aided manufacturing
and design, management of the lifecycle of products, collaborative work, technical databases, management of manufacturing processes, and software development tools as well as research and development
in these areas. For a complete description of our purposes, please refer to our by-laws.

SHAREHOLDERS' MEETINGS AND VOTING RIGHTS

Resolutions will be proposed for approval at the shareholders' meeting scheduled for June 6, 2007, to amend ourstatuts(by-laws) to comply with new French
regulations, reflected in the text below, regarding notices of shareholders' meetings and the
use of telecommunications to enable shareholders' participation in shareholders' meetings.

Notice of shareholders' meetings

The Company must announce general meetings of shareholders at least 35 days in advance by means of a preliminary notice which is published in France in the Bulletin des annonces légales
olbigatories(BALO).

Shareholders'
meetings are convened by the Board of Directors. If the Board of Directors fails to convene a shareholders' meeting the statutory auditors may call the meeting. In case of bankruptcy,
the liquidator or court-appointed agent may also call a shareholders' meeting in some instances. Any of the following may request the court to appoint an agent: (i) one or several shareholders
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5%
of our share capital; (ii) any interested party in case of emergency; (iii) duly qualified associations of shareholders who have held their shares in registered form for at least two
years and who together hold at least a specified percentage of the voting rights of our Company; or (iv) the workers' committee in an emergency.

In
addition, shareholders representing a majority of the share capital or voting rights may convene a meeting after a public tender offer or the acquisition of a controlling block of shares.

Additional resolutions for shareholders' meetings

Additional resolutions to be submitted to a vote of the shareholders at the meeting may be proposed to the Board of Directors after the publication of the preliminary notice in
the BALO but not later than 25 days before the shareholders' meeting by one or several shareholders holding a specified percentage of our share capital or a duly qualified association of
shareholders who have held their shares in registered form for at least two years and who together hold at least a specified percentage of the voting rights of our Company. Shareholders wishing to
submit additional resolutions must provide to the Board of Directors a certificate from their accredited intermediary evidencing their share ownership. This certificate must be issued again at
midnight on the third business day before the shareholders' meeting. In addtion, the workers' committee may propose additional reolutions within 10 days of the publication of the notice in
the BALO.

During
the two weeks preceding a meeting of shareholders, any shareholder may submit written questions to the Board of Directors. The questions must be received by the Company no later than
four business days before the meeting and be accompanied by a certificate from an accredited intermediary evidencing share ownership. The Board of Directors must respond to these questions.

Attendance and voting at shareholders' meetings

In general, each share confers on the shareholder the right to one vote. Nevertheless, based on a resolution voted by the shareholders at the extraordinary shareholders'
meeting dated May 28, 2002, our by-laws provide that a double voting right will be awarded to all fully paid-up shares held in registered form for at least two
consecutive years in the name of the same holder. Under French company law, shares of a company held by entities controlled directly or indirectly by that company are not entitled to voting rights and
do not count for quorum or voting purposes. In the case of a capital increase by incorporation of reserves, profits or premiums, this double voting right will be attached on the date of their issuance
to registered shares newly allotted to a shareholder in consideration for the old shares giving rise to such right.

Any
share converted into a bearer share or changing hands shall lose the right to the double voting right unless in case of transfer on succession, or in case of partition of property jointly owned by
spouses, or in case of a gift inter vivos to a spouse or a relative entitled to succeed to the donor's estate. The double voting right may be cancelled by a resolution of the shareholders at an
extraordinary shareholders' meeting approved by the special meeting of shareholders having a double voting right.

Our
by-laws provide that upon decision by our Board of Directors, shareholders may participate and vote at general meetings of shareholders by videoconference or by other means of
telecommunication permitting shareholders' identification and effective participation in accordance with applicable laws and regulations. If such participation is permitted, shareholders who
participate in this manner will be counted for the calculation of a quorum and a majority at general meetings of shareholders.

In
accordance with French law, a precondition for exercising any voting rights is that a holder of shares of the Company has his/her securities registered in his/her name or in the name of his/her
intermediary at midnight (Paris time) on the third business day preceding the meeting, either in registered form or in bearer form.

In
the case of a holder of shares in bearer form, the accredited intermediary must issue a certificate (attestation de participation) as an exhibit to
the voting form (formulaire de vote à distance), the proxy or the admission card (carte
d'admission) at midnight (Paris time) on the third business day preceding the meeting.

Pursuant
to French law, a holder of shares who has already voted, sent a proxy or requested his/her admission card or certificate may transfer all or part of his/her shares at any time. However, if
the sale takes place before midnight (Paris time) on the third business day preceding the meeting, the Company shall invalidate or modify accordingly, as the case may be, the vote, the proxy or the
admission card or the certificate. The accredited intermediary who maintains the accounts shall notify the sale to the Company or to its authorized agent. If the sale takes place after midnight
(Paris time) on the third business day preceding the meeting, the accredited intermediary is not required to notify the Company and the Company is not required to take any action.

The
company does not follow the Nasdaq Rule 4350(f). In compliance with French law for ordinary meetings of shareholders, a quorum consists of at least one fifth of the voting rights upon the
first notice of call. There is no quorum in case of a second notice of call. For extraordinary meetings of shareholders, a quorum consists of at least one fourth of the voting rights upon the first
notice of call and one fifth of the voting rights in case of a second notice of call.

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Proxies and votes by mail

A shareholder may be represented at a shareholders' meeting by his or her spouse, or by another shareholder to whom he/she grants a written proxy, or the shareholder may vote
by mail using the form provided. A shareholder may also send us a blank proxy (dated and signed) without nominating a representative. In this case, the chairman of the meeting will vote the blank
proxies in favour of all resolutions proposed or agreed to by the Board of Directors and against all others.

A
shareholder not domiciled in France, as defined in the French Civil Code, may also be represented at a shareholders' meeting by an intermediary registered under the conditions set forth by the legal
and regulatory provisions in force. Such shareholder will be considered to be present at the meeting for the computation of the quorum and the results of voting.

Financial statements and other communications with shareholders

In connection with any shareholders' meeting, we must provide a set of documents, including our management report, a summary of the results of the five previous fiscal years
and special reports regarding the work of our Board of Directors and our internal control. We must also provide, to any shareholder who so requests, special reports regarding grants of stock options
and of shares.

DIVIDENDS

Legal reserve

At December 31, 2006, our legal reserve was €11.5 million.

Distribution of dividends

French companies typically pay dividends once per year. Shares issued upon exercise of our stock options during the period from January 1 through the dividend payment
date of a given year will not have dividend rights with respect to such dividends and during this period will be quoted with a second CUSIP ("DASSY" on the Nasdaq and "DSYNV"on Eurolist). Following
the dividend payment date, these shares will be assimilated to, and prospectively will entitle the holder to the same rights and benefits as shares issued before January 1.

In
addition, our by-laws provide that our shareholders, in an ordinary general meeting, may authorize the grant to each shareholder of an option to receive all or part of any dividends
declared either in cash or in our shares.

CHANGES IN SHARE CAPITAL

Increases in share capital

As provided by French company law, our share capital may be increased only with the shareholders' approval at an extraordinary general meeting of shareholders following a
recommendation of the Board of Directors. Increases in our share capital may be effected by (i) issuing common shares or preferred shares; or (ii) increasing the nominal value of
existing shares.

Increases
in share capital by issuing additional common or preferred shares may be effected by issuing such securities (i) for cash; (ii) for assets contributed in kind; (iii) by
conversion, exchange or redemption of debt securities previously issued; (iv) by exercise of any other securities giving rights to such securities, such as warrants or stock options;
(v) by capitalization of profits, reserves or share premiums; (vi) subject to various conditions, in satisfaction of debt incurred by our Company; (vii) by conversion of common
shares into preferred shares or conversion of preferred shares into common shares or into another class of preferred shares; or (viii) any combination of the above.

Decisions
to increase the share capital through the capitalization of reserves, profits and/or share premiums require the approval of an extraordinary general meeting, acting under the quorum and
majority requirements applicable to ordinary shareholders' meetings. Increases effected by an increase in the nominal value of shares require unanimous approval of the shareholders, unless effected by
capitalization of reserves, profits or share premiums. All other capital increases require the approval of shareholders at an extraordinary general meeting acting under applicable quorum and majority
requirements.

The
shareholders at an extraordinary general meeting of shareholders may delegate the right to carry out any increase in share capital (other than for an in-kind contribution, subject to
certain exceptions) to the Board of Directors. The Board of Directors may further sub-delegate this right to our Chief Executive Officer. Each time the shareholders decide to carry out a
capital increase or decide to delegate to the Board of Directors the right to carry out a capital increase (except for a contribution in kind or when it results from an earlier issue of securities
giving rights to shares), they must decide on whether or not to carry out a capital increase reserved to employees of our Company and its subsidiaries or on whether or not to delegate to the Board of
Directors the right to implement such reserved capital increase.

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On
June 8, 2005, our general meeting of shareholders granted new authorizations to the Board, for a period of 26 months, to increase the share capital in accordance with the new French
company law provisions. Pursuant to this delegation by our shareholders, the Board of Directors is now authorized to (i) increase the share capital, with or without preemptive subscription
rights of our shareholders, by an issuance of shares and/or any other securities granting access to a portion of our share capital, provided, however, that the nominal amount of increases in the share
capital to be made pursuant to this delegation may not exceed €15 million and the nominal amount of debt securities to be issued pursuant to this delegation shall not exceed a
maximum of €750 million; (ii) increase the share capital by the capitalization of profits, reserves or share premiums; (iii) increase the initial amount of any
capital increases by 15% in the event of over-subscription, within the same nominal aggregate limit of €15 million; and (iv) increase the share capital to
issue new shares in the event of a contribution in kind of securities by a third party, up to a limit of 10% of our total share capital; and (v) increase the capital of a nominal amount not
exceeding €10 million through the issue of new shares or other securities giving access to the capital of the Company reserved to the employees of Dassault
Systèmes and/or to its affiliates who are members of aplan d'épargne d'entreprise.The Board of Directors has proposed
for shareholder approval at the next shareholders' meeting on June 6, 2007 to replace these authorizations, which will expire in 2007, with authorizations of to increase capital within the same
limits and for the same period of 26 months.

Our
share capital may also be increased through grants of stock options and shares. Our general meeting of shareholders on June 8, 2005, authorized the Board to grant stock options to subscribe
or to purchase our shares for a period of 38 months and with the limitation that all outstanding stock options for our shares may not at anytime exceed 20% of our share capital. This
authorization replaced the prior authorization of May 28, 2002. At the June 8, 2005, meeting of shareholders, the Board of Directors was also authorized for a period of 38 months
to grant shares representing up to a maximum of 1% of our share capital. The Board of Directors has proposed for shareholder approval at the next shareholders' meeting on June 6, 2007, that the
authorization to grant shares be extended for a further 38 months, and that the Board be authorized to take advantage of recent changes in French law providing greater flexibility with respect
to the conditions of such share grants. See also "Item 6B. Compensation  Stock Grants".

Decreases in share capital

According to French company law, any decrease in our share capital requires approval by the shareholders entitled to vote at an extraordinary general meeting. The shareholders
may delegate the right to carry out any decrease in share capital to the Board of Directors, provided that this decrease has been previously authorized by the shareholders. In the case of a capital
reduction, other than a reduction to absorb losses or a reduction as part of a program to purchase our own shares, all shareholders must be offered the opportunity to participate in such a reduction.
The share capital may be reduced either by decreasing the nominal value of the outstanding share capital or by reducing the number of outstanding shares. The number of outstanding shares may be
reduced either by an exchange of shares or by the repurchase and cancellation of shares. Holders of each class of shares must be treated equally unless each affected shareholder agrees otherwise.

Preemptive Subscription Rights

According to French law, if we issue securities for cash giving a right either immediately or at a later date to subscribe to new shares, current shareholders will have
preemptive subscription rights to these securities on a pro rata basis. Thus the holder of such rights is entitled to subscribe to any issuance of securities that may increase the share capital
of our Company. Preemptive subscription rights are transferable during the subscription period relating to a particular offering. These rights may also be listed on Eurolist or any relevant Stock
Exchange. Shareholders may notify us on an individual basis if they wish to waive their own preemptive subscription rights with respect to any particular issuance.

The
shareholders may vote to decide or to authorize the Board to decide an issuance of new securities at a majority of two-thirds of the voting rights held by present or represented
shareholders. Generally, in the event of an authorization to increase the share capital granted to the Board by the general meeting of the shareholders, the decision to issue new securities must be
taken by the Board within 26 months, the period prescribed by law.

The
shareholders may waive the preemptive subscription rights of existing shareholders with respect to any particular offering to the public. The general meeting of shareholders may also decide to
waive the preemptive subscription rights of the shareholders to reserve the issuance of new securities to a specific beneficiary or a category of beneficiaries; in such case, the securities must be
issued within eighteen months from the general meeting. French law requires that the Board of Directors and our independent auditors present reports that specifically address any proposal to waive
such rights.

The
shareholders may also decide at an extraordinary general meeting to give the existing shareholders a non-transferable priority right to subscribe to such new securities during a
limited period of time of at least three trading days.

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FORM, HOLDING AND TRANSFER OF SHARES

Form and holding of shares

Our by-laws permit us to request that Euroclear France provide us at any time with the identity, nationality and address of the holders of our shares or other
securities granting immediate or future voting rights, held in bearer form, and with the number of shares or other securities so held. French company law states that shares held by any
non-French resident may be held by an intermediary on the shareholder's behalf in a collective account or in several individual accounts. The intermediary must declare its position as an
intermediary holding shares on behalf of the beneficial owner. Consequently, the owner of shares recorded in the collective account or in several individual accounts by an intermediary will be
represented at the general meetings of shareholders by this intermediary.

Transfer of shares

Registered shares must be converted into bearer form before being transferred on Eurolist and, accordingly, must be registered in an account maintained by an accredited
intermediary. A shareholder may initiate a transfer by giving instructions to the relevant accredited intermediary.

For
dealings on Eurolist, animpôt sur les opérations de Bourse,or a tax assessed on the price at which the securities
were traded, is payable at the rate of 0.3 percent on transactions up to €153,000 and at a rate of 0.15 percent thereafter, subject to a rebate of
€23 per transaction and a maximum assessment of €610 per transaction. Non-residents of France are generally not subject to the payment of such impôt sur les opérations de
Bourse.In addition, a fee or commission is payable to the broker, accredited intermediary or
other agent involved in the transaction (whether within or outside France). No registration duty is normally payable in France, unless a transfer instrument has been executed in France. See
" Taxation  French Taxation  Taxation on Sale or Disposal of Shares" below.

REQUIREMENTS FOR HOLDINGS EXCEEDING CERTAIN PERCENTAGES

French company law provides that any individual or entity, including a holder of ADSs, acting alone or in concert with others, that becomes the owner, directly
or indirectly, of more than one-twentieth, one-tenth, three-twentieths, one-fifth, one-fourth, one-third, one-half,
two-third, eighteen-twentieths, or nineteen-twentieths of the outstanding share capital or the voting rights of a listed company in France, or whose holdings fall below any such level,
must notify us within five trading days of the date it crosses the threshold of the number of shares or ADSs it holds and their voting rights. The individual or entity must also notify the AMF within
five trading days of such date of the number of equity securities it holds and the voting rights attached thereto. This information will be made public pursuant to the conditions set forth in the
General Regulation of the AMF.

French
law and the AMF impose additional reporting requirements on persons, acting alone or in concert with others, who acquire more than 10 percent, and subsequently, as the case may be, more
than 20 percent of the outstanding shares or voting rights of a listed company. These persons must file with the AMF and such listed company a report disclosing their intentions for the next
12 months with respect to such company. In this report, the acquirer must disclose whether or not it intends, within the 12-month period following the acquisition, to increase its
shareholding, to acquire control of such company, or to seek a nomination to such company's board of directors. Such report must be filed with the AMF and with such listed company within
10 trading days of the date such threshold has been crossed. The AMF publicly releases the notice. The acquirer must also publish a press release stating its intentions in a financial newspaper
of national circulation in France. The acquirer may amend its stated intentions, provided that it does so on the basis of significant changes in its own situation or that of the shareholders. Upon any
change of intention, it must file a new report.

In
addition, our by-laws provide that any person who, directly or indirectly, acting alone or in concert with others, becomes the owner of more than 2.5 percent, or any subsequent
multiple of 2.5 percent up to 50 percent, of our share capital or voting rights, or whose holdings fall below any such percentage, shall be required to notify us of such fact within five
trading days of such acquisition by registered mail. Failure to comply with such notification provisions will result in the suspension for up to two years of the voting rights attached to the excess
of the relevant threshold if requested in the minutes of a shareholders' meeting by one or more shareholders holding equity securities representing at least 2.5 percent of our share capital or
voting rights.

PURCHASE OF OUR OWN SHARES

Under French law, we may not subscribe to our own shares. However, we may, directly or through an intermediary acting on our behalf, purchase our own shares in
accordance with French and EU law. Our general meeting of shareholders held on June 14, 2006, authorized the Board to implement a share repurchase program (which permits us to repurchase our
shares for the purposes detailed below) limited to 10 percent of our share capital. Under this authorization, we may not buy shares at a price exceeding €60 per share
(transaction fees excluded) or above a maximum aggregate amount of €400 million. This authorization expires at our next general shareholders' meeting, to be held on
June 6, 2007. At the meeting on June 14, 2006, our shareholders also authorized our Board of Directors to cancel the repurchased shares, and reduce our share capital by up to
10 percent within any 24-month period. These authorizations replaced the authorizations that were granted by our shareholders at the general meeting of shareholders on
June 8, 2005. No shares have been repurchased under the authorizations of either June 8, 2005, or June 14, 2006.

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Our
Board of Directors has proposed a resolution to our next general shareholders' meeting that would authorize the Board to implement a new share repurchase program in order to replace the program
previously authorized. The new repurchase program is also limited to 10 percent of our share capital as of the date of the shareholder approval. We may also repurchase shares according to this
authorization in the context of a tender offer, within the limits permitted under French law. This authorization would expire on the general meeting of shareholders approving the financial statements
for the financial year ending December 31, 2007. Under this repurchase program, we may not buy shares at a price exceeding €60 per share (transaction fees excluded) or
above a maximum aggregate amount of €500 million. At the meeting scheduled for June 6, 2007, our shareholders will also be asked by the Board of Directors to
authorize the cancellation of any repurchased shares, and to reduce our share capital by up to 10 percent within any 24-month period.

The
resolution to be proposed to the June 6, 2007, shareholders' meeting would permit us to use repurchased shares to:

Under
French law we may not, directly or through a person acting on our behalf, own more than 10 percent of our outstanding share capital or, if we have different classes of shares, more than
10 percent of the shares in each class. The General Regulation of the AMF and its instructions require us to publicly disclose a description of the program prior to its implementation.

We
must hold any shares we repurchase in registered form. These shares also must be fully paid up. Shares repurchased by us are deemed outstanding under French law but are not entitled to dividends or
voting rights, and we may not exercise the preemptive subscription rights attached to them.

TRADING IN OUR OWN SHARES

Pursuant to regulations of the European Union and the AMF, we may not trade in our own shares for purposes of manipulating the market. In order for trades to be
valid according to the applicable regulations:

In
addition, in order to benefit from the exemption provided by applicable regulations, we may not, during any participation in a buy-back program, engage in the following:

The
prohibitions mentioned above do not apply if:

Pursuant
to the General Regulation of the AMF and its instructions, we must publicly disclose, by means of a press release posted on our website, no later than the seventh trading day following the
date of execution, any transactions pursuant to an ongoing buy-back program.

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In
addition, we disclose monthly buy-back transactions and we inform the annual general meeting of shareholders of the realization of buy-back transactions such meeting
authorized.

OWNERSHIP OF SHARES OR ADSS BY NON-FRENCH RESIDENTS

Under French law, there is normally no limitation on the right of non-French residents or non-French security holders to own, or, where
applicable, to vote securities of a French company.

C. Material Contracts

For a discussion of material contracts between IBM and our Company, see "Item 3D: Risk Factors," "Item 4B: Business Overview" and "Item 5A:
Operating Results."

D. Exchange Controls

Under current French exchange control regulations, there are no limitations on the amount of payments that may be remitted by a French company to
non-French residents. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a
non-French resident be handled by an accredited intermediary. In France, all credit establishments, including all registered banks, are accredited intermediaries.

E. Taxation

FRENCH TAXATION

The following is a general summary of the material French tax consequences of owning and disposing of shares by a holder that is not a resident of France and
does not hold the shares in connection with a business conducted in France. The statements relating to French tax laws set out below are based on the laws in force as of the date hereof, and are
subject to any changes in applicable French tax laws or in any applicable double taxation conventions or treaties with France occurring after such date. Special treaty "tie-breaker" rules
apply to individuals who may be considered residents of both countries under the tax laws of each country.

This
discussion is intended only as a descriptive summary and does not purport to be a complete analysis or list of all potential tax effects of the purchase or ownership of the shares.

Potential
purchasers of shares are urged to consult their own tax advisers concerning the consequences of ownership and disposal of shares.

Taxation on Sale or Disposal of Shares.Subject to more favorable provisions of any relevant double tax treaty, persons who are not French residents for
the purpose of French taxation (as well as, under certain conditions, foreign states, international organizations and certain foreign public bodies) and who have held, alone or with relatives,
not more than 25%, directly or indirectly, of our dividend rights (bénéfices sociaux) at any time during the preceding five years are not generally subject to any French
income tax or capital gains tax on any sale or disposal of shares.

If
a share transfer is evidenced by a written agreement, such share transfer agreement is, in principle, subject to registration formalities and therefore to a 1.1% registration duty assessed on the
higher of the purchase price and the market value of the shares (subject to a maximum assessment of €4,000 per transfer), provided that, under certain circumstances, no duty is
due if such written share transfer agreement is executed outside France.

Taxation of Dividends.In France, dividends are paid out of after-tax income. French individual shareholders are entitled, with respect to
dividends paid as of January 1, 2005, to a new tax credit equal to 50% of the dividend paid, capped at
€230 or, as the case may be, €115, depending on the marital status of the individual shareholder. Corporate shareholders are not entitled to this tax credit.

French
domestic law states that dividends paid to non-residents are normally subject to a 25% French withholding tax, and non-residents are not eligible for the benefit of the
French tax credits.

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Under
most tax treaties entered into between France and other countries, such withholding tax may, subject to certain conditions, be reduced and give rise in such other country to a tax credit of the
amount of the tax or, in the case of certain tax treaties, be eliminated.

Certain
tax treaties further provide for a refund of the French tax credits attached to dividends to certain non-residents. The French tax authorities have indicated that
non-resident individual shareholders benefiting from a tax treaty providing for the refund of the French tax credits attached to dividends are entitled to the refund of the above-mentioned
French tax credit, net of the applicable withholding tax.

The
following countries and Territoires d'Outre-Mer and other territories have entered into treaties with France whereby tax residents of such countries and territories may, under certain
circumstances, obtain from the French tax authorities a reduction (generally reducing the withholding tax rate to 15%) of such withholding tax and refund of the tax credits attached to dividends
(net of applicable witholding tax).

|Australia    |  | Ghana       |  | Mali            |  | Singapore      |  | Territoires d'Outre-Mer & other territories: | 
|------------ |  | ----------- |  | --------------- |  | -------------- |  | -------------------------------------------- | 
|Austria      |  | Iceland     |  | Malta           |  | South Korea    |  | Mayotte                                      | 
|Belgium      |  | India       |  | Mauritius       |  | Spain          |  | New Caledonia                                | 
|Bolivia      |  | Israel      |  | Mexico          |  | Sweden         |  | Saint-Pierre-et-Miquelon                     | 
|Brazil       |  | Italy       |  | Namibia         |  | Switzerland    |  |                                              | 
|Burkina Faso |  | Ivory Coast |  | The Netherlands |  | Togo           |  |                                              | 
|Canada       |  | Japan       |  | New Zealand     |  | Turkey         |  |                                              | 
|Estonia      |  | Latvia      |  | Niger           |  | Ukraine        |  |                                              | 
|Finland      |  | Lithuania   |  | Norway          |  | United Kingdom |  |                                              | 
|Gabon        |  | Luxembourg  |  | Pakistan        |  | United States  |  |                                              | 
|Germany      |  | Malaysia    |  | Senegal         |  | Venezuela      |  |                                              | 

As to dividends paid in 2006 by us, non-resident shareholders benefiting from a treaty may have been subject, on the date of payment, to the
withholding tax at the reduced rate provided for by such treaty, rather than to the French withholding tax at the rate of 25% to be later reduced to the treaty rate, if the shareholder established
entitlement to such reduced rate before the date of payment by providing the paying agent with a certificate (the Certificate) based on the draft provided by the French tax authorities in their
Administrative Guidelines 4 J-1-05, dated February 25, 2005.

If
the non-resident shareholder did not file the Certificate before the dividend payment date, we withheld the French withholding tax at the rate of 25%. This non-resident may
claim a refund of the excess withholding tax by completing and providing the paying agent with the French Treasury forms 5000 and 5001 before December 31, 2008.

Furthermore,
if a shareholder is entitled to a refund of the French tax credits attached to dividends under the relevant tax treaty, such shareholder can file a claim for the refund of the
French tax credit of 50% (capped at €230 or €115) on distributions made by us in 2006, net of the applicable withholding tax, but only to the extent that the
shareholder is an individual.

The
French tax authorities have not detailed the filing formalities that have to be completed in order to obtain the refund of the French tax credit described above.

Estate and Gift Tax.France imposes estate and gift tax on securities issued by French and non-French companies acquired by inheritance or
gift from a non-resident of France. France has entered into estate and gift tax treaties with a number of countries pursuant to which, assuming certain conditions are met, residents of the
treaty countries may be exempted from such tax or may obtain a tax credit. Prospective investors in shares should consult their own advisors concerning the applicability of French estate and gift tax
to their holding of our shares, and the availability of, and the conditions for claiming exemption or tax credit under such a treaty.

Wealth Tax.Even in the absence of a more favorable tax treaty, the French wealth tax (impôt de solidarité sur la fortune)
does not apply to the shares of non-French resident individual investors owning directly or indirectly less than 10% of our share capital, provided that the lesser amount does not enable
the holder to exercise influence on our Company.

TAXATION OF U.S. INVESTORS

The following is a general summary of the material U.S. federal income tax and French tax consequences of purchasing, owning and disposing of our shares
or ADSs. This discussion applies only to U.S. holders. You are a U.S. holder if you are the beneficial owner of shares or ADSs and all of the following five points apply to you:

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If
a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds shares or ADSs, the tax treatment of a partner generally will depend
upon the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds shares or ADSs, you are urged to consult your own tax adviser regarding the
specific tax consequences of owning and disposing of such shares or ADSs.

Special
rules may apply to U.S. expatriates, insurance companies, tax-exempt entities, pension funds, banks, financial institutions, persons subject to the alternative minimum tax,
securities broker-dealers, persons holding shares or ADS as part of a hedging transaction, straddle or conversion transaction, persons who acquired their shares or ADSs pursuant to the exercise of
employee stock options or otherwise as compensation, among others. Those special rules are not discussed herein. Furthermore, this discussion is based upon current U.S. and French law and practice,
including the U.S. Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), the Treasury regulations promulgated thereunder, rulings, judicial decisions and
administrative pronouncements. This summary is subject to any changes to (or changes in the interpretation of) U.S. or French law or practice occurring after the date hereof, which may have
retroactive effect. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the Deposit Agreement, and all other related agreements, will be
performed in accordance with its terms. Holders should consult their own tax advisers concerning the U.S. federal, state and local tax consequences of the ownership or disposition of our shares
or ADSs in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

The
statements of U.S. and French tax laws set forth below assume that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms. This summary
is based upon current U.S. and French tax laws, including the U.S. Internal Revenue Code of 1986, as amended (the "Code"), the Treasury regulations promulgated thereunder, rulings,
judicial decisions and administrative pronouncements, the Treaty, and the practice of the French tax authorities, as of the date hereof, and as a consequence are subject to any changes in such laws,
conventions or practice occurring after such date, which may have retroactive effect.

TAXATION OF DIVIDENDS

Under the Treaty, the rate of French withholding tax on dividends paid to a U.S. Holder whose ownership of the ADSs or shares is not effectively connected with a
permanent establishment or a fixed base in France "an Eligible U.S. Holder" is reduced to 15%. Dividends paid to such Eligible U.S. Holder are immediately subject to the reduced rate of
15% on the date of payment of such dividends, provided that such Eligible U.S. Holder establishes before the date of payment that he or she is a resident of the United States under the
Treaty in accordance with the procedures described above.

Dividends paid as of January 1, 2005.If you are, and so long as you will remain an Eligible U.S. Holder, you are subject to withholding
tax from your dividend at the reduced rate of 15%, provided that you have previously established that you are a resident of the United States under the Treaty, in accordance with the
"Simplified procedure" below. Otherwise, the "Normal procedure" must be followed.

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The
forms, together with their respective instructions, are available from theCentre des Impôts des
Non-Résidents(10, rue du Centre, 93465 Noisy-le-Grand Cedex, France). The depositary will provide to all
U.S. Holders of ADSs registered with the depositary the forms and instructions, and will arrange for the filing with the French tax authorities of all forms completed by U.S. Holders of
ADSs that are returned to the depositary in sufficient time.

U.S. FEDERAL INCOME TAX

For U.S. federal income tax purposes, the gross amount of your distribution (including the related French tax credit paid to a U.S. Holder and before deduction of
any French tax withheld), will be taxable as dividend income to a U.S. Holder, based on the U.S. dollar value of the distribution calculated by reference to the spot rate in effect on
the date the distribution is actually or constructively received by the U.S. Holder, in the case of shares, or by the Depositary, in the case of ADSs. No dividends received deduction will be
allowed to U.S. corporate Holders with respect to dividends paid by us. For foreign tax credit limitation purposes, such dividends generally will constitute foreign source "passive" or in the
case of certain U.S. Holders, "financial services" income. For taxable years beginning after December 31, 2006 dividend income generally will constitute "passive category income" or in
the case of certain U.S. Holders, "general category income." The amount of any dividend paid in euro, including the amount of any French taxes withheld therefrom, will be equal to the
U.S. dollar value of the euro amount received calculated by reference to the spot rate in effect on the date the dividend is includible in income, regardless of whether the payment is in fact
converted into U.S. dollars. If the euros are converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not recognize any foreign currency gain or loss
upon conversion. If the euros are not converted in to U.S. dollars on the date of receipt, a U.S. Holder generally will have a basis in the euros equal to their U.S. dollar value
on the date of receipt. Such U.S. Holder will be required to recognize foreign currency gain or loss, which generally will be U.S. source ordinary income or loss, upon a subsequent
conversion or other disposition of the euros. Moreover, a U.S. Holder may be required to recognize foreign currency gain or loss upon the receipt of a refund of amounts, if any, withheld from a
dividend in excess of the treaty rate of 15%. Special rules govern and specific elections are available to accrual method taxpayers to determine the U.S. dollar amount includible in income in
the case of taxes withheld in a foreign currency. Accrual method taxpayers are urged to consult their own tax advisors in this regard.

French
withholding tax imposed at the Treaty rate of 15% on dividends paid by us and on the payment of any related French tax credit is treated as payment of a foreign income tax and, subject to
certain conditions and limitations, may be taken as a credit against a U.S. Holder's U.S. federal income tax liability. Alternatively, a U.S. Holder may claim foreign taxes paid
in a particular year as an itemized deduction. A deduction does not reduce U.S. tax on a dollar-for-dollar basis as does a tax credit. The deduction, however, is not
subject to the limitations applicable to foreign tax credits. U.S. holders are urged to consult their own tax advisors concerning their eligibility for benefits under the Treaty, and whether,
and to what extent, a foreign tax credit will be available.

The
United States Treasury has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits or reduced tax rates
in respect of qualified dividends by U.S. Holders of ADSs. Accordingly, the discussion above regarding the creditability of French withholding tax or the availability of qualified dividend
treatment could be affected by future actions that may be taken by the United States Treasury with respect to ADSs.

Certain
U.S. Holders (including individuals) are eligible for reduced rates of U.S. federal income tax at a maximum rate of 15%, in respect of "qualified dividend income" received in
taxable years beginning before January 1, 2011. For this purpose, qualified dividend income generally includes dividends paid by a non-U.S. corporation if, among other
things, the U.S. Holders meet certain minimum holding periods and the non-U.S. corporation satisfies certain minimum requirements, including that either (i) the shares
(or ADSs) with respect to which the dividend has been paid are readily tradable on an established securities market in the United States or (ii) the
non-U.S. corporation is eligible for the benefits of a comprehensive U.S. income tax treaty (such as the Treaty) which provides for the exchange of information.
We currently believe that dividends paid with respect to our ADSs and shares should constitute qualified dividend income for U.S. federal income tax purposes and we anticipate that our
dividends will be reported as qualified dividends on Forms 1099-DIV delivered to U.S. Holders. Each individual U.S. Holder of ADSs or shares is urged to consult its
own tax advisor regarding the availability to it of the reduced dividend tax rate in light of its own particular situation and regarding the computations of its foreign tax credit limitation with
respect to any qualified dividend income paid by us, as applicable.

TAXATION OF CAPITAL GAINS

A U.S. Holder who is a resident of the United States as defined pursuant to the provisions of the Treaty will not be subject to French tax on any capital gain
from the sale or other disposal of ADSs or shares unless these ADSs or shares form part of a business property of a permanent establishment or fixed base that the U.S. Holder has in France.
Special rules apply to individuals who are residents of more than one country.

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For
U.S. federal income tax purposes, a U.S. Holder generally will recognize capital gain or loss on the sale, exchange, or other disposition of ADSs or shares in an amount equal to the
difference between the U.S. dollar value of the amount realized for the ADSs or shares and the U.S. Holder's adjusted tax basis (determined in U.S. dollars) in the ADS or shares.
This capital gain or loss will be U.S. source gain or loss, and generally will be treated as a long-term capital gain or loss if the Holder's holding period in the ADSs or shares
exceeds one year at the time of disposition. In the case of a U.S. Holder who is an individual, any capital gain generally will be subject to U.S. federal income tax at preferential
rates if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.

The
deposit or withdrawal of shares for ADSs by a U.S. Holder under the Deposit Agreement will not be subject to U.S. federal income tax.

PASSIVE FOREIGN INVESTMENT COMPANY STATUS

A non-U.S. corporation will be classified as a passive foreign investment company (a "PFIC") for any taxable year if at least 75% of its gross income
consists of passive income (such as dividends, interest, rents or royalties  other than rents or royalties derived in the active conduct of a trade or business
and received from an unrelated person  or gains on the disposition of certain minority interests), or at least 50% of the average value of its assets consist of
assets that produce, or are held for the production of, passive income. We currently believe that we did not qualify as a PFIC for the 2006 taxable year for U.S. federal income tax purposes. If
we were characterized as a PFIC for any taxable year (which conclusion is a factual determination that must be made as of the close of the taxable year), U.S. Holders would suffer adverse tax
consequences. These consequences may include having gains realized on the disposition of ADSs or shares treated as ordinary income rather than capital gains and being subject to punitive interest
charges on certain dividends and on the proceeds of the sale or other disposition of the ADSs or shares. Furthermore, dividends paid by us would not be "qualified dividend income" and would be taxed
at the higher rates applicable to other items of ordinary income. Application of the PFIC rules is complex. U.S. Holders should consult their own tax advisors regarding the potential
application of the PFIC rules to their ownership of ADSs or shares.

FRENCH ESTATE AND GIFT TAXES

Under "The Convention Between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Estates, Inheritance and Gifts of November 24, 1978," a transfer of ADSs or shares by gift or by reason of the death of a U.S. Holder will not be subject
to French gift or inheritance tax unless (i) the donor or the transferor is domiciled in France at the time of the making of the gift, or at the time of his or her death, or (ii) the
ADSs or shares were used in, or held for use in, the conduct of a business through a permanent establishment or fixed base in France.

FRENCH WEALTH TAX

The French wealth tax generally does not apply to the ADSs or shares owned by a U.S. Holder who is a resident of the United States as defined
pursuant to the provisions of the Treaty (except in the case where substantial participations are held by a U.S. resident individual).

UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING

Dividend payments made to a Holder, and proceeds paid from the sale, exchange, or other disposition of ADSs or shares, may be subject to information reporting
to the IRS and possible U.S. federal backup withholding at a current rate of 28%. Backup withholding will not apply to a U.S. Holder who furnishes a correct taxpayer identification
number or certificate of foreign status and makes any other required certification, or who is otherwise exempt from backup withholding. U.S. persons who are required to establish their exempt
status generally must provide such certification on IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Non-U.S. Holders generally are
not subject to U.S. information reporting or backup withholding. However, these Holders may be required to provide certification of non-U.S. status (generally on IRS
Form W-8BEN) in connection with payments received in the United States or through certain U.S.-related financial intermediaries. Backup withholding is not an additional tax.
Amounts withheld as backup withholding may be credited against a Holder's U.S. federal income tax liability. A Holder may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the IRS in a timely manner and furnishing any required information.

F. Dividends and Paying Agents

Not applicable.

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G. Statements by Experts

Not applicable.

H. Documents on Display

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act) and file reports, including Annual
Reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission
(the SEC). As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and our officers, directors, and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Under the Exchange Act, as a foreign private issuer, we are
not required to publish financial statements as frequently or as promptly as United States companies. However, we intend to file with the SEC, as long as we are required to do so, within
180 days after the end of each fiscal year, Annual Reports on Form 20-F containing financial statements audited by an independent accounting firm.

You
may review a copy of our filings with the SEC including exhibits and schedules filed with it, at the SEC's public reference facilities in Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy
charges. In addition, the SEC maintains an Internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC. These SEC filings
are also available to the public from commercial document retrieval services.

In
addition, material filed by us with the SEC and other information about us can be inspected at the offices of The Nasdaq Stock Market at 1735 K Street, N.W., Washington D.C.
20006-1506.

We
provide JP Morgan Chase Bank with annual and semi-Annual Reports in English, as well as summaries in English or an English version of all notices of stockholders' meetings and other
reports and communications that we generally make available to our stockholders. Copies of these reports and other documents are available upon request from JP Morgan Chase Bank, attention of the
ADR department.

I. Subsidiary Information

Not applicable.

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Item 11: Quantitative and Qualitative Disclosures About Market Risk

Our
overall risk management policy is based upon the prudent management of our market risks, primarily interest rate risk and foreign currency exchange risk. Our programs with respect to the
management of these risks, including the use of hedging instruments, are discussed below. Our exposure to these risks may change over time and there can be no assurance that the benefits of our risk
management policies will exceed the related costs. Such changes could have a materially adverse impact on our financial results.

INTEREST RATE RISK

Except for their impact on the general economic environment, which is difficult to assess, we believe that changes in interest rates in 2006 did not materially
affect our revenue and earnings before financial income. Similarly, interest rates are not expected to affect future earnings before financial income, but may affect financial income. Therefore, our
interest rate risk is primarily a risk related to a reduction of financial revenue. The increase in U.S. interest rates and the positive performance of our short-term placements
contributed to our financial income in 2006.

We
generate positive cash flows from operations and have some financial obligations (e.g., employee profit-sharing, a long-term capital
lease for a building and credit facilities), but our cash position net of debt is positive throughout the year. We sometimes use bank overdrafts, for non-significant amounts, for which the
interest rate is a variable market rate.

We
have a long-term capital lease for a building, as described in Note 10 to our consolidated financial statements. In December 2005, we signed a 5-year
variable rate revolving credit facility for up to €200 million, with two options for one-year extensions, and we entered into interest rate swap agreements in
connection with this facility. These swap agreements have the economic effect of modifying a portion of our forecasted interest obligations relating to this facility so that the interest payable
effectively becomes fixed. Under the terms of the credit facility, we are subject to limitations on granting liens on, or selling, Company assets or the assets of our principal subsidiaries, and on
restructurings involving the Company. A change in control of the Company triggers early reimbursement of amounts outstanding under the facility. We drew down the entire
€200 million from the facility on March 15, 2006 to finance the MatrixOne acquisition.

Financial
revenue is composed in part of interest income from cash and cash equivalents, as well as from short-term investments. As a result, it is sensitive to fluctuations in interest
rates. We follow a conservative policy for investing our cash resources, mostly relying on short-term, investment grade investments. Investment rules are determined and controlled by the
treasury department of the parent company.

In
2006, for cash management purposes, we did not invest in any common shares. We invested a non-significant part of our cash in a fund directly invested in stocks. Our financial results
are therefore not significantly directly linked to stock market variations.

The
following table presents the notional amount and market value of interest rate financial instruments at December 31, 2006 and 2005:

|                        |  | Year ended December 31, 2006 |  | Year ended December 31, 2005 | 
|----------------------- |  | ---------------------------- |  | ---------------------------- | 
|
|Euro interest rate swap |  | 200,000                      |  | 5,672                        | 
|                        |  |                              |  |                              | 

FOREIGN CURRENCY EXCHANGE RISK

Our revenue is primarily invoiced in U.S. dollars, euro and Japanese yen. Under the IBM marketing and sales agreement, the royalties we receive for the
products distributed by IBM are generally set in the local currency of the end purchaser, and then remitted to us by IBM in U.S. dollars based on conversion rates adjusted monthly. In addition,
we incur expenses in several currencies, through our suppliers and employees in different countries. Finally, we engage in mergers and acquisitions outside the euro zone and may lend money in
different currencies to our fully or partially owned subsidiaries. As a result, our results of operations may be affected by changes in exchange rates, particularly between the U.S. dollar or
the Japanese yen and the euro.

To
a certain extent, we experience natural hedging, with revenue denominated in U.S. dollars partially offset by our U.S. dollar expenses. Our net exposure in Japanese yen is more
significant. In 2006, revenue denominated in U.S. dollars represented approximately 39% of total revenue, compared with 39% in 2005 and 33% in 2004, after taking into account the monthly
conversion by IBM of royalties coming from end purchaser payments in currencies other than U.S. dollars. Our operating expenses denominated in U.S. dollars represented 45% of total
operating expenses in 2006, compared with 38% in 2005 and 35% in 2004.

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As
a result, our net operating exposure to U.S. dollars was limited to €32 million in 2006 (2% of our revenue), and this exposure was in part hedged through market
instruments at a level of €12 million, as further described below.

The
U.S. dollar decreased on average by 1% in 2006 having a negative impact on our operating income, while it was on average flat and had no significant impact in 2005. In 2006 and 2005, the
Japanese yen depreciated 7% and 2% against the euro, respectively, compared to the respective preceding year, with a negative impact on our operating income.

Currency
fluctuations may impact revenue and expenses as well as financial revenue. The main items of financial revenue subject to fluctuations linked to exchange rates are:

We
are able to hedge some of our foreign currency exchange risk, but some currency risks, such as the impact of the consolidation of subsidiaries reporting in U.S. dollars, cannot be hedged.
Our hedging transactions typically involve purchasing currency options and foreign exchange contracts. We only hedge our revenues and expenses coming from usual and predictable activity arising in the
normal course of operations. We use exclusively forward agreements or financial instruments with a maximum predictable loss. All hedging activities are carried out or formally approved by the parent
company and all hedging transactions and our net exposure are reported to the Chief Financial Officer on a monthly basis. The table below sets forth, for the year ended December 31, 2006, the
euro value of our revenue, operating expenses and net position, before and after hedging, denominated in U.S. dollars, Japanese yen together with Korean won and other currencies, principally
the euro.

|                         |  | Year ended December 31, 2006 | 
|------------------------ |  | ---------------------------- | 
|
|Revenue                  |  | 446,420                      | 
|Operating expenses       |  | 414,797                      | 
|Net position             |  | 31,623                       | 
|Hedge(1)                 |  | 11,946                       | 
|                         |  |                              | 
|Net position after hedge |  | 19,677                       | 
|                         |  |                              | 

The following table presents the notional amount and market value of foreign currency financial instruments at December 31, 2006 and 2005:

|                                             |  | Year ended December 31, 2006 |  | Year ended December 31, 2005 |   |        
|-------------------------------------------- |  | ---------------------------- |  | ---------------------------- | - | -------
|
|Collars USD/euro                             |  | 3,846                        |  | 69                           |   | 11,226 
|Dual forward contract                        |  | 1,000                        |  | (7                           | ) |        
|Forward contract GBP/euro-sale(1)            |  | 1,426                        |  | (60                          | ) |        
|Forward exchange contract USD/euro  sale(2) |  | 38,883                       |  | 179                          |   | 291,671
|Forward exchange contract JPY/euro  sale(3) |  | 1,483                        |  | 204                          |   | 3,093  
|                                             |  |                              |  |                              |   |        

Revenue and expenses denominated in currencies other than the euro are translated into euro using rates determined by the applicable accounting regulation. For
example, most non-euro transactions originating in France are translated using the average exchange rate of the month preceding the transaction. When consolidating subsidiaries reporting
in currencies other than the euro, however, the average exchange rate of the quarter in which the consolidation takes place is used. In the context of business acquisitions, the currency exchange rate
used is the rate on the date of the acquisition, or on the date the foreign currency used for the acquisition was purchased.

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Item 12: Description of Securities Other than Equity Securities

Not
applicable.

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PART II



|                                                                                         |  |   
|---------------------------------------------------------------------------------------- |  | --
|Item 13:    Defaults, Dividend Arrearages and Delinquencies                              |  | 90
|Item 14:    Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 90
|Item 15:    Controls and Procedures                                                      |  | 90
|Item 16:    [RESERVED]                                                                   |  | 92
|Item 16A:    Audit Committee Financial Expert                                            |  | 92
|Item 16B:    Code of Ethics                                                              |  | 92
|Item 16C:    Principal Accountants Fees and Services                                     |  | 92
|Item 16D:    Exemptions from the Listing Standards for Audit Committees                  |  | 93
|Item 16E:    Purchases of Equity Securities by the Issuer and Affiliated Purchasers      |  | 93
|                                                                                         |  |   

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Item 13: Defaults, Dividend Arrearages and Delinquencies

To
our knowledge, there has been no material default in the payment of principal or interest or any other material default not cured within 30 days relating to our indebtedness or that of any
of our subsidiaries.

Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds

To
our knowledge, no one (i) has modified materially the instruments defining the rights of holders of our shares or (ii) has modified materially or qualified the rights evidenced by our
registered securities by issuing or modifying any other class of securities.

Item 15: Controls and Procedures

As
of December 31, 2006, the Company conducted an evaluation, pursuant to Rule 13a-15e promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
the disclosure controls and procedures, as of December 31, 2006, were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit
under the Exchange Act, is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure.

There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Our
management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide
only reasonable assurances with respect to financial statements preparation and presentation.

Our
management assessed the effectiveness of our internal control over financial reporting based on the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework. Based on
this assessment, management concluded that as of December 31, 2006 our internal control over financial reporting was effective.

Our
management has excluded MatrixOne, Inc from its assessment of internal control over financial reporting as of December 31, 2006 because it was acquired by the Company in a purchase business
combination during 2006. MatrixOne Inc is a wholly-owned subsidiary whose total assets and total revenues represented (excluding corporate-controlled assets) 6% and 5.3%, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2006.

90DASSAULT
SYSTÈMESForm 20-F 2006

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PricewaterhouseCoopers,
which audited our consolidated financial statements for the year ended December 31, 2006, has issued an attestation report on management's assessment of the
effectiveness of the company's internal control over financial reporting under Auditing Standard No. 2 of the Public Company Accounting Oversight Board (United States of America).

See
the Report of Independent Registered Public Accounting Firm on page F-1.

During
2006, there were changes in our internal control over financial reporting as a result of the acquisition of MatrixOne, as discussed below.

MatrixOne
was acquired by the Company in May 2006. MatrixOne had previously reported the following material weaknesses in its Annual Report on Form 10-K filed for the fiscal
year ended July 2, 2005:

Since
its last 10-K report, MatrixOne has implemented a plan to remediate these material weaknesses. MatrixOne has taken a list of actions to analyze sales transactions and verify that
appropriate revenue recognition rules have been applied including:

Although
MatrixOne was excluded from the scope of management assessment of the Company's Internal Control over Financial Reporting, as mentioned in (b) above, we believe that, further to the
implementation of the remediation plan, and based on other controls over financial reporting in place, the Company's internal control over financial reporting is effective.

DASSAULT SYSTÈMESForm 20-F
200691

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Item 16: [RESERVED]

Item 16A: Audit Committee Financial Expert

The
Board of Directors has determined that Paul R. Brown, Audit Committee member and independent member of our Board of Directors, is an "audit committee financial expert" as defined by the
Sarbanes-Oxley Act of 2002 and Item 16.A of Form 20-F.

Item 16B: Code of Ethics

The Company has adopted a code of ethics that applies to its Chief Executive Officer, all Executive Vice Presidents (including the Chief Financial Officer), the
Controller, the Accounting and Consolidation Director, and the Internal Audit Director, as well as the Chief Executive Officers and Chief Financial Officers of the main Dassault
Systèmes companies. This code of ethics is incorporated by reference to Exhibit 11 to our 2003 Annual Report on Form 20-F, filed on
June 30, 2004.

Item 16C: Principal Accountants Fees and Services

PricewaterhouseCoopers
Audit served as our independent public accountant for each of the fiscal years ended December 31, 2006 and 2005.

The
following table presents the aggregate audit fees, audit-related fees and fees for other professional services rendered to us by PricewaterhouseCoopers in 2006 and 2005.

|                      |  | Fee amount |           | Percentage of total fees |        | Fee amount |   | Percentage of total fees | 
|--------------------- |  | ---------- | --------- | ------------------------ | ------ | ---------- | - | ------------------------ | 
|
|
|
|Audit fees(1)         |  | €          | 2,801,538 |                          | 86.0%  |            | € | 915,008                  | 
|Audit-related fees(2) |  |            | 413,506   |                          | 12.7%  |            |   | 742,755                  | 
|Tax fees(3)           |  |            | 42,028    |                          | 1.3%   |            |   | 51,078                   | 
|All other fees        |  |            |          |                          |       |            |   |                         | 
|                      |  |            |           |                          |        |            |   |                          | 
|Total                 |  |            | 3,257,072 |                          | 100.0% |            |   | 1,708,841                | 
|                      |  |            |           |                          |        |            |   |                          | 

92DASSAULT
SYSTÈMESForm 20-F 2006

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AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee assesses the independence of the external auditors of our financial statements and recommends to the Board of Directors their appointment
and termination (subject to shareholder approval under French law). In connection with this process, the Audit Committee recommends the external auditors' compensation and discusses with them the
scope of the audit, has the authority to pre-approve all audit-related and non-audit related services provided by the independent auditors, and discusses with the independent
auditors all critical accounting policies used in connection with the preparation of the financial statements. At the end of each fiscal year, the Audit Committee reviews the audited annual
consolidated financial statements before it gives its report to the Board of Directors.

During
2006, none of the Audit-Related Fees, Tax Fees and all Other Fees provided to us by PricewaterhouseCoopers were approved by the Audit Committee pursuant to thede
minimisexception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

Item 16D: Exemptions from the Listing Standards for Audit Committees

Not
applicable.

Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our common shares in 2006 or, as of the date hereof, in 2007.

DASSAULT SYSTÈMESForm 20-F
200693

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PART III



|                                 |  |   
|-------------------------------- |  | --
|Item 17:    Financial Statements |  | 95
|Item 18:    Financial Statements |  | 95
|Item 19:    Exhibits             |  | 96

94DASSAULT
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Item 17: Financial Statements

Not applicable.

Item 18: Financial Statements

The
following financial statements, together with the reports of PricewaterhouseCoopers and of Deloitte & Associés and Ernst & Young Audit thereon, are filed as part of
this Annual Report on Form 20-F.



|Consolidated Financial Statements                                                                    |  |     | 
|---------------------------------------------------------------------------------------------------- |  | --- | 
|Report of PricewaterhouseCoopers                                                                     |  | F-1 | 
|Report of Deloitte & Associés and Ernst & Young                                                      |  | F-2 | 
|Consolidated Balance Sheets at December 31, 2006 and 2005                                            |  | F-3 | 
|Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004               |  | F-4 | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004           |  | F-5 | 
|Consolidated Statements of Shareholders' Equity for the years ended December 31, 2006, 2005 and 2004 |  | F-7 | 
|Notes to the Consolidated Financial Statements for the years ended December 31, 2006, 2005 and 2004  |  | F-9 | 

DASSAULT SYSTÈMESForm 20-F
200695

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Item 19: Exhibits

|1.1     | Dassault Systèmes' by-laws, including amendments to be proposed for adoption at the Ordinary Shareholders' Meeting to be held on June 6, 2007 (Unofficial English translation).                                                                                                                                                                                                                                                                                                                                                                                                             | 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|4(a).1 | Amended and Restated License Agreement for the Use and Marketing of Programming Materials between International Business Machines Corporation and Dassault Systèmes (incorporated by reference from Exhibit 10.1
to Amendment No. 1 to our Registration Statement on form F-1 (Registration No. 333-04970), filed with the Securities and Exchange Commission (the "SEC") on June 24, 1996), as amended by the amendments filed with the
SEC as exhibits to our Annual Reports on Form 20-F for each of the years ended December 31, 1996, through December 31, 2005 (the "IBM Agreement"). | 
|4(a).2 | Amendment 154, dated July 7, 2006, to the IBM Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|4(a).3 | Amendment 155, dated August 14, 2006, to the IBM Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|4(a).4 | Amendment 156, dated December 11, 2006, to the IBM Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 
|4(a).5 | Amendment 157, dated January 2, 2007, to the IBM Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|4(a).6 | Amendment 158, dated January 2, 2007, to the IBM Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 
|*4(c).1 | Incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|**11    | Incorporated by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|12.1    | Certification of Bernard Charlès, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
|12.2    | Certification of Thibault de Tersant, Executive Vice President and Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|13.1    | Certification of Bernard Charlès, President and Chief Executive Officer of Dassault Systèmes S.A. and Thibault de Tersant, Executive Vice President and Chief Financial Officer of Dassault
Systèmes S.A. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                         | 
|15(a).1 | Consent of PricewaterhouseCoopers Audit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 
|15(a).2 | Consent of Deloitte & Associés.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
|15(a).3 | Consent of Ernst & Young Audit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 

For a list of our direct subsidiaries, see Note 18 to our consolidated financial statements for the year 2006.

96DASSAULT
SYSTÈMESForm 20-F 2006

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Signatures

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

DASSAULT
SYSTÈMES S.A.

Date:
May 29, 2007

/s/
Thibault de Tersant
Thibault de Tersant
Senior Executive Vice President and Chief Financial Officer

DASSAULT SYSTÈMESForm 20-F
200697

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Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Shareholders of Dassault Systèmes:

We
have completed an integrated audit of Dassault Systèmes' 2006 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006
and an audit of its 2005 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.

Consolidated financial statements

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the
financial position of Dassault Systèmes and its subsidiaries at December 31, 2006 and December 31, 2005, and the results of their operations and their cash flows for each
of the two years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

Internal control over financial reporting

Also,
in our opinion, management's assessment, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 15 in this Form 20-F,
that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established inInternal
Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in
all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2006, based on criteria established inInternal Control  Integrated Frameworkissued by the
COSO. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express opinions on management's assessment and on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our
audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial
reporting includes obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As
described in Management's Report on Internal Control over Financial Reporting appearing under Item 15 in this Form 20-F, management has excluded MatrixOne, Inc from its
assessment of internal control over financial reporting as of December 31, 2006 because it was acquired by the Company in a purchase business combination during 2006. We have also excluded
MatrixOne, Inc from our audit of internal control over financial reporting. MatrixOne Inc is a wholly-owned subsidiary whose total assets (excluding corporate-controlled assets) and total revenues
represent 6% and 5.3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2006.

PricewaterhouseCoopers
Audit

Neuilly-sur
Seine, France, May 21, 2007

DASSAULT SYSTÈMESForm 20-F
2006F-1

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Report of Independent Registered Public Accounting Firms

To the Board of Directors and Shareholders of Dassault Systèmes

We have audited the consolidated balance sheet of Dassault Systèmes and subsidiaries ("the Company") as of December 31, 2004 (not
presented herein) and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. An
audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dassault Systèmes and subsidiaries as of
December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Paris-La
Défense and Neuilly-sur-Seine, France
June 24, 2005 (May 30, 2006 as to the "Reclassifications" paragraph of Note 1)

|Ernst & Young Audit  |  | Deloitte & Associés
|-------------------- |  | -------------------
|Represented by       |  | Represented by     
|Jean-Marc MONTSERRAT |  | Philippe MOURARET  

F-2DASSAULT
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Consolidated Balance Sheets

|                                                                                                          |  |           |  | December 31, |          
|--------------------------------------------------------------------------------------------------------- |  | --------- |  | ------------ | ---------
|
|ASSETS                                                                                                    |  |           |  |              |          
|Current assets:                                                                                           |  |           |  |              |          
|Cash and cash equivalents                                                                                 |  | (Note 2)  |  | €            | 408,746  
|Short-term investments                                                                                    |  | (Note 2)  |  |              | 50,524   
|Trade accounts receivable, net of allowance for doubtful accounts of €5,111 in 2006 and
   €5,414 in 2005 |  | (Note 7)  |  |              | 303,606  
|Deferred tax assets                                                                                       |  | (Note 13) |  |              | 38,000   
|Prepaid expenses and advances                                                                             |  |           |  |              | 24,499   
|Other current assets                                                                                      |  |           |  |              | 52,157   
|                                                                                                          |  |           |  |              |          
|Total current assets                                                                                      |  |           |  |              | 877,532  
|                                                                                                          |  |           |  |              |          
|Property and equipment, net                                                                               |  | (Note 3)  |  |              | 63,872   
|Investments and loans receivable                                                                          |  | (Note 4)  |  |              | 1,437    
|Deferred tax assets                                                                                       |  | (Note 13) |  |              | 79,141   
|Intangible assets, net                                                                                    |  | (Note 6)  |  |              | 378,221  
|Goodwill                                                                                                  |  | (Note 6)  |  |              | 455,836  
|                                                                                                          |  |           |  |              |          
|Total assets                                                                                              |  |           |  | €            | 1,856,039
|                                                                                                          |  |           |  |              |          

|
|

|                                           |  |           |  | December 31, |          
|------------------------------------------ |  | --------- |  | ------------ | ---------
|
|LIABILITIES AND SHAREHOLDERS' EQUITY       |  |           |  |              |          
|Current liabilities:                       |  |           |  |              |          
|Accounts payable                           |  |           |  | €            | 52,189   
|Accrued wages and other personnel costs    |  |           |  |              | 93,551   
|Sales incentive payable                    |  | (Note 7)  |  |              | 6,334    
|Unearned revenue                           |  |           |  |              | 170,603  
|Income taxes payable                       |  |           |  |              | 17,719   
|Deferred tax liabilities                   |  | (Note 13) |  |              | 8,036    
|Other current liabilities                  |  |           |  |              | 62,765   
|                                           |  |           |  |              |          
|Total current liabilities                  |  |           |  |              | 411,197  
|                                           |  |           |  |              |          
|Non-current obligations:                   |  |           |  |              |          
|Deferred tax liabilities                   |  | (Note 13) |  |              | 92,631   
|Borrowings                                 |  | (Note 8)  |  |              | 200,000  
|Other non-current liabilities              |  |           |  |              | 41,186   
|                                           |  |           |  |              |          
|Total non-current obligations              |  |           |  |              | 333,817  
|                                           |  |           |  |              |          
|Commitments and contingencies              |  | (Note 9)  |  |              |         
|Minority interest                          |  |           |  |              | 980      
|Shareholders' equity                       |  |           |  |              | 1,110,045
|                                           |  |           |  |              |          
|Total liabilities and shareholders' equity |  |           |  | €            | 1,856,039
|                                           |  |           |  |              |          

The
accompanying notes are an integral part of these consolidated financial statements.

DASSAULT SYSTÈMESForm 20-F
2006F-3

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Consolidated Statements of Income

|                                                               |  |           |  | Year ended December 31, |           |  
|-------------------------------------------------------------- |  | --------- |  | ----------------------- | --------- | -
|
|Revenue:                                                       |  |           |  |                         |           |  
|New licenses revenue                                           |  |           |  | €                       | 432,170   |  
|Periodic licenses, maintenance and product development revenue |  |           |  |                         | 530,948   |  
|                                                               |  |           |  |                         |           |  
|Software revenue                                               |  | (Note 7)  |  |                         | 963,118   |  
|Services and other revenue                                     |  |           |  |                         | 194,680   |  
|                                                               |  |           |  |                         |           |  
|Total revenue                                                  |  |           |  |                         | 1,157,798 |  
|                                                               |  |           |  |                         |           |  
|Cost of software revenue                                       |  |           |  |                         | (49,605   | )
|Cost of services and other revenue                             |  |           |  |                         | (143,713  | )
|Research and development                                       |  |           |  |                         | (299,864  | )
|Marketing and sales                                            |  |           |  |                         | (295,988  | )
|General and administrative                                     |  |           |  |                         | (83,655   | )
|Amortization of acquired intangibles                           |  | (Note 6)  |  |                         | (39,028   | )
|                                                               |  |           |  |                         |           |  
|Total operating expenses                                       |  |           |  |                         | (911,853  | )
|                                                               |  |           |  |                         |           |  
|Operating income                                               |  |           |  |                         | 245,945   |  
|                                                               |  |           |  |                         |           |  
|Financial revenue and other, net                               |  | (Note 12) |  |                         | 3,580     |  
|Income from equity investees                                   |  |           |  |                         | 1,033     |  
|                                                               |  |           |  |                         |           |  
|Income before income taxes                                     |  |           |  |                         | 250,558   |  
|                                                               |  |           |  |                         |           |  
|Income tax expense                                             |  | (Note 13) |  |                         | (70,810   | )
|Minority interest                                              |  |           |  |                         | 54        |  
|                                                               |  |           |  |                         |           |  
|Net income                                                     |  |           |  | €                       | 179,802   |  
|                                                               |  |           |  |                         |           |  
|Basic net income per share                                     |  | (Note 14) |  | €                       | 1.56      |  
|Diluted net income per share                                   |  | (Note 14) |  | €                       | 1.51      |  

The
accompanying notes are an integral part of these consolidated financial statements.

F-4DASSAULT
SYSTÈMESForm 20-F 2006

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Consolidated Statements 
of Cash Flows

|                                                                                  |                                                              | Year ended December 31, |          |         
|--------------------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------- | -------- | --------
|
|Cash flows from operating activities                                              |                                                              |                         |          |         
|Net income                                                                        |                                                              | €                       | 179,802  |         
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                              |                         |          |         
|                                                                                  | Depreciation of property and equipment                       |                         |          | 24,951  
|                                                                                  | Amortization of intangible assets                            |                         |          | 40,740  
|                                                                                  | Gain on disposal of investment in MSC                        |                         |          |        
|                                                                                  | Impairment charge                                            |                         |          | 796     
|                                                                                  | Deferred income taxes                                        |                         |          | (30,371 
|                                                                                  | Tax benefits from employee stock-option plans                |                         |          | 14,184  
|                                                                                  | Excess tax benefits from stock-based compensation            |                         |          | (14,184 
|                                                                                  | Non-cash stock-based compensation                            |                         |          | 11,621  
|                                                                                  | Exchange loss on receivables/debts in foreign currency       |                         |          | 20,200  
|                                                                                  | Other                                                        |                         |          | 1,271   
|Changes in current assets and liabilities:                                        |                                                              |                         |          |         
|                                                                                  | (Increase) in trade accounts receivable                      |                         |          | (14,056 
|                                                                                  | Decrease (increase) in other current assets                  |                         |          | 2,518   
|                                                                                  | Increase in accounts payable and accrued expenses            |                         |          | 4,341   
|                                                                                  | (Decrease) increase in income taxes payable                  |                         |          | (5,547  
|                                                                                  | (Decrease) increase in sales incentive payable               |                         |          | (4,025  
|                                                                                  | Increase in unearned revenue                                 |                         |          | 28,151  
|                                                                                  | (Decrease) increase in other current liabilities             |                         |          | (591    
|                                                                                  |                                                              |                         |          |         
|Net cash provided by operating activities                                         |                                                              |                         | 259,801  |         
|                                                                                  |                                                              |                         |          |         
|Cash flows from investing activities                                              |                                                              |                         |          |         
|                                                                                  | Additions to property, equipment and intangibles             |                         |          | (25,851 
|                                                                                  | Purchases of short-term investments                          |                         |          | (20,607 
|                                                                                  | Proceeds from sales and maturities of short-term investments |                         |          | 38,609  
|                                                                                  | Payment for acquisition of businesses, net of cash acquired  |                         |          | (260,862
|                                                                                  | Proceeds from sale of investments                            |                         |          |        
|                                                                                  | Increase in long-term receivables                            |                         |          |        
|                                                                                  | Other                                                        |                         |          | 128     
|                                                                                  |                                                              |                         |          |         
|Net cash used in investing activities                                             |                                                              |                         | (268,583 | )       
|                                                                                  |                                                              |                         |          |         

DASSAULT SYSTÈMESForm 20-F
2006F-5

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Consolidated Statements 
of Cash Flows (continued)

|                                                    |                                                                    | Year ended December 31, |         |        
|--------------------------------------------------- | ------------------------------------------------------------------ | ----------------------- | ------- | -------
|
|Cash flows from financing activities                |                                                                    |                         |         |        
|                                                    | Borrowings                                                         |                         |         | 200,000
|                                                    | Proceeds from exercise of stock options                            |                         |         | 23,810 
|                                                    | Repurchase of SolidWorks shares, net of option exercises (Note 14) |                         |         | (63,243
|                                                    | Cash dividends paid                                                |                         |         | (48,200
|                                                    | Principal payments on capital lease obligations                    |                         |         | (1,689 
|                                                    | Excess tax benefits from stock-based compensation                  |                         |         | 14,184 
|                                                    |                                                                    |                         |         |        
|Net cash provided by (used in) financing activities |                                                                    |                         | 124,862 |        
|                                                    |                                                                    |                         |         |        
|                                                    | Effect of exchange rate changes on cash                            |                         |         | (20,486
|Increase (decrease) in cash and cash equivalents    |                                                                    |                         | 95,594  |        
|                                                    |                                                                    |                         |         |        
|Cash and cash equivalents at beginning of period    |                                                                    |                         | 313,152 |        
|                                                    |                                                                    |                         |         |        
|Cash and cash equivalents at end of period          |                                                                    | €                       | 408,746 |        
|                                                    |                                                                    |                         |         |        
|Supplemental disclosure                             |                                                                    |                         |         |        
|Income taxes paid                                   |                                                                    | €                       | 91,373  |        
|Cash paid for interest                              |                                                                    | €                       | 4,847   |        

The
accompanying notes are an integral part of these consolidated financial statements.

F-6DASSAULT
SYSTÈMESForm 20-F 2006

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Consolidated Statements 
of Shareholders' Equity

|                                    |                                                       |             |  |   |         | Share capital outstanding |             |  |   |         |   |   |         |   |   |        |  |  
|----------------------------------- | ----------------------------------------------------- | ----------- |  | - | ------- | ------------------------- | ----------- |  | - | ------- | - | - | ------- | - | - | ------ |  | -
|
|
|
|January 1, 2004                     |                                                       | 113,403,665 |  | € | 113,404 |                           | 113,044,227 |  | € | 66,694  |   | € | 514,363 |   | € | 11,457 |  | €
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Net income                          |                                                       |             |  |   |         |                           |             |  |   |         |   |   | 156,418 |   |   |        |  |  
|Other items of comprehensive income |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Available for sale securities                         |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Net derivative losses on cash-flow hedges, net of tax |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Minimum pension liability                             |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Foreign currency translation Adjustment               |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Comprehensive income                |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Exercise of stock options (Note 14) |                                                       | 382,746     |  |   | 382     |                           | 429,742     |  |   | 10,181  |   |   |         |   |   |        |  |  
|Other stock transactions            |                                                       |             |  |   |         |                           |             |  |   | (2,189  | ) |   |         |   |   |        |  |  
|Tax benefits (Note 13)              |                                                       |             |  |   |         |                           |             |  |   | 2,421   |   |   |         |   |   |        |  |  
|Cash dividends paid                 |                                                       |             |  |   |         |                           |             |  |   |         |   |   | (38,435 | ) |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|December 31, 2004                   |                                                       | 113,786,411 |  |   | 113,786 |                           | 113,473,969 |  |   | 77,107  |   |   | 632,346 |   |   | 11,457 |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Net income                          |                                                       |             |  |   |         |                           |             |  |   |         |   |   | 175,462 |   |   |        |  |  
|Other items of comprehensive income |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Available for sale securities                         |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Minimum pension liability                             |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    | Foreign currency translation Adjustment               |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Comprehensive income                |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|Exercise of stock options (Note 14) |                                                       | 1,251,967   |  |   | 1,252   |                           | 1,284,374   |  |   | 32,782  |   |   |         |   |   |        |  |  
|Dilution gain on SolidWorks         |                                                       |             |  |   |         |                           |             |  |   | 12,391  |   |   |         |   |   |        |  |  
|Other stock transactions            |                                                       |             |  |   |         |                           |             |  |   | 3,118   |   |   |         |   |   |        |  |  
|Tax benefits (Note 13)              |                                                       |             |  |   |         |                           |             |  |   | 3,169   |   |   |         |   |   |        |  |  
|Cash dividends paid                 |                                                       |             |  |   |         |                           |             |  |   |         |   |   | (43,120 | ) |   |        |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  
|December 31, 2005                   |                                                       | 115,038,378 |  |   | 115,038 |                           | 114,758,343 |  |   | 128,567 |   |   | 764,688 |   |   | 11,457 |  |  
|                                    |                                                       |             |  |   |         |                           |             |  |   |         |   |   |         |   |   |        |  |  

DASSAULT SYSTÈMESForm 20-F
2006F-7

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Consolidated Statements 
of Shareholders' Equity (continued)

|                                    |                                                        |             |  |         |  | Share capital outstanding |  |         |  |         |   |        |  |         |         |           |         |  
|----------------------------------- | ------------------------------------------------------ | ----------- |  | ------- |  | ------------------------- |  | ------- |  | ------- | - | ------ |  | ------- | ------- | --------- | ------- | -
|
|
|
|Net income                          |                                                        |             |  |         |  |                           |  |         |  | 179,802 |   |        |  |         |         | 179,802   |         |  
|Other items of comprehensive income |                                                        |             |  |         |  |                           |  |         |  |         |   |        |  |         |         |           |         |  
|                                    | Derivative gains on cash-flow hedges, net of tax       |             |  |         |  |                           |  |         |  |         |   |        |  |         | 3,719   |           | 3,719   |  
|                                    | Adjustment to initially apply SFAS No. 158, net of tax |             |  |         |  |                           |  |         |  |         |   |        |  |         | 2,874   |           | 2,874   |  
|                                    | Foreign currency translation Adjustment                |             |  |         |  |                           |  |         |  |         |   |        |  |         | (59,213 | )         | (59,213 | )
|                                    |                                                        |             |  |         |  |                           |  |         |  |         |   |        |  |         |         |           |         |  
|Comprehensive income                |                                                        |             |  |         |  |                           |  |         |  |         |   |        |  |         |         | 127,182   |         |  
|Exercise of stock options (Note 14) |                                                        | 731,912     |  | 732     |  | 750,369                   |  | 18,139  |  |         |   |        |  |         |         | 18,871    |         |  
|Stock-based compensation (Note 14)  |                                                        |             |  |         |  |                           |  | 11,621  |  |         |   |        |  |         |         | 11,621    |         |  
|Other stock transactions            |                                                        |             |  |         |  |                           |  | 282     |  |         |   |        |  |         |         | 282       |         |  
|Tax benefits (Note 13)              |                                                        |             |  |         |  |                           |  | 14,184  |  |         |   |        |  |         |         | 14,184    |         |  
|Cash dividends paid                 |                                                        |             |  |         |  |                           |  |         |  | (48,200 | ) |        |  |         |         | (48,200   | )       |  
|                                    |                                                        |             |  |         |  |                           |  |         |  |         |   |        |  |         |         |           |         |  
|December 31, 2006                   |                                                        | 115,770,290 |  | 115,770 |  | 115,508,712               |  | 172,793 |  | 896,290 |   | 11,457 |  | (86,265 | )       | 1,110,045 |         |  
|                                    |                                                        |             |  |         |  |                           |  |         |  |         |   |        |  |         |         |           |         |  

The
accompanying notes are an integral part of these consolidated financial statements.

F-8DASSAULT
SYSTÈMESForm 20-F 2006

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Notes to the Consolidated Financial
Statements for the Years Ended
December 31, 2006, 2005 and 2004

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Dassault Systèmes, which refers to Dassault Systèmes S.A. and its subsidiaries (the "Company"), develops 3D and
Product Lifecycle Management (PLM) software solutions powered by three-dimensional (3D) representation. The Company's strategic mission is to provide software solutions and consulting services that
enable its customers to innovate in products and services; accelerate product
design in order to satisfy market demand; create and manufacture products more cost effectively; and simulate their end-customers' experiences.

The
Company operates in two segments, the "Process-centric" segment and the "Design-centric" segment. The "Process-centric" segment is dedicated to Product Lifecycle Management ("PLM") software
solutions. PLM solutions are organized around four of the Company's brands: CATIA for virtual product design and product excellence, DELMIA for virtual manufacturing and production performance,
SIMULIA for engineering quality through virtual testing and ENOVIA to provide a global collaborative environment. The "Design-centric" segment is dedicated to customers primarily focused on product
design solutions. The Company's design-centric solutions complement its PLM software applications by reaching a far larger number of potential users. The Company primarily addresses the mainstream,
design-centric market with its SolidWorks software applications for productive and easy-to-use 3D mechanical design. Its products and solutions are designed to capitalize on
the significant migration opportunity of 2D users to 3D design. The Company largely markets and sells its software solutions through indirect selling channels. With respect to most of the Company's
process-centric solutions its primary partner is IBM, with whom the Company has a long-standing strategic relationship.

In
addition to the development and distribution of software products, the Company also provides services related to its software products and solutions and obtains other revenue from its support of
IBM's marketing and distribution efforts, direct support to customers, technological consulting services, and hardware resale activities.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States
("U.S. GAAP"). The consolidated financial statements include the accounts of Dassault Systèmes S.A. and its subsidiaries. Companies over which the Company has control are
fully consolidated. Companies over which the Company exercises significant influence over operating and financial policies are accounted for under the equity method. Investments in which the Company
is not able to exercise significant influence over the investee are accounted for under the cost method. Intercompany transactions and balances have been eliminated.

DASSAULT SYSTÈMESForm 20-F
2006F-9

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Summary of Significant Accounting Policies

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Examples include: estimating
loss contingencies; assessing product life cycles; identifying the different elements comprising a software arrangement, including the distinction between upgrades/enhancements and new products;
determining when technological feasibility is achieved for our products; estimating the fair value and/or goodwill impairment for our reporting units; determining when a decline in value of our
investments is
other-than-temporary; determining the nature, fair value and useful life of acquired intangible assets in a business combination; determining assumptions for share-based
payments; and assessing the realizability of our deferred tax assets. Actual results and outcomes could differ from management's estimates and assumptions.

REVENUE RECOGNITION

The Company derives revenue from three primary sources: (1) its marketing and distribution agreement with IBM; (2) new software licenses, periodic
licenses, maintenance and product development, which includes software license updates, technical support and the development of additional functionalities of standard products requested by clients;
and (3) consulting and training services and other revenue, including commissions received for sales support. Revenues are disclosed net of taxes collected from customers and remitted to
governmental authorities.

Marketing and distribution agreement with IBM Under the Company's agreement with IBM, the Company licenses its
products to IBM who then sublicenses the products to end-users. The Company provides maintenance to IBM but does not contract directly with IBM customers. In addition, the Company provides
training to IBM employees for new product releases, participates with IBM in a worldwide marketing arrangement and is involved in other product development initiatives for both the Company and
IBM products.

Royalties
under this arrangement are earned as revenue is recognized by IBM from its sublicensing of the products and services. Royalties are recognized in software revenue when earned from IBM and
reported to us. In general, this results in recognition of license royalties when IBM sublicenses software to end-users and Postcontract Customer Support ("PCS") royalties over the period
during which IBM is required to provide support to end-users. Royalty payments are generally made within 30 days after the end of the month in which the royalties are earned.

The
Company's agreement with IBM provides for increases in the share of licensing revenue to be retained by IBM if certain annual growth targets are met by IBM. This incentive is also linked to IBM
meeting a certain level of sales and marketing expenses for the distribution of CATIA, ENOVIA and SMARTEAM. This incentive is recorded as a reduction to software revenue.

Software License, Maintenance and Product Development Revenue Software license revenue represents fees earned
from granting customers licenses to use our software. Our software license revenue consists of perpetual and periodic license sales of software products. Software license revenue is recognized when:
persuasive evidence of an arrangement exists, delivery and acceptance of the software has occurred, the software license fee is fixed or determinable, and collectibility is probable. In instances when
any of the four criteria are not met, we defer recognition of software license revenue until all criteria are met. Revenue related to the licensing of software through value-added resellers (VAR) is
recognized when evidence of a sale to an end-user customer is provided to the Company, assuming all other revenue recognition criteria have been met. Periodic licenses generally have a
one-year term and the corresponding fee is recognized ratably over the term of the license.

Maintenance
revenue represents periodic fees associated with the sale of unspecified product updates on a when-and-if-available-basis and technical support.
Maintenance agreements are entered into in connection with the initial software license purchase. Maintenance support may be renewed at the conclusion of each term. Revenue from maintenance is
deferred and recognized as revenue on a straight-line basis over the term of the maintenance agreement.

Product
development revenue relates to the development of additional functionalities of standard products requested by clients and is recognized as the development work is performed.

Recurring
fees for periodic license and maintenance and product development revenue are reported within software revenue.

Revenue
under multiple-element arrangements, which typically include new software licenses and maintenance agreements sold together, is allocated to each element in the arrangement primarily using the
residual method based upon the fair value of the undelivered elements, which is specific to us (vendor-specific objective evidence of fair value or "VSOE"). Discounts, if any, are applied to the
delivered elements, usually software licenses, under the residual method. For maintenance, VSOE is based upon either the renewal rate specified in each contract or the price charged when sold
separately. If VSOE of one or more undelivered elements cannot be established, the entire amount of revenue from the arrangement is deferred and recognized when delivery of those elements occurs or
when VSOE can be established.

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SYSTÈMESForm 20-F 2006

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Services and Other Services revenue consists primarily of fees from consulting, services and training,
commissions received in connection with our sales support activities, and revenue generated by hardware resale activities. Services generally do not require significant modification or customization
of software products and are accounted for separately to the extent they are not essential to the functionality of software products. Service revenues derived from time and material contracts are
recognized as time is incurred. Service revenues derived from fixed price contracts are generally recognized using a percentage of completion basis. For customer support contracts, when no performance
pattern is discernible, revenue is recognized ratably over the term of the contract, generally one year, on a straight-line basis. Commissions are recognized when earned. Revenue derived
from hardware resale activities is recognized upon delivery.

COMPUTER SOFTWARE COSTS/RESEARCH AND DEVELOPMENT

Costs incurred to develop computer software products  such as payroll and other headcount-related costs associated with
product development  to be licensed or otherwise marketed to customers are expensed in the period incurred, unless such costs qualify for capitalization after
technological feasibility is established. We have determined that technological feasibility for our software products is reached shortly before the commercial release of our products. Costs incurred
after technological feasibility is established are not material, and accordingly, the application of this accounting policy has resulted in substantially all research and development costs being
expensed in the period incurred. Purchased in-process research and development that is not technologically feasible as of the acquisition date and has no future alternative use
is expensed.

GOVERNMENT GRANTS

The Company receives grants from various governmental authorities to finance certain research and development activities (including tax research credits in
France that are treated as government grants because they are realizable in cash in the event the Company has insufficient income tax payable). Government grants are recognized as a reduction of
research and development costs when the qualifying research and development activities have been performed and there is reasonable assurance that the grants will be received. Government grants
amounting to €5.8 million, €1.8 million and €0.3 million were recorded as a reduction to research and development expenses in 2006,
2005 and 2004, respectively.

FINANCIAL INSTRUMENTS

Fair Value The carrying amounts of cash and cash equivalents,
short-term investments, accounts receivable, accounts payable and accrued expenses approximate fair value, due to the short-term maturities of such instruments. Foreign
exchange options, futures, and forward contracts, which are designated and serve as hedges, are recorded at their fair market value.

Cash and Cash Equivalents and Short-Term InvestmentsThe Company considers
marketable debt securities with maturities of less than 90 days when acquired, deposits with banks, and investments in money market mutual funds to be cash equivalents. Marketable debt
securities with maturities of more than 90 days when acquired and mutual funds that do not qualify as cash equivalents are considered to be short-term investments and are generally
classified as trading securities with changes in fair value recorded through financial income.

Investments Investments include, principally, available-for-sale equity securities at
fair value, debt securities at amortized cost, securities that are not publicly traded at cost, and equity method investments. For available-for-sale equity securities, any
unrealized holding gains and losses, net of deferred taxes, are excluded from operating results and are recognized in other comprehensive income ("OCI") until realized. The fair values of securities
are determined based on prevailing market prices. The Company assesses declines in the value of individual investments to determine whether such decline is other-than-temporary
and thus the investment is impaired. This assessment is made by considering available evidence including changes in general market conditions, specific industry and individual company data, the length
of time and the extent to which the market value has been less than cost, the financial condition and near  term prospects of the individual company, and the
Company's intent and ability to hold the investment.

Derivative instruments The Company uses derivative instruments to manage exposures to foreign currency and
interest rates and accounts for its derivative instruments under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133,Accounting
for Derivative Instruments and Hedging Activities,as amended. This statement requires that each derivative instrument be recorded on the balance sheet as either an
asset or liability measured at its fair value, and that changes in the derivative's fair value be recognized in current earnings unless specific hedge accounting criteria are met. The statement also
establishes criteria for a derivative to qualify as a hedge for accounting purposes. Changes in fair value of derivatives designated as hedges of forecasted transactions are deferred and recorded as a
component of accumulated OCI until the hedged forecasted transaction occurs and is recognized in earnings. Changes in the fair value of derivatives designated as cash-flow hedges are
reported as a component of OCI until the hedged item is recognized in earnings.

DASSAULT SYSTÈMESForm 20-F
2006F-11

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ALLOWANCE FOR DOUBTFUL ACCOUNTS AND LOANS RECEIVABLE

The allowance for doubtful accounts and loans receivable reflects the Company's best estimate of probable losses inherent in the receivable balance. The Company
determines the allowance based on known troubled accounts, historical experience and other currently available evidence.

BORROWINGS

Borrowings are recognized initially at an amount equal to the proceeds received, net of transaction costs incurred. Any difference between the recorded amount
and the redemption value is amortized into income over the period of the borrowing using the effective interest rate method.

FOREIGN CURRENCY ADJUSTMENTS

The functional currency of the Company's foreign subsidiaries is the applicable local currency, while the Company's functional and reporting currency is the
euro. Assets and liabilities with functional currencies other than the euro are translated into euro equivalents at the rate of exchange in effect on the balance sheet date. Revenues and expenses are
translated at the weighted average monthly
exchange rates for the year. Translation gains or losses are recorded as a separate component of shareholders' equity and transaction gains and losses are reflected in net income.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to credit risk consist primarily of cash equivalents, short-term investments, derivatives
and accounts receivable. The Company places its cash equivalents and its short-term investments with high credit-quality financial institutions. The Company invests its excess cash
primarily in money market funds, bank certificates of deposit, and commercial paper.

The
Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Management monitors the credit-worthiness of the
aforementioned counter-parties and considers the credit risk exposure due to counter-party failure to be minimal.

As
further discussed in Note 7. Software Revenue and Transactions with IBM, during 2006, 2005 and 2004, the Company generated approximately 45%, 52% and 56%, respectively, of its total revenue
through its commercial relationship with IBM. Outside of IBM, the Company's credit risk is partially mitigated due to the fact that its customer base is diversified both by geography
and industry.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives: buildings,
30 years; computer equipment, 18 months to 5 years; office furniture and equipment, 5 to 10 years; leasehold improvements are amortized over the shorter of the life of the
assets or the remaining lease term, not exceeding 10 years. Repair and maintenance costs are expensed as incurred.

GOODWILL AND INTANGIBLE ASSETS

Goodwill, which is equal to the fair value of consideration paid in excess of the fair value of the net assets purchased, has been recorded in conjunction with
several of the Company's purchase business combinations. Goodwill is tested annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. The impairment test is performed annually in the fourth quarter of the fiscal year at the reporting unit level using a two-step, fair-value based approach. The
first step compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, a second step is
performed to measure the amount of impairment loss. The second step allocates the fair value of the reporting unit to the Company's tangible and intangible assets and liabilities. This derives an
implied fair value for the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized equal to
that excess. For the purpose of the impairment test, the Company relies upon projections of future cash flows and takes into account assumptions regarding the evolution of the market and its ability
to successfully develop and commercialize its products. Changes in market conditions could have a major impact on the valuation of these assets and could justify additional impairment losses. No
impairment of goodwill has been identified during any of the periods presented.

Intangible
assets primarily include acquired technology, contractual customer relationships and trademarks. Costs related to acquired technology, contractual customer relationships, and patents and
trademarks are capitalized and amortized using the straight-line method

F-12DASSAULT
SYSTÈMESForm 20-F 2006

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over
their estimated useful lives, which range from three to 12 years. No impairment of intangible assets has been identified during any of the periods presented.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in earnings in the period during which the change is enacted.

The
Company assesses the likelihood that its deferred tax assets will be recovered from its future taxable income, and to the extent the Company believes that recovery is not likely, it establishes a
valuation allowance. The Company considers historical taxable income, estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the amount of the
valuation allowance. Adjustments could be required in the future if the Company determines that the amount to be realized is greater or less than the valuation allowance it has recorded.

SHIPPING AND HANDLING

Shipping and handling costs are included in cost of sales for all periods presented.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expenses were €16.6 million, €14.6 million and
€13.8 million for the years ended December 31, 2006, 2005 and 2004, respectively.

COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Company
reports comprehensive income in the consolidated statements of shareholders' equity.

STOCK-BASED COMPENSATION

On January 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004),Share-Based
Payment("SFAS 123(R)"), which requires the measurement and recognition of compensation expense based on estimated fair value for all share-based payment awards
including stock options, employee stock purchases under employee stock purchase plans, non-vested share awards (such as restricted stock) and stock appreciation rights. SFAS 123(R)
supersedes SFAS 123,Accounting for Stock-Based Compensation, ("SFAS 123"). The Company elected the modified prospective transition
method, under which prior periods are not restated for comparative purposes to reflect the impact of SFAS 123(R). The modified prospective transition method requires that share-based
compensation expense be recorded for (a) any share-based payments granted through, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in
accordance with the pro forma provisions of SFAS 123, and (b) any share-based payments granted or modified subsequent to January 1, 2006, based on the
grant-date fair value estimated in accordance with the provisions of SFAS 123(R). In March 2005, the Commission issued Staff Accounting Bulletin No. 107
("SAB 107"), which provided supplemental implementation guidance for SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

SFAS 123(R)
requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of awards expected to vest is
recognized as expense over the applicable requisite service periods. Prior to January 1, 2006, the Company accounted for its share-based compensation plans using the intrinsic value method
under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees("APB 25") and related guidance. Under the intrinsic value method, the Company did not recognize any amount of compensation expense in the Company's consolidated statements of operations in
connection with its employee stock option plans, as options granted under those plans had an exercise price equal to or greater than the share market value on the date of grant.

The
adoption of SFAS 123(R) had a material effect on the Company's reported financial results. The Company recorded €11.6 million of share-based compensation expense for
the year ended December 31, 2006. For years ended December 31, 2005 and 2004, the pro-forma effect of recording our share-based compensation plans under the fair value method
of SFAS 123 is disclosed in Note 14. Stock Option Plans and Earnings per Share.

DASSAULT SYSTÈMESForm 20-F
2006F-13

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Reclassifications

Certain reclassifications have been made to prior year amounts to conform with current year presentation. Notably, during fiscal year 2005, the Company revised
its accounting policy related to the classification of certain French mutual funds. The revised policy is considered preferable as it further aligns classification with the respective funds' risk of
change in value. To conform with this presentation, the Company reclassified €50.8 million and €46.3 million from cash and cash equivalents to short-term
investments as of December 31, 2004 and 2003 with a related decrease in net cash used in investing activities and decrease in cash and cash equivalents by €4.5 million
for the year ended December 31, 2004.

Recently Issued Accounting Standards

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48,Accounting
for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109("FIN 48"), which clarifies the
accounting for uncertainty in
income tax positions. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48 became effective for the Company on January 1, 2007, with the cumulative effect of the change in accounting
principle, if any, recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 and its impact on its financial position, cash
flows, and results of operations.

In
September 2006, the Securities and Exchange Commission ("SEC") released SAB No. 108,Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements("SAB 108"). SAB 108 provides interpretive guidance on the SEC's views on how the effects of the
carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The Company adopted SAB 108 in 2006. The adoption did not have a material
impact on the Company's financial position, cash flows, or results of operations.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"), which clarifies the definition of
fair value, establishes guidelines for measuring fair value, and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements and eliminates
inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 will be effective for the Company on January 1, 2008. The Company does not believe that the
adoption of SFAS 157 will have a material impact on its financial position, cash flows, or results of operations.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value.
SFAS 159 will be effective for the Company on January 1, 2008. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows, and
results of operations.

Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC did not or are not believed by management to have a material impact on the
Company's present or future consolidated financial statements.

Note 2. Cash and Cash Equivalents 
and Short-term Investments

Cash and cash equivalents are maintained on deposit with large financial institutions, for which management monitors the credit-worthiness, principally in
France, and are comprised of the following:

|                          |  | December 31, |        
|------------------------- |  | ------------ | -------
|
|Bank accounts             |  | €            | 227,744
|Money market accounts     |  |              | 181,002
|                          |  |              |        
|Cash and cash equivalents |  | €            | 408,746
|                          |  |              |        

Short-term investments of €50,524 and €66,767 in 2006 and 2005 respectively, are primarily comprised of
mutual funds held with large financial institutions. Management considers the credit risk exposure due to counter-party failure to be minimal. At December 31, 2006, and 2005, short term
investments included investments in the amounts of €32,568 thousand and €24,474 thousand denominated in US dollars, respectively. Such
short-term investments are liquid and have stated maturities of one year or less at each balance sheet date.

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Note 3. Property and Equipment

Property and equipment, at cost, consists of the following:

|                               |  | Year ended December 31, 2006 |         | Year ended December 31, 2005 |  
|------------------------------ |  | ---------------------------- | ------- | ---------------------------- | -
|
|Land and buildings             |  | €                            | 32,868  |                              | €
|Computer equipment             |  |                              | 82,293  |                              |  
|Office furniture and equipment |  |                              | 32,958  |                              |  
|Leasehold improvements         |  |                              | 44,379  |                              |  
|                               |  |                              |         |                              |  
|Total                          |  | €                            | 192,498 |                              | €
|                               |  |                              |         |                              |  

The change in the carrying amount of property and equipment as of December 31, 2006 is as follows:

|(in thousands)                             |  | Land and buildings |        | Computer equipment |   | Office furniture and equipment |   | Leasehold improvements |        | Total |   |       
|------------------------------------------ |  | ------------------ | ------ | ------------------ | - | ------------------------------ | - | ---------------------- | ------ | ----- | - | ------
|Net value  January 1, 2006                |  | €                  | 20,407 |                    | € | 17,773                         |   | €                      | 11,627 |       | € | 19,577
|Acquisitions                               |  |                    |       |                    |   | 11,229                         |   |                        | 3,857  |       |   | 3,898 
|Acquisitions through business combinations |  |                    |       |                    |   | 1,127                          |   |                        | 889    |       |   | 1,624 
|Disposals                                  |  |                    |       |                    |   | (83                            | ) |                        | (87    | )     |   | (119  
|Depreciation for the period                |  |                    | (906   | )                  |   | (12,928                        | ) |                        | (4,307 | )     |   | (6,810
|Exchange differences                       |  |                    |       |                    |   | (1,181                         | ) |                        | (975   | )     |   | (740  
|                                           |  |                    |        |                    |   |                                |   |                        |        |       |   |       
|Net value  December 31, 2006              |  | €                  | 19,501 |                    | € | 15,937                         |   | €                      | 11,004 |       | € | 17,430
|                                           |  |                    |        |                    |   |                                |   |                        |        |       |   |       

In May 2006, the Company recorded €3.5 million of property and equipment, net, related to the acquisition of MatrixOne.

Note 4. Investments and Loans Receivable

Investments and loans receivable consist of the following:

|                                       |  | Year ended December 31, |       |  
|-------------------------------------- |  | ----------------------- | ----- | -
|
|Cost basis                             |  | €                       | 196   |  
|Gross unrealized gains                 |  |                         |      |  
|Gross unrealized losses                |  |                         |      |  
|                                       |  |                         |       |  
|Available-for-sale securities          |  |                         | 196   |  
|                                       |  |                         |       |  
|Equity method investments              |  |                         | 1,241 |  
|Loans receivable                       |  |                         | 76    |  
|Less: current portion                  |  |                         | (76   | )
|                                       |  |                         |       |  
|Loans receivable  non-current portion |  |                         |      |  
|                                       |  |                         |       |  
|Investments and loans receivable       |  | €                       | 1,437 |  
|                                       |  |                         |       |  

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The available-for-sale investments included above represent investments in listed securities. There is no fixed maturity or coupon rate
associated with these investments. The fair values of these securities are based on quoted market prices.

In
January 2005, loans receivable from Rand A Technology Corporation ("Rand") amounting to €28.3 million were applied against the purchase price of certain Rand
subsidiaries (see Note 5. Acquisitions).

In
October 2005, loans receivable from ImpactXoft amounting to €10.6 million were applied against the purchase price of certain technology assets from ImpactXoft.

In
October 2005, the Company recorded a €14.7 million gain on the sale of its remaining €5.1 million investment in MSC.Software Corporation.

In
the fourth quarter of 2005, the Company recorded a €14.3 million impairment charge, which primarily reflects an other-than-temporary decline in the
value of its investments in ImpactXoft and Gehry Technologies, Inc.

Note 5. Acquisitions

MatrixOne

On May 11, 2006, the Company completed its acquisition of 100% of the outstanding common shares of MatrixOne, Inc. ("MatrixOne") for approximately
€324 million in cash (including approximately €4 million of direct transaction costs). MatrixOne is a global provider of collaborative PLM software and
services to medium-to-large organizations including companies across the high tech, consumer products and medical devices industries, among others. The acquisition of MatrixOne
will allow the Company to expand its collaborative product offerings and extend its reach across a broader range of industries. The results of operations of MatrixOne have been included in the
Company's consolidated financial statements beginning May 11, 2006.

Under
business combinations accounting, the total purchase price was allocated to MatrixOne's net tangible and intangible assets based on their fair values as of the date of acquisition with the
residual amount allocated to goodwill. The allocation of the purchase price resulted in €124 million of goodwill, which has been assigned to the Process-centric segment. The
primary items that generated goodwill include, but are not limited to, the value of the synergies between MatrixOne and the Company's process-centric activities and the acquired assembled workforce,
neither of which qualifies as an amortizable intangible asset. Of the amount assigned to goodwill, approximately €8 million is expected to be deductible for tax purposes.

The
following table summarizes the fair value of assets acquired and liabilities assumed at the date of acquisition.

|(in thousands)                |  |   |         |  
|----------------------------- |  | - | ------- | -
|Cash and cash equivalents     |  | € | 72,325  |  
|Other tangible assets         |  |   | 30,418  |  
|Deferred taxes, net           |  |   | (16,598 | )
|Deferred revenue(1)           |  |   | (12,303 | )
|Restructuring reserve(2)      |  |   | (11,809 | )
|Other liabilities             |  |   | (16,234 | )
|                              |  |   |         |  
|Net tangible assets acquired  |  |   | 45,799  |  
|                              |  |   |         |  
|Intangible assets acquired(3) |  |   | 153,627 |  
|Goodwill                      |  |   | 124,094 |  
|                              |  |   |         |  
|Total purchase price          |  | € | 323,520 |  
|                              |  |   |         |  

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|(in thousands)                                 |  | Fair Value |         | Estimated Weighted-Average Useful Life |         
|---------------------------------------------- |  | ---------- | ------- | -------------------------------------- | --------
|Technology                                     |  | €          | 44,161  |                                        | 9 years 
|Contractual customer relationships             |  |            | 104,629 |                                        | 12 years
|Trademarks                                     |  |            | 2,114   |                                        | 5 years 
|                                               |  |            |         |                                        |         
|Total amortizable intangible assets acquired   |  |            | 150,904 |                                        |         
|In process research & development ("IPR&D")(1) |  |            | 2,723   |                                        |         
|                                               |  |            |         |                                        |         
|Total intangible assets acquired               |  | €          | 153,627 |                                        |         
|                                               |  |            |         |                                        |         

The unaudited pro forma financial information presented in the table below summarizes the combined results of operations for the year ended
December 31, 2006 and 2005 as if the acquisition of MatrixOne had occurred at the beginning of the period presented. The pro forma information is presented for informational purposes and
does not purport to be indicative of results that would have been achieved if the MatrixOne acquisition had taken place at the beginning of the period presented, nor does it purport to be indicative
of the results that will be achieved in the future. The impact of adjustments to reduce MatrixOne's deferred revenue to the fair value of the associated support obligations has not been reflected in
the following pro forma financial information as the reduction in revenue represents a material non-recurring charge directly attributable to the transaction. The charges associated
with acquired in-process research and development have not been reflected in the following pro forma summary as they are non-recurring.

|                             |  | Year ended December 31, |          
|---------------------------- |  | ----------------------- | ---------
|
|
|Revenue                      |  | €                       | 1,210,035
|Income before income taxes   |  |                         | 250,271  
|Net income                   |  |                         | 179,399  
|Basic net income per share   |  | €                       | 1.56     
|Diluted net income per share |  | €                       | 1.51     

Abaqus

On October 4, 2005, the Company completed its acquisition of 100% of the outstanding common shares of Abaqus Inc., ("Abaqus") for approximately
€346 million in cash (including approximately €5 million of direct transaction costs). Abaqus develops, markets and supports finite element analysis
software. The acquisition of Abaqus enabled the Company to expand its capabilities in realistic 3D simulation and to diversify in markets beyond its existing manufacturing base. The results of
operations of Abaqus were included in the Company's consolidated financial statements beginning October 1, 2005.

Under
business combinations accounting, the total purchase price was allocated to Abaqus' net tangible and intangible assets based on their fair values as of the date of acquisition with the residual
amount allocated to goodwill. The allocation of the purchase price resulted in €169 million of goodwill, which has been assigned to the Process-centric segment. The primary
items that generated goodwill include, but are not limited to, the value of the synergies between Abaqus and the Company's Process-centric activities and the acquired assembled workforce, neither of
which qualifies as an amortizable intangible asset. The entire amount assigned to goodwill is expected to be deductible for tax purposes.

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The
following table summarizes the fair value of assets acquired and liabilities assumed at the date of acquisition.

|(in thousands)                            |  |   |         |  
|----------------------------------------- |  | - | ------- | -
|Cash and cash equivalents                 |  | € | 22,324  |  
|Other tangible assets                     |  |   | 17,375  |  
|Deferred revenue(1)                       |  |   | (9,030  | )
|Other liabilities                         |  |   | (13,299 | )
|                                          |  |   |         |  
|Net tangible assets acquired              |  |   | 17,370  |  
|                                          |  |   |         |  
|Amortizable intangible assets acquired(2) |  |   | 160,251 |  
|Goodwill                                  |  |   | 168,802 |  
|                                          |  |   |         |  
|Total purchase price                      |  | € | 346,423 |  
|                                          |  |   |         |  

|(in thousands)                               |  | Fair Value |         | Estimated Weighted-Average Useful Life |         
|-------------------------------------------- |  | ---------- | ------- | -------------------------------------- | --------
|Technology                                   |  | €          | 57,195  |                                        | 10 years
|Contractual customer relationships           |  |            | 99,402  |                                        | 11 years
|Trademarks                                   |  |            | 3,654   |                                        | 10 years
|                                             |  |            |         |                                        |         
|Total amortizable intangible assets acquired |  | €          | 160,251 |                                        |         
|                                             |  |            |         |                                        |         

Other acquisitions

DYNASIM

In April 2006, the Company acquired Dynasim for cash consideration of approximately €5.4 million. Dynasim is a Swedish company
that develops and markets Dymola, a software tool used for dynamic multi-engineering modeling and simulation. Dynasim customers include the automotive, aerospace, power generating and process
industries. As a result of this transaction, an amount of €4.6 million was recorded in goodwill.

GCS SCANDINAVIA AKTIEBOLAG

In April 2006, the Company acquired GCS Scandinavia for cash consideration of approximately €4.9 million. GCS Scandinavia is a
Swedish company that develops and markets Conisio, a software tool used for designing integrated data management solutions in the product design process in a wide range of industries. This acquisition
will provide the Company with the ability to quickly deliver its customers an integrated, scalable product to meet their data management needs. As a result of this transaction, an amount of
€3.5 million was recorded in goodwill.

VIRTOOLS

In June 2005, the Company acquired Virtools for cash consideration of approximately €11.3 million. Virtools provides software
development solutions for building highly interactive 3D content. As a result of this transaction, an amount of €8.4 million was recorded in goodwill.

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RAND SUBSIDIARIES IN EUROPE AND RAND NORTH AMERICA

In January 2005, the Company acquired certain subsidiaries of Rand A Technology Corporation ("Rand") in Germany, the United Kingdom, Sweden and
Switzerland, plus the subsidiary Rand Technologies C.I.S., Inc., and increased its ownership in Rand NA from 60 to 70 percent. The Company entered into this transaction to expand and
better support its European indirect channel with IBM for sales to small and medium-sized businesses. The total purchase price was €31.7 million consisting of
€28.3 million in loans, advances and interest due from Rand (see Note 4. Investments and Loans Receivable) and €3.4 million in cash. As a
result of this transaction, an amount of €28.1 million was recorded in goodwill.

All
of the other acquisitions discussed above have been accounted for under the purchase method of accounting and have been consolidated in the Company's financial statements as of the date the
acquisition was finalized. Pro forma results of operations reflecting these acquisitions have not been presented because the results of operations of the acquired companies, either individually
or in the aggregate, are not material to the Company's results of operations.

Note 6. Intangible Assets and Goodwill

Intangible assets at December 31, 2006 consisted of the following:

|                        |  | Year ended December 31, 2006 |         | Year ended December 31, 2005 |  
|----------------------- |  | ---------------------------- | ------- | ---------------------------- | -
|
|Software                |  | €                            | 268,191 |                              | €
|Customer relationships  |  |                              | 236,007 |                              |  
|Other                   |  |                              | 15,514  |                              |  
|                        |  |                              |         |                              |  
|Total intangible assets |  | €                            | 519,712 |                              | €
|                        |  |                              |         |                              |  

The change in the carrying amount of intangible assets as of December 31, 2006 is as follows:

|(in thousands)                                |  | Software |         | Customer Relationships |   | Other Intangible assets |   | Total Intangible assets |        |  
|--------------------------------------------- |  | -------- | ------- | ---------------------- | - | ----------------------- | - | ----------------------- | ------ | -
|Net intangible assets as of January 1, 2006   |  | €        | 105,452 |                        | € | 117,728                 |   | €                       | 7,438  |  
|                                              |  |          |         |                        |   |                         |   |                         |        |  
|MatrixOne acquisition                         |  |          | 44,161  |                        |   | 104,629                 |   |                         | 4,837  |  
|Other additions                               |  |          | 33,905  |                        |   | 25,586                  |   |                         | 3,189  |  
|Disposals, net                                |  |          | (719    | )                      |   |                        |   |                         | (197   | )
|Write off of IPR&D(1)                         |  |          |        |                        |   |                        |   |                         | (2,723 | )
|Amortization for the period(1)                |  |          | (20,909 | )                      |   | (18,757                 | ) |                         | (1,074 | )
|Exchange differences                          |  |          | (9,110  | )                      |   | (14,519                 | ) |                         | (696   | )
|                                              |  |          |         |                        |   |                         |   |                         |        |  
|Net intangible assets as of December 31, 2006 |  | €        | 152,780 |                        | € | 214,667                 |   | €                       | 10,774 |  
|                                              |  |          |         |                        |   |                         |   |                         |        |  

Other additions to intangible assets in 2006 resulted primarily from the acquisition of Dynasim (€4.0 million), GCS
(€3.0 million) and from the purchase of certain minority interests in SolidWorks in connection with the buy-back of SolidWorks mature shares
(€46.6 million; see Note 14. Stock-option Plans and Earnings per Share).

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Total
intangible amortization expense was €40,740 thousand, €13,702 thousand, and €3,143 thousand for the years ended
December 31, 2006, 2005 and 2004 respectively. The future amortization expense for each of the five succeeding years relating to all intangible assets that are currently recorded in the
consolidated balance sheets is estimated to be the following at December 31, 2006:

|(in thousands) |  | Estimated Amortization Expense |       
|-------------- |  | ------------------------------ | ------
|2007           |  | €                              | 48,462
|2008           |  |                                | 46,424
|2009           |  |                                | 44,353
|2010           |  |                                | 41,173
|2011           |  |                                | 38,134

The change in the carrying amount of goodwill as of December 31, 2006 is as follows:

|(in thousands)                   |  | Goodwill |         |  
|-------------------------------- |  | -------- | ------- | -
|Goodwill as of January 1, 2006   |  | €        | 326,617 |  
|                                 |  |          |         |  
|MatrixOne acquisition            |  |          | 124,094 |  
|Other additions                  |  |          | 34,719  |  
|Exchange differences             |  |          | (29,594 | )
|                                 |  |          |         |  
|Goodwill as of December 31, 2006 |  | €        | 455,836 |  
|                                 |  |          |         |  

Other additions to goodwill in 2006 resulted primarily from the acquisition of Dynasim (€4.6 million) and from the purchase of certain
minority interests in SolidWorks in connection with the buy-back of SolidWorks mature shares (€27.6 million; see Note 14. Stock-option Plans and Earnings
per Share).

The
Company performed an annual impairment test in the fourth quarter of 2006, 2005 and 2004; no impairment of goodwill was indicated as a result of these tests. These tests consisted of a comparison
of the fair value of the Company's reporting units with their respective carrying amount, including goodwill. Each acquired company has been allocated to a single reporting unit and consequently,
goodwill relating to these acquired companies has been allocated to the respective reporting units in accordance with the provisions of SFAS No. 142. The fair value of the reporting
units was determined based on the income approach, which estimates the fair value based on the future discounted cash flows. Based on the analysis, the Company determined that the fair value was in
excess of the carrying amount of the reporting units.

Note 7. Software Revenue and Transactions with IBM

Software revenue

Software revenue was comprised of the following:

|                                          |  | Year ended December 31, |        
|----------------------------------------- |  | ----------------------- | -------
|
|New licenses revenue                      |  | €                       | 432,170
|Periodic licenses and maintenance revenue |  |                         | 512,126
|Product development revenue               |  |                         | 18,822 
|                                          |  |                         |        
|Software revenue                          |  | €                       | 963,118
|                                          |  |                         |        

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Transactions with IBM

Pursuant to the Company's long-standing, mutually non-exclusive agreement with IBM, IBM markets and distributes a substantial portion of
the Company's PLM products worldwide, primarily, CATIA, ENOVIA and SMARTEAM.

Revenue
obtained through the commercial relationship with IBM represents 45%, 52% and 56% of consolidated revenues of the Company for the years ended December 31, 2006, 2005, and 2004,
respectively. There is no contractual obligation for either IBM or the Company to continue to market and distribute the Company's products according to the present agreement. Changes in roles and
responsibilities could cause disruptions and negatively affect the sales organization performance, which could have a material adverse impact on the revenues generated through IBM.

For
the years ended December 31, 2006, 2005, and 2004, IBM met certain annual sales and growth targets and the Company charged a sales incentive to software revenue of
€6,004 thousand, €7,578 thousand, and €20,526 thousand respectively. The related liability on the balance sheet will be settled in
U.S. dollars.

The
balances of trade accounts receivable with IBM were €90,546 thousand, €119,225 thousand and €116,754 thousand, at
December 31, 2006, 2005, and 2004, respectively, substantially all of which relates to software revenue. Management believes that the financial position of IBM mitigates the potential credit
risk related to the concentration of its trade accounts receivable with IBM. At December 31, 2006, 88% of such accounts receivable were denominated in U.S. dollars (2005: 89%), with the
remainder denominated in euros.

Note 8. Borrowings

In December 2005, the Company entered into a €200 million multicurrency revolving loan facility (the "Loan Facility"). This
agreement provides for revolving credit for a period of five years, which can be extended by two additional years at the Company's option. Borrowings under the Loan Facility bear interest at Euribor
plus 0.18% per annum. The annual commitment fee in effect on the unused portion of the Loan Facility is 0.055%.

In
March 2006, the Company drew down €200 million under the Loan Facility and in April 2006, the Company exercised its option to extend the revolving loan facility
for an additional year.

Note 9. Commitments and Contingencies

The Company is involved in litigation incidental to normal operations. It is not possible to determine the ultimate liability, if any, in these matters. In the
opinion of management, after consultation with legal counsel, the resolution of such litigation and proceedings will not have a material effect on the consolidated financial statements of
the Company.

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Note 10. Leases

At December 31, 2006, future minimum annual rental commitments under non-cancelable lease obligations were as follows:

|(in thousands)                                       |  | Capital Leases |      |   |  | Operating Leases |  
|---------------------------------------------------- |  | -------------- | ---- | - |  | ---------------- | -
|2007                                                 |  | €              | 439  |   |  |                  | €
|2008                                                 |  |                | 11   |   |  |                  |  
|2009                                                 |  |                | 5    |   |  |                  |  
|2010                                                 |  |                | 4    |   |  |                  |  
|2011                                                 |  |                | 1    |   |  |                  |  
|Thereafter                                           |  |                |     |   |  |                  |  
|                                                     |  |                |      |   |  |                  |  
|Total minimum lease payments                         |  |                | 460  |   |  |                  |  
|Less amount representing interest                    |  |                | (18  | ) |  |                  |  
|                                                     |  |                |      |   |  |                  |  
|Present value of net minimum lease payments          |  |                | 442  |   |  |                  |  
|                                                     |  |                |      |   |  |                  |  
|Less current maturities of capital lease obligations |  |                | (439 | ) |  |                  |  
|                                                     |  |                |      |   |  |                  |  
|Lease obligations                                    |  | €              | 3    |   |  |                  |  
|                                                     |  |                |      |   |  |                  |  

In addition, in March 2006, the Company entered into a build-to-suit lease agreement for new headquarters facilities which will
take effect when the construction is completed, which is expected to be in mid-2008. Under this agreement, the Company has committed to lease approximately 55,000 square meters of
office space located in V élizy, outside Paris, France, for a non-cancelable initial term of 12 years, with options to renew for additional periods. When
construction is completed, this lease is expected to be classified as an operating lease. Future minimum rental payments over the initial term amount to approximately
€178 million in the aggregate and have not been included in the table presented above.

The
Company leases land and buildings related to its offices under capital leases. The following summarizes property held under capital leases:

|                         |  | Year ended December 31, |         |  
|------------------------ |  | ----------------------- | ------- | -
|
|Land                     |  | €                       | 5,680   |  
|Buildings                |  |                         | 27,188  |  
|Accumulated depreciation |  |                         | (13,367 | )
|                         |  |                         |         |  
|Total                    |  | €                       | 19,501  |  
|                         |  |                         |         |  

The Company also leases computer equipment, premises and office equipment under operating leases. Rent expense under operating leases was
€46,922 thousand, €38,504 thousand and €32,315 thousand, for the years ended December 31, 2006, 2005, and 2004,
respectively.

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Note 11. Personnel Costs

Personnel Costs

Personnel costs excluding stock-based compensation (see Note 14. Stock-option Plans and Earnings per Share) were
€515,028 thousand, €400,899 thousand and €332,391 thousand for the years ended December 31, 2006, 2005, and 2004,
respectively and included social security costs of €101,332 thousand, €87,359 thousand, and €72,801 thousand for the same periods.
Directors' compensation was €144 thousand, €140 thousand and €120 thousand in the years ended December 31, 2006, 2005, and
2004, respectively.

Compensation
excluding stock-based compensation (see Note 14. Stock-option Plans and Earnings per Share) for key management personnel, composed of our executive officers
(10 persons), was €5,797 thousand, €4,970 thousand and €4,259 thousand in the years ended December 31, 2006, 2005,
and 2004, respectively.

Individual right to training for employees in France

French law provides employees employed under indefinite-term employment contracts by French entities within the Company with the right to receive
individual training of at least 20 hours per year ("Individual Training Rights"). Individual Training Rights can be accumulated over six years and the related costs are expensed as incurred. As
of December 31, 2006, accumulated Individual Training Rights were approximately 94,000 hours.

Note 12. Derivatives and Financial Revenue and Other, Net

Foreign currency risk

The Company transacts in various foreign currencies, primarily U.S. dollars and Japanese yen. To manage this currency exposure, the Company generally
uses foreign exchange forward contracts, currency options and collars. Except as noted below, the derivative instruments held by the Company are designated as accounting hedges, have high correlation
with the underlying exposure and are highly effective in offsetting underlying price movements.

The
effectiveness of forward contracts is measured using forward rates and the forward value of the underlying hedged transaction. For currency options, effectiveness is measured by the change in the
option's intrinsic value, which represents the change in the option's strike price compared to the spot price of the underlying hedged transaction. During 2006, 2005, and 2004, the portion of hedging
instruments' gains or losses excluded from the assessment of effectiveness and the ineffective portions of hedges had no material impact on earnings and was recorded in financial revenue in the
statement of income.

No
cash flow hedges were discontinued for the years ended December 31, 2006, 2005 and 2004.

Interest rate risk

The Company entered into a €200 million multicurrency revolving loan facility which bears interest at variable rates
(see Note 8. Borrowings). In December 2005, the Company entered into interest rate swap agreements that have the economic effect of modifying a portion of its forecasted interest
obligations relating to this facility so that the interest payable effectively becomes fixed.

DASSAULT SYSTÈMESForm 20-F
2006F-23

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Derivative instruments

At December 31, 2006 and 2005, the fair value of all derivative instruments has been recorded in other current assets or other current liabilities in the
consolidated balance sheet and is summarized as follows:

|                                                         |  | Year ended December 31, |         | 
|-------------------------------------------------------- |  | ----------------------- | ------- | 
|
|
|Collars U.S. dollars/euros                               |  | €                       | 3,846   | 
|Forward exchange contract U.S. dollars/euros(1)          |  |                         | 38,883  | 
|Forward exchange contract Japanese yen/euros             |  |                         | 1,483   | 
|Forward exchange contract GB pounds/euros                |  |                         | 1,426   | 
|Forward exchange contract GB pounds or U.S dollars/euros |  |                         | 1,000   | 
|Interest rate swaps                                      |  |                         | 200,000 | 
|                                                         |  |                         |         | 
|Total fair value                                         |  |                         |         | 
|                                                         |  |                         |         | 

The fair market values of these derivative instruments were determined by financial institutions using quoted market prices and option pricing models.

All
financial instruments, which relate to the foreign currency hedging strategy of the Company, usually have a maturity date of less than 24 months when maturity of interest rate swap
instruments is equal to 5 years. Management believes counter-party risk on financial instruments is minimal since the Company deals with major banks and financial institutions.

Financial revenue and other

Financial revenue and other for the years ended December 31, 2006, 2005 and 2004 is as follows:

|                                     |  | Year ended December 31, |        |  
|------------------------------------ |  | ----------------------- | ------ | -
|
|Interest income                      |  | €                       | 16,701 |  
|Interest expense(1)                  |  |                         | (5,663 | )
|Foreign exchange (losses) gains, net |  |                         | (6,857 | )
|Other, net(2)                        |  |                         | (601   | )
|                                     |  |                         |        |  
|Total                                |  | €                       | 3,580  |  
|                                     |  |                         |        |  

F-24DASSAULT
SYSTÈMESForm 20-F 2006

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Note 13. Income Taxes

Deferred tax assets and (liabilities) are as follows:

|                                                                           |  | Year ended December 31, |          |  
|-------------------------------------------------------------------------- |  | ----------------------- | -------- | -
|
|Deferred tax assets:                                                       |  |                         |          |  
|Accelerated depreciation and amortization for financial statement purposes |  | €                       | 12,023   |  
|Profit sharing and pension accruals not yet deductible                     |  |                         | 5,430    |  
|Provisions and other expenses not currently deductible                     |  |                         | 51,619   |  
|Net tax loss and tax credit carryforward assets                            |  |                         | 73,875   |  
|Valuation reserves                                                         |  |                         | (25,806  | )
|                                                                           |  |                         |          |  
|Total deferred tax assets                                                  |  |                         | 117,141  |  
|                                                                           |  |                         |          |  
|Deferred tax liabilities:                                                  |  |                         |          |  
|Accelerated depreciation and amortization for tax purposes                 |  |                         | (18,362  | )
|Acquired intangibles                                                       |  |                         | (78,360  | )
|Other                                                                      |  |                         | (3,945   | )
|                                                                           |  |                         |          |  
|Total deferred tax liabilities                                             |  |                         | (100,667 | )
|                                                                           |  |                         |          |  
|Net deferred tax asset                                                     |  | €                       | 16,474   |  
|                                                                           |  |                         |          |  

The increase in deferred tax assets is primarily attributable to a tax reorganization in the United States of America and to the acquisition of MatrixOne
in 2006.

In
2006 and 2005, deferred tax liabilities relate primarily to intangible assets acquired in business combinations.

The
balance sheet classification of deferred tax assets and liabilities is as follows:

|                                     |  | Year ended December 31, |          |  
|------------------------------------ |  | ----------------------- | -------- | -
|
|Current deferred tax assets          |  | €                       | 38,000   |  
|Non current deferred tax assets      |  |                         | 79,141   |  
|                                     |  |                         |          |  
|Total deferred tax assets            |  |                         | 117,141  |  
|                                     |  |                         |          |  
|Current deferred tax liabilities     |  |                         | (8,036   | )
|Non current deferred tax liabilities |  |                         | (92,631  | )
|                                     |  |                         |          |  
|Total deferred tax liabilities       |  |                         | (100,667 | )
|                                     |  |                         |          |  
|Net deferred tax asset               |  | €                       | 16,474   |  
|                                     |  |                         |          |  

Current deferred tax assets relate primarily to the profit sharing expenses and reserves not currently deductible.

Non
current deferred tax liabilities mainly include the tax effect of intangible assets created through acquisitions (primarily MatrixOne and SolidWorks).

The
components of income before income taxes are as follows:

|                           |  | Year ended December 31, |        
|-------------------------- |  | ----------------------- | -------
|
|France                     |  | €                       | 190,276
|Foreign                    |  |                         | 60,282 
|                           |  |                         |        
|Income before income taxes |  | €                       | 250,558
|                           |  |                         |        

DASSAULT SYSTÈMESForm 20-F
2006F-25

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The significant components of income tax expense are as follows:

|                         |  | Year ended December 31, |        
|------------------------ |  | ----------------------- | -------
|
|France                   |  | €                       | 64,248 
|Foreign                  |  |                         | 36,933 
|                         |  |                         |        
|Current taxes            |  |                         | 101,181
|Change in deferred taxes |  |                         | (30,371
|                         |  |                         |        
|Income tax expense       |  | €                       | 70,810 
|                         |  |                         |        

The differences between the income tax provision and the provision computed using the statutory French income tax rate are as follows:

|                                                                                             |  | Year ended December 31, |         |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | -
|
|Taxes computed at the statutory rate of 34.43% for 2006, 34.93% for 2005 and 35.43% for 2004 |  | €                       | 86,267  |  
|Foreign losses                                                                               |  |                         | 3,491   |  
|Foreign tax rate differentials                                                               |  |                         | 4,048   |  
|Change in valuation allowance(1)                                                             |  |                         | (11,804 | )
|R&D tax credit and other tax credits(2)                                                      |  |                         | (11,605 | )
|Stock-based compensation(3)                                                                  |  |                         | 4,493   |  
|Tax exempt income(4)                                                                         |  |                         | (5,770  | )
|Other                                                                                        |  |                         | 1,690   |  
|Income tax expense                                                                           |  | €                       | 70,810  |  
|                                                                                             |  |                         |         |  
|Effective tax rate                                                                           |  |                         | 28.3%   |  
|                                                                                             |  |                         |         |  

At December 31, 2006, there were net tax operating losses and tax credit carryforwards of €152,906 thousand and
€18,765 thousand respectively, which are scheduled to expire in the following years:

|(in thousands) |  | Net operating losses |         | Tax credits |  
|-------------- |  | -------------------- | ------- | ----------- | -
|2007           |  | €                    |        |             | €
|2008           |  |                      |        |             |  
|2009           |  |                      |        |             |  
|2010           |  |                      |        |             |  
|2011           |  |                      |        |             |  
|2012 and later |  |                      | 152,906 |             |  
|               |  |                      |         |             |  
|Total          |  | €                    | 152,906 |             | €
|               |  |                      |         |             |  

The Company has not provided any deferred income taxes on the undistributed earnings of its foreign subsidiaries based upon its determination that such earnings
will be indefinitely reinvested. Company management has decided that the determination of the amount of any unrecognized deferred tax liability for the cumulative undistributed earnings of the foreign
subsidiaries is not practical since it would depend on a number of factors that cannot be known until such time as a decision to repatriate earnings might be made.

In
connection with the exercise of stock options, U.S. entities (mainly SolidWorks, Delmia Corp. and DSAC) realized tax benefits of €14,184 thousand,
€3,169 thousand and €2,421 thousand for the years ended December 31, 2006, 2005 and 2004 respectively, which have been reflected in shareholders'
equity.

F-26DASSAULT
SYSTÈMESForm 20-F 2006

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Note 14. Stock-option Plans and Earnings per Share

Stock-based compensation

On January 1, 2006, the Company adopted SFAS 123(R), which requires the grant-date fair value of all share-based payment awards that
are expected to vest, including employee share options, to be recognized as employee compensation expense over the requisite service period. The Company adopted SFAS 123(R) by applying the
modified prospective transition method and, therefore, (1) did not restate any prior periods and (2) is recognizing compensation expense for all share-based payment awards that were
outstanding, but not yet vested, as of January 1, 2006, based upon the same estimated grant-date fair values and service periods used to prepare the SFAS 123
pro-forma disclosures.

Prior
to adopting SFAS 123(R), the Company accounted for its share-based payment awards using the intrinsic value method of APB 25 and SFAS 123, as amended by SFAS 148.
Under APB 25, the Company did not record compensation expense for employee share options unless the awards were modified, because the share options were granted with exercise prices equal to or
greater than the fair value of the stock on the date of grant. The following table illustrates the effect on reported net income and earnings per share applicable to common shareholders for the years
ended December 31, 2005 and 2004, had we accounted for the share-based compensation plans using the fair value method of SFAS 123:

|                                                                                                                    |  | Year Ended December 31, |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | -
|
|Net Income:                                                                                                         |  |                         |         |  
|As reported                                                                                                         |  | €                       | 175,462 |  
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effect           |  |                         |        |  
|Less: Stock-based employee compensation expense determined under fair value based method, net of related tax effect |  |                         | (5,770  | )
|                                                                                                                    |  |                         |         |  
|Pro forma                                                                                                           |  | €                       | 169,692 |  
|                                                                                                                    |  |                         |         |  
|Basic net income per share                                                                                          |  |                         |         |  
|As reported                                                                                                         |  | €                       | 1.54    |  
|Pro forma                                                                                                           |  | €                       | 1.49    |  
|Diluted net income per share                                                                                        |  |                         |         |  
|As reported                                                                                                         |  | €                       | 1.49    |  
|Pro forma                                                                                                           |  | €                       | 1.44    |  

SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from
initial estimates. Stock-based compensation expense was recorded net of estimated forfeitures for the year ended December 31, 2006 such that expense was recorded only for those stock-based
awards that are expected to vest. Previously under APB 25 to the extent awards were forfeited prior to vesting, the corresponding previously recognized expense was reversed in the period
of forfeiture.

The
Company recognizes compensation expense for stock-based payment awards on a straight-line basis over the requisite service period of the entire award. In addition, SAB 107
requires share-based compensation to be classified in the same expense line items as cash compensation. As of December 31, 2006, compensation expense related to the share-based payment awards
of €11,621 thousand is recorded respectively in cost of service and other revenue for €355 thousand, in research and development for
€6,850 thousand, in marketing and sales for €2,498 thousand, and in general and administrative for €1,918 thousand. Income tax
benefits recognized against compensation expense are immaterial since beneficiaries are located in tax jurisdictions where the Company will not receive tax deductions.

DASSAULT SYSTÈMESForm 20-F
2006F-27

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The
following table summarizes the unvested restricted awards as of December 31, 2006 and changes during 2006:

|                              |  | Number of awards |   | 
|----------------------------- |  | ---------------- | - | 
|Unvested at January 1, 2006   |  | 1,344,550        |   | 
|Granted                       |  | 1,555,700        |   | 
|Vested                        |  | (110,225         | ) | 
|Forfeited                     |  | (37,200          | ) | 
|                              |  |                  |   | 
|Unvested at December 31, 2006 |  | 2,752,825        |   | 
|                              |  |                  |   | 

As of December 31, 2006, total compensation cost related to unvested awards expected to vest but not yet recognized was
€25,420 thousand, and the Company expects to recognize this expense over a weighted average period of 1.67 years.

In
addition, upon the adoption of SFAS 123(R) in fiscal year 2006, the Company included as part of cash flows from financing activities the gross benefit of tax deductions related to
stock-based awards in excess of the grant date fair value of the related share-based awards. This amount is shown as a reduction to cash flows from operating activities and an increase to cash flows
from financing activities. In fiscal years 2005 and 2004, prior to the adoption of SFAS 123(R), these tax benefits were classified as operating cash flows.

STOCK OPTION PLANS

Since 1996 the Board of Directors has adopted several stock option plans for eligible employees and executives. Options generally vest over various periods
ranging from one to five years, subject to continued employment. Options generally expire seven to ten years from grant date or shortly after termination of employment, whichever is earlier. To date
options have been granted at an exercise price equal to or greater than the grant-date market value of the Company's share.

A
summary of the Company's stock option activity is as follows:

|                                 |  | 2006       |   | 2005 |       | 2004 |           
|-------------------------------- |  | ---------- | - | ---- | ----- | ---- | ----------
|
|Outstanding at beginning of year |  | 17,328,241 |   | €    | 35.68 |      | 17,609,016
|Granted                          |  | 1,405,700  |   |      | 47.00 |      | 1,200,000 
|Exercised                        |  | (749,725   | ) |      | 25.15 |      | (1,284,374
|Forfeited                        |  | (141,893   | ) |      | 34.02 |      | (196,401  
|                                 |  |            |   |      |       |      |           
|Outstanding at end of year       |  | 17,842,323 |   |      | 36.71 |      | 17,328,241
|                                 |  |            |   |      |       |      |           
|Exercisable                      |  | 15,389,498 |   | €    | 35.58 |      | 15,733,716

A summary of the weighted average remaining contractual life and the weighted average exercise price of options outstanding as of December 31, 2006 is
presented below:

|             |  | Outstanding options |  | Exercisable options | 
|------------ |  | ------------------- |  | ------------------- | 
|
|€0.09 to €23 |  | 3,491,549           |  | 5.99                | 
|€23 to €26   |  | 554,571             |  | 1.91                | 
|€26 to €30   |  | 1,830,903           |  | 1.86                | 
|€30 to €34   |  | 444,055             |  | 4.53                | 
|€34 to €37   |  | 4,448,089           |  | 3.31                | 
|€37 to €46   |  | 2,819,456           |  | 5.31                | 
|€46 to €52   |  | 4,253,700           |  | 5.08                | 
|             |  |                     |  |                     | 
|€0.09 to €52 |  | 17,842,323          |  | 4.41                | 
|             |  |                     |  |                     | 

F-28DASSAULT
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The weighted average grant-date fair value of options granted in 2006 and 2005 was €14.90 and €12.24, respectively.
No options were granted in 2004.

The
fair values of stock options granted in 2006 and 2005 were estimated on the date of grant using a finite difference option pricing model. Assumptions used in 2006 are as follows: weighted-average
expected life of 6 years, expected volatility rate of 38.4%, expected dividend yield of 1.0% and risk-free interest rate of 3.91%. Assumptions used in 2005 are as follows:
weighted-average expected life of 5.2 years, expected volatility rate of 41.6%, expected dividend yield of 1.0% and risk-free interest rate of 3.53%.

The
expected volatility was determined using a combination of the historical volatility of the Company's stock and the implied volatility of the Company's exchange-traded options adjusted for other
factors, such as a comparison to the Company's peer group.

EXECUTIVE STOCK GRANTS

Pursuant to an authorization granted by the shareholders at shareholders' meetings held on June 8, 2005 and June 14, 2006, the Board of Directors
decided to grant to our Chief Executive Officer ("CEO") 150,000 shares and 150,000 shares, respectively. Such shares shall be vested at the end of an acquisition period of 3 years
and 2 years, respectively, subject to the condition that the CEO shall be a director of the Company at the acquisition date. In addition, the CEO is required to hold the vested shares until the
end of a 2-year lock-up period and may not sell or transfer them during that period.

Stock
grants are measured at fair value on the date of grant based on the quoted price of the Company's common stock.

SOLIDWORKS BUY-BACK PLAN

Pursuant to a 1998 stock option plan, 6,787,365 stock options giving the right to subscribe to shares of SolidWorks were granted to employees of
SolidWorks and its affiliates, including 2,800,000 stock options granted to certain of our executive officers. In 2002, SolidWorks instituted a buy-back plan for the SolidWorks
shares held by its employees under which (1) an employee can put his mature shares (i.e., shares that have been owned by an employee for a period greater than 6 months) to
SolidWorks on specific dates at their then fair market value as determined by an independent valuation expert, and (2) SolidWorks can call such mature shares in this same timeframe at the same
fair market value. The adoption of this amendment did not create any compensation charge.

In
2006, 2005 and 2004, the SolidWorks stock option and buy-back plan resulted in a cash inflow of approximately €8.5, €12.7, and
€14.9 million, respectively, and a cash outflow of approximately €71.7, €41.9 and €29.3 million, respectively. At
December 31, 2006, all shares were repurchased under the plan and no additional cash outflow is expected to occur in subsequent years.

The
terms of the SolidWorks stock option and share buy-back plan do not result in the recognition of compensation expense. The net gain resulting from the exercise of SolidWorks stock
options at prices greater than the corresponding carrying value is recorded as an equity transaction. The repurchase of SolidWorks stock is recorded in accordance with the purchase method.
Accordingly, the excess of share repurchase price over the carrying value of minority interest is first allocated to fair value adjustments to SolidWorks assets and liabilities (primarily consisting
of developed technology and contractual customer relationship intangibles, subject to an amortization period of ten years), with any residual difference allocated to goodwill.

Earnings per share

Basic income per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per
share is determined by dividing net income by the weighted average number of common shares outstanding plus the effect of applying the treasury stock method of computing dilution for the stock options
outstanding during the period.

DASSAULT SYSTÈMESForm 20-F
2006F-29

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The
following table presents the calculation for both basic and diluted earnings per share:

|                                                      |  | Year ended December 31, |            
|----------------------------------------------------- |  | ----------------------- | -----------
|
|Net income                                            |  | €                       | 179,802    
|Weighted average number of shares outstanding         |  |                         | 115,184,258
|Dilutive effect of stock options                      |  |                         | 3,903,228  
|Diluted weighted average number of shares outstanding |  |                         | 119,087,486
|Basic net income per share                            |  | €                       | 1.56       
|Diluted net income per share                          |  | €                       | 1.51       

For the years ended December 31, 2006, 2005 and 2004, 6,630,536, 2,856,730 and 4,725,178 options, respectively, were excluded from the earnings
per share calculation as their effects would have been anti-dilutive.

Note 15. Related-party Transactions

The Company licenses its products for internal use to Dassault Aviation, a former direct shareholder of the Company whose Chief Executive Officer is the
Chairman of the Company. Dassault Aviation licenses the Company's products on commercial terms consistent with those granted to the Company's other customers of similar size. Software revenue amounted
to €12,472 thousand, €7,732 thousand and €5,690 thousand for the years ended December 31, 2006, 2005, and 2004,
respectively.

The
Company also provides service and support to Dassault Aviation. Such activity generated service revenues of €8,161 thousand, €7,538 thousand and
€8,655 thousand in the years ended December 31, 2006, 2005, and 2004, respectively.

The
balances of trade accounts receivable with Dassault Aviation were €4,016 thousand, €10,794 thousand and €10,571 thousand at
December 31, 2006, 2005, and 2004, respectively.

Most
of our development organizations subcontract software development work to 3D PLM Software Solutions Limited ("3D PLM"), a company located in India in which the Company owns 30% interest and which
is accounted for under the equity method. Services purchased from 3D PLM amounted to €12,699 thousand in 2006 (€10,339 thousand and
€7,592 thousand in 2005 and 2004, respectively).

F-30DASSAULT
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Note 16. Pension Benefits

The Company provides defined benefit retirement indemnities to the employees of its French operations, and sponsors defined benefit pension plans for certain
employees in the United States. In addition, the Company has certain other plans in countries other than the United States, which are not significant and are combined with the French
plans for presentation purposes.

The
measurement date for all defined benefit plans is December 31.

The
Company applied SFAS No. 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of FASB Statements No. 87, 88, 106, and 132(R)("SFAS 158"), for the first time in 2006. SFAS 158 requires the recognition of the funded status
of each defined benefit pension plan on the Company's balance sheet. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. The initial impact of
SFAS 158 due to previously unrecognized actuarial gains and losses and prior service costs or credits, as well as subsequent changes in the funded status, is recognized as a component of
accumulated other comprehensive income (net of tax) in Shareholders' equity. The incremental effect of applying SFAS 158 to all plans on individual line items is shown below:

|(in thousands)                          |  | Before Application of SFAS 158 |           | Adjustments |   | After Application of SFAS 158 |   |   |          
|--------------------------------------- |  | ------------------------------ | --------- | ----------- | - | ----------------------------- | - | - | ---------
|Liability for pension benefits          |  | €                              | 14,423    |             | € | (3,000                        | ) | € | 11,423   
|Deferred income taxes                   |  |                                | 99,761    |             |   | 906                           |   |   | 100,667  
|Total liabilities and minority interest |  |                                | 748,868   |             |   | (2,874                        | ) |   | 745,994  
|Accumulated other comprehensive income  |  |                                | (55,494   | )           |   | 2,874                         |   |   | (52,620  
|Total shareholders' equity              |  |                                | 1,107,171 |             |   | 2,874                         |   |   | 1,110,045

French plans and other

In France, defined employee benefits include certain gratifications paid upon anniversary of employment and retirement indemnities that are based upon an
individual's years of credited service and annualized salary at retirement. Retirement indemnity benefits vest, and are settled as a lump sum paid to the employee upon the employee's retirement.

ASSUMPTIONS

Weighted-average assumptions used to determine the benefit obligation:

|                               |  | Year ended December 31, | 
|------------------------------ |  | ----------------------- | 
|
|Discount rate                  |  | 4.60%                   | 
|Expected return on plan assets |  | 5.00%                   | 
|Rate of compensation increase  |  | 3.00%                   | 

Weighted-average assumptions used to determine the net periodic benefit cost:

|                               |  | Year ended December 31, | 
|------------------------------ |  | ----------------------- | 
|
|Discount rate                  |  | 4.25%                   | 
|Expected return on plan assets |  | 5.00%                   | 
|Rate of compensation increase  |  | 3.00%                   | 

DASSAULT SYSTÈMESForm 20-F
2006F-31

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To develop the expected long-term rate of return on pension plan assets assumption, the Company considers the current and expected asset
allocations, as well as historical and expected returns on each category of plan assets.

COMPONENTS OF NET PERIODIC COSTS

The components of net periodic benefit cost were as follows:

|(in thousands)                 |  | Year ended December 31, |       |  
|------------------------------ |  | ----------------------- | ----- | -
|
|Service cost                   |  | €                       | 1,728 |  
|Interest cost                  |  |                         | 616   |  
|Expected return on plan assets |  |                         | (413  | )
|Net amortization and deferral  |  |                         | (422  | )
|                               |  |                         |       |  
|Net periodic benefit cost      |  | €                       | 1,509 |  
|                               |  |                         |       |  

OBLIGATIONS AND FUNDED STATUS

Changes in the funded status of the benefit plans were as follows:

|(in thousands)                                 |  | Year ended December 31, |        |  
|---------------------------------------------- |  | ----------------------- | ------ | -
|
|Change in benefit obligations                  |  |                         |        |  
|Benefit obligations at beginning of year       |  | €                       | 15,624 |  
|Service cost                                   |  |                         | 1,728  |  
|Interest cost                                  |  |                         | 616    |  
|Plan amendments                                |  |                         |       |  
|Change in scope                                |  |                         |       |  
|Actuarial loss                                 |  |                         | 512    |  
|Exchange rate differences                      |  |                         | (253   | )
|Benefits paid                                  |  |                         | (424   | )
|                                               |  |                         |        |  
|Benefit obligations at end of year             |  | €                       | 17,803 |  
|                                               |  |                         |        |  
|Change in plan assets                          |  |                         |        |  
|Fair value of plan assets at beginning of year |  |                         | 8,537  |  
|Employer contribution                          |  |                         | 425    |  
|Actual return on plan assets                   |  |                         | 577    |  
|Change in scope                                |  |                         |       |  
|Benefits paid                                  |  |                         | (424   | )
|                                               |  |                         |        |  
|Fair value of plan assets at end of year       |  | €                       | 9,115  |  
|                                               |  |                         |        |  
|Funded status                                  |  |                         | (8,688 | )
|Unrecognized actuarial (gain) loss             |  |                         |        |  
|Unrecognized prior service cost                |  |                         |        |  
|                                               |  |                         |        |  
|Accrued benefit cost  French plans and other  |  |                         |        |  
|                                               |  |                         |        |  

The accumulated benefit obligation for the French defined benefit plans was €12.4 and €8.8 million at December 31,
2006, and 2005, respectively.

PLAN ASSETS

All plan assets for the French plans are invested in an insurance contract with Sogecap, a life-insurance company that is part of the
Société Générale group, a high credit-quality financial institution. To date, the Company has contributed
€6.8 million to this insurance contract.

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The
weighted average asset allocations, by asset category, are as follows:

|(in thousands)    |  | Year ended December 31, | 
|----------------- |  | ----------------------- | 
|
|Debt securities   |  | 66%                     | 
|Equity securities |  | 34%                     | 
|                  |  |                         | 
|Total             |  | 100%                    | 
|                  |  |                         | 

CASH FLOWS

The Company does not expect to make any additional contributions to its French pension plans in 2007.

The
following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

|(in thousands) |  |   |      
|-------------- |  | - | -----
|
|2007           |  | € | 1,316
|2008           |  |   |     
|2009           |  |   | 18   
|2010           |  |   | 23   
|2011           |  |   |     
|2012-2016      |  |   | 199  

U.S. Plans

In the United States, pension benefits are based upon years of credited service and the employee's average final earnings. Retirement benefits are funded
by the Company's contributions to segregated pension plan assets, in an amount that is sufficient to meet or exceed the minimum annual funding requirements of the Employee Retirement Income Security
Act. The projected benefit obligation was determined using the prospective method. Weighted-average assumptions used for the U.S. plans were as follows:

ASSUMPTIONS

Weighted-average assumptions used to determine the benefit obligation:

|                               |  | Year ended December 31, | 
|------------------------------ |  | ----------------------- | 
|
|Discount rate                  |  | 6.25%                   | 
|Expected return on plan assets |  | 8.50%                   | 
|Rate of compensation increase  |  | 3.25%                   | 

Weighted-average assumptions used to determine the net periodic benefit cost:

|                               |  | Year ended December 31, | 
|------------------------------ |  | ----------------------- | 
|
|Discount rate                  |  | 5.75%                   | 
|Expected return on plan assets |  | 8.50%                   | 
|Rate of compensation increase  |  | 3.00%                   | 

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To develop the expected long-term rate of return on pension plan assets assumption, the Company considers the current and expected asset
allocations, as well as historical and expected returns on each category of plan assets.

COMPONENTS OF NET PERIODIC COSTS

The components of net periodic benefit cost were as follows:

|(in thousands)                         |  | Year ended December 31, |        |  
|-------------------------------------- |  | ----------------------- | ------ | -
|
|Service cost                           |  | €                       | 1,169  |  
|Interest cost                          |  |                         | 1,027  |  
|Expected return on plan assets         |  |                         | (1,160 | )
|Net amortization and deferral          |  |                         | 314    |  
|                                       |  |                         |        |  
|Net periodic benefit cost  U.S. plans |  | €                       | 1,350  |  
|                                       |  |                         |        |  

OBLIGATIONS AND FUNDED STATUS

Changes in the funded status of the benefit plan were as follows:

|(in thousands)                                 |  | Year ended December 31, |        |  
|---------------------------------------------- |  | ----------------------- | ------ | -
|
|Change in benefit obligations                  |  |                         |        |  
|Benefit obligations at beginning of year       |  | €                       | 18,717 |  
|Service cost                                   |  |                         | 1,169  |  
|Interest cost                                  |  |                         | 1,027  |  
|Actuarial loss                                 |  |                         | (1,143 | )
|Benefits paid                                  |  |                         | (302   | )
|Exchange rate differences                      |  |                         | (1,905 | )
|                                               |  |                         |        |  
|Benefit obligations at end of year             |  | €                       | 17,563 |  
|                                               |  |                         |        |  
|Change in plan assets                          |  |                         |        |  
|Fair value of plan assets at beginning of year |  |                         | 13,901 |  
|Employer contribution                          |  |                         | 1,640  |  
|Actual return on plan assets                   |  |                         | 1,155  |  
|Benefits paid                                  |  |                         | (302   | )
|Exchange rate differences                      |  |                         | (1,566 | )
|                                               |  |                         |        |  
|Fair value of plan assets at end of year       |  | €                       | 14,828 |  
|                                               |  |                         |        |  
|Funded status                                  |  |                         | (2,735 | )
|Unrecognized actuarial loss                    |  |                         |        |  
|Unrecognized prior service cost                |  |                         |        |  
|                                               |  |                         |        |  
|Prepaid (Accrued) benefit cost  U.S. Plans    |  |                         |        |  
|                                               |  |                         |        |  

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PLAN ASSETS

The weighted average asset allocations, by asset category, are as follows:

|(in thousands)    |  | Year ended December 31, | 
|----------------- |  | ----------------------- | 
|
|Equity securities |  | 52%                     | 
|Debt securities   |  | 44%                     | 
|Other             |  | 4%                      | 
|                  |  |                         | 
|Total             |  | 100%                    | 
|                  |  |                         | 

CASH FLOWS

The Company expects to contribute €2.2 million to its U.S. pension plans in 2007. The following benefit payments, which reflect
expected future service, as appropriate, are expected to be paid:

|(in thousands) |  |   |      
|-------------- |  | - | -----
|
|2007           |  | € | 319  
|2008           |  |   | 336  
|2009           |  |   | 383  
|2010           |  |   | 427  
|2011           |  |   | 479  
|2012-2016      |  |   | 3,893

Note 17. Segment and Geographic Information

Operating segments are components of the Company for which discrete financial information is available and whose operating results are regularly reviewed by
management to assess performance and allocate resources. The Company operates in two reportable segments: the "Process-Centric" segment and the "Design-centric" segment. The "Process-centric" market
serves customers seeking to optimize their industrial processes from the design stage through to manufacturing and maintenance. The "Design-centric" market serves companies seeking to support product
design. The accounting policies of the reportable segments are the same as those described in Note 1. Description of Business and Summary of Significant Accounting Policies.

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Data
by reportable segment is as follows:

|                                                                             |  | 2006 |           |  
|---------------------------------------------------------------------------- |  | ---- | --------- | -
|
|Revenue:                                                                     |  |      |           |  
|Software revenue                                                             |  | €    | 748,756   |  
|Services and other revenue                                                   |  |      | 198,384   |  
|                                                                             |  |      |           |  
|Total revenue                                                                |  |      | 947,140   |  
|                                                                             |  |      |           |  
|Operating income                                                             |  |      | 176,491   |  
|Income tax expense                                                           |  |      | (46,402   | )
|Depreciation of property and equipment and amortization of intangible assets |  |      | 54,055    |  
|Non-cash stock-based compensation                                            |  |      | 11,621    |  
|Total assets                                                                 |  |      | 1,533,168 |  
|Liabilities                                                                  |  |      | 596,812   |  
|Acquisitions of property and equipment and intangible assets                 |  |      | 18,501    |  
|Goodwill                                                                     |  |      | 385,271   |  

|                                                                             |  | 2005 |           |  
|---------------------------------------------------------------------------- |  | ---- | --------- | -
|
|Revenue:                                                                     |  |      |           |  
|Software revenue                                                             |  | €    | 602,845   |  
|Services and other revenue                                                   |  |      | 152,904   |  
|                                                                             |  |      |           |  
|Total revenue                                                                |  |      | 755,749   |  
|                                                                             |  |      |           |  
|Operating income                                                             |  |      | 187,645   |  
|Income tax expense                                                           |  |      | (69,070   | )
|Depreciation of property and equipment and amortization of intangible assets |  |      | 24,635    |  
|Total assets                                                                 |  |      | 1,162,648 |  
|Liabilities                                                                  |  |      | 299,237   |  
|Acquisitions of property and equipment and intangible assets                 |  |      | 32,387    |  
|Goodwill                                                                     |  |      | 282,343   |  

|                                                                             |  | 2004 |         |  
|---------------------------------------------------------------------------- |  | ---- | ------- | -
|
|Revenue:                                                                     |  |      |         |  
|Software revenue                                                             |  | €    | 525,079 |  
|Services and other revenue                                                   |  |      | 127,030 |  
|                                                                             |  |      |         |  
|Total revenue                                                                |  |      | 652,109 |  
|                                                                             |  |      |         |  
|Operating income                                                             |  |      | 182,673 |  
|Income tax expense                                                           |  |      | (62,733 | )
|Depreciation of property and equipment and amortization of intangible assets |  |      | 14,473  |  
|Total assets                                                                 |  |      | 875,334 |  
|Liabilities                                                                  |  |      | 248,646 |  
|Acquisitions of property and equipment and intangible assets                 |  |      | 23,029  |  
|Goodwill                                                                     |  |      | 70,388  |  

F-36DASSAULT
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The data by geographic operations of the Company is established according to the geographical location of the consolidated companies.

|(in thousands)                                               | France |         | North America |   | Other     |  | Total |        
|------------------------------------------------------------ | ------ | ------- | ------------- | - | --------- |  | ----- | -------
|2006                                                         |        |         |               |   |           |  |       |        
|Revenue                                                      | €      | 512,305 |               | € | 564,206   |  | €     | 81,287 
|Long lived assets                                            |        | 75,264  |               |   | 747,788   |  |       | 74,876 
|Total assets                                                 |        | 446,774 |               |   | 1,280,288 |  |       | 128,977
|Acquisitions of property and equipment and intangible assets |        | 8,520   |               |   | 15,799    |  |       | 1,532  
|2005                                                         |        |         |               |   |           |  |       |        
|Revenue                                                      | €      | 490,102 |               | € | 379,918   |  | €     | 67,493 
|Long lived assets                                            |        | 83,159  |               |   | 475,401   |  |       | 68,059 
|Total assets                                                 |        | 449,696 |               |   | 852,014   |  |       | 111,607
|Acquisitions of property and equipment and intangible assets |        | 23,936  |               |   | 15,917    |  |       | 3,337  
|2004                                                         |        |         |               |   |           |  |       |        
|Revenue                                                      | €      | 466,961 |               | € | 293,826   |  | €     | 35,765 
|Long lived assets                                            |        | 54,316  |               |   | 69,475    |  |       | 37,150 
|Total assets                                                 |        | 608,230 |               |   | 427,551   |  |       | 63,370 
|Acquisitions of property and equipment and intangible assets |        | 12,955  |               |   | 11,582    |  |       | 2,267  

The Company also receives data from IBM that identifies the location of IBM's end-user customers. Using such information,
revenue  including revenue not derived from IBM  by geographic area would be as follows:

|(in thousands)                     |  | 2006 |           | 2005 |   | 2004    | 
|---------------------------------- |  | ---- | --------- | ---- | - | ------- | 
|France                             |  | €    | 165,212   |      | € | 120,392 | 
|Western Europe  other than France |  |      | 376,658   |      |   | 317,790 | 
|Americas                           |  |      | 356,028   |      |   | 283,047 | 
|Asia/Pacific                       |  |      | 259,900   |      |   | 213,284 | 
|                                   |  |      |           |      |   |         | 
|                                   |  | €    | 1,157,798 |      | € | 934,513 | 
|                                   |  |      |           |      |   |         | 

DASSAULT SYSTÈMESForm 20-F
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Note 18. Principal Dassault Systèmes Companies

The principal Dassault Systèmes' companies included in the scope of consolidation as at December 31, 2006 are as follows:

|Country        |  | Consolidated companies                                      |  | % of voting rights |  | % of share-holding |  | 
|-------------- |  | ----------------------------------------------------------- |  | ------------------ |  | ------------------ |  | 
|United States  |  | Abaqus Inc. and its subsidiaries                            |  | 100%               |  | 100%               |  | 
|France         |  | Athys SAS                                                   |  | 100%               |  | 100%               |  | 
|France         |  | Dassault Data Services SA                                   |  | 95%                |  | 95%                |  | 
|Germany        |  | Dassault Systèmes AG                                        |  | 100%               |  | 100%               |  | 
|United States  |  | Dassault Systèmes Americas Corporation and its subsidiaries |  | 100%               |  | 100%               |  | 
|Canada         |  | Dassault Systèmes Canada Inc.                               |  | 100%               |  | 100%               |  | 
|United States  |  | Dassault Systèmes Corporation                               |  | 100%               |  | 100%               |  | 
|United States  |  | Dassault Systèmes Holding Llc                               |  | 100%               |  | 100%               |  | 
|Canada         |  | Dassault Systèmes Inc.                                      |  | 100%               |  | 100%               |  | 
|Japan          |  | Dassault Systèmes Kabushiki Kaisha and its subsidiaries     |  | 100%               |  | 100%               |  | 
|United Kingdom |  | Dassault Systèmes Ltd.                                      |  | 100%               |  | 100%               |  | 
|France         |  | Dassault Systèmes Provence                                  |  | 100%               |  | 100%               |  | 
|Russia         |  | Dassault Systèmes Russia Corporation                        |  | 100%               |  | 100%               |  | 
|France         |  | Dassault Systèmes SAS                                       |  | 100%               |  | 100%               |  | 
|Canada         |  | Dassault Systèmes Services Llc                              |  | 100%               |  | 100%               |  | 
|Italy          |  | Dassault Systèmes Srl                                       |  | 100%               |  | 100%               |  | 
|Switzerland    |  | Dassault Systèmes Switzerland Ltd.                          |  | 98%                |  | 98%                |  | 
|United States  |  | Delmia Corporation and its subsidiaries                     |  | 100%               |  | 100%               |  | 
|Germany        |  | Delmia GmbH                                                 |  | 100%               |  | 100%               |  | 
|Sweden         |  | Dynasim AB                                                  |  | 100%               |  | 100%               |  | 
|United States  |  | MatrixOne Inc. and its subsidiaries                         |  | 100%               |  | 100%               |  | 
|United States  |  | Rand North America Corp.                                    |  | 70%                |  | 70%                |  | 
|Canada         |  | Safework Inc.                                               |  | 100%               |  | 100%               |  | 
|Israel         |  | SmarTeam Corporation Ltd and its subsidiaries               |  | 100%               |  | 100%               |  | 
|United States  |  | SolidWorks Corporation and its subsidiaries                 |  | 100%               |  | 100%               |  | 
|United States  |  | Spatial Corporation and its subsidiaries                    |  | 100%               |  | 100%               |  | 
|United States  |  | Structural Research and Analysis Corporation                |  | 100%               |  | 100%               |  | 
|Germany        |  | TransCAT Verwaltungs GmbH                                   |  | 100%               |  | 100%               |  | 
|Germany        |  | TransCAT Kunststofftechnik GmbH                             |  | 60%                |  | 60%                |  | 
|Sweden         |  | TransCAT PLM AB                                             |  | 100%               |  | 100%               |  | 
|Switzerland    |  | TransCAT PLM AG                                             |  | 100%               |  | 100%               |  | 
|Germany        |  | TransCAT PLM GmbH & Co.KG                                   |  | 100%               |  | 100%               |  | 
|United Kingdom |  | TransCAT PLM Ltd.                                           |  | 100%               |  | 100%               |  | 
|France         |  | Virtools SA and its subsidiary                              |  | 100%               |  | 100%               |  | 
|India          |  | 3DPLM Software Solutions Ltd.                               |  | 30%                |  | 30% (1)            |  | 

Note 19. Subsequent Events

In April 2007, the Company announced an agreement pursuant to which Dassault Systèmes would acquire ICEM, a provider of styling,
high-quality surface modeling and rendering solutions, for an estimated price of €51.4 million, to be paid in cash. The transaction is expected to be completed in
June 2007 subject to specific closing conditions.

F-38DASSAULT
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