RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 2

Annual Report 1999 RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 3

Contents

Message from the Chairman of the Supervisory Board 2 Message from the Chairman of the Management Board 4 Strategy/Management 6 Corporate Governance 8 Financial and Operating Highlights 10 The Aerospatiale Matra Group 12 1999 Highlights 14 Share performance 16

Aircraft 18 Airbus 20 Other Aviation Operations 22 Helicopters 24 Space 26 Missile Systems 30 Systems, Services and Telecoms 34

Research & Development 38 Human Resources 40 Financial Policy 42 Offices and Facilities 44 RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 1

Aerospatiale Matra is a world-class aerospace and defense enterprise. Strategic vision and innovation are the cornerstones of our corporate philosophy. Aerospatiale Matra has always excelled in creating new concepts and products. As the driving force behind alliances with other majors, Aerospatiale Matra has initiated some of Europe's most striking successes: Airbus, Arianespace, Euromissile, Astrium in the space sector and New MBD in the missile sector.

Sales 84.6 billion francs 12.9 billion euros

Order book 251.9 billion francs 38.4 billion euros

Operating income 3.15 billion francs 0.48 billion euros

Workforce 52,387

Breakdown of 1999 sales

72.8% Aircraft 11.5% Space 9.0% Missile Systems 6.7% Systems, Services and Telecoms RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 2

Message from the Chairman of the Supervisory Board RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 3

Jean-Luc Lagardère Chairman of the Supervisory Board

Your company was created on June 11, 1999 and Aerospatiale Matra has been listed on the Paris Bourse since June 4. Less than a year has passed since then, and this period has been particularly rich in events that bode well for our future. When we created the Aerospatiale Matra Group in June, we clearly indicated that it signaled a start to the restructuring of the European aerospace and defense industry – a development in which we were determined to take the 2 leading role. European consolidation is a reality and I have always believed that 3 it is up to businesses to lead the way rather than follow in the path of others. Our teams worked exceptionally hard to ensure the success of the merger. The excellent results we achieved in 1999 stand as a testimony to their efforts. The corporate cultures of Aerospatiale and Matra Hautes Technologies turned out to be extremely close. The Aerospatiale Matra share was added to the CAC 40 stock market index on November 5. This reflects the importance of the enterprise and is a key fac- tor both in its valuation and the share’s liquidity. We are committed to meeting three strategic objectives: • First, we must continue to consolidate our leadership positions, as in 1999. In the key commercial jetliner market, we have now attained parity with our main competitor. • Next, we must improve our profitability. We have already implemented several major action plans to achieve our goal of doubling operating margins by 2003. • And we must be a pivotal player in the ongoing consolidation of our industry. On October 14, 1999 in Strasbourg and on December 2 in Madrid we formalized our relationship with our German and Spanish partners to create EADS, the European Aeronautic, Space and Defense Company. This historic development is much more than a symbol. As you all know, it was front page news around the world. The merg- er is the logical conclusion of over thirty years of partnership and also set the stage for the agreement with Finmeccanica, signed on April 14, 2000. EADS will be one of three global leaders in the aerospace and defense industry and will take a premier position in all its markets. I look forward to the future with great confidence, and with rock-solid faith in the abilities of our people and our extensive technological expertise.

Jean-Luc Lagardère RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 4

Message from the Chairman of the Management Board RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 5

Philippe Camus Chairman of the Management Board

Nineteen-ninety nine was a watershed year in the history of both Aerospatiale Matra and the aerospace and defense industry as a whole. Our company was created in June 1999 and I would like to take this opportunity to review the three commitments I made on the occasion of the merger between Aerospatiale and Matra Hautes Technologies: • Make a success of the merger. 4 • Improve the profitability of the new enterprise. 5 • Put the new group at the heart of the European aerospace and defense industry consolidation, critical to its survival in a hotly contested global market. Our excellent performance in 1999 and the first few months of 2000 is a clear indication that these commitments have been honored. The reorganization of Aerospatiale Matra was achieved in record time and has proved a great success. I am particularly pleased with the rate of progress on 17 consolidation initiatives, started last summer, and found this a particularly eloquent testimony to the truly dynamic spirit of the enterprise. Our 1999 results and long-term outlook demonstrate that we are well on the way to achieving our goal of significantly improving our profitability. As for our third goal, it is clear that the agreements reached for European consolidation of the satellite and missile sectors — and in particular the agreement between Aerospatiale Matra, DaimlerChrysler Aerospace and CASA leading to the creation of EADS — have put Aerospatiale Matra at the core of European industry restructuring. The enterprise has reenergized the sector and created the conditions for the success of European aerospace and defense consolidation. We intend to maintain this dynamic spirit, since 2000 will undoubtedly be a year of major decisions that will shape the future of the enterprise and enable us to continue our development. Philippe Camus RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 6

Strategy Management RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:08 Page 7

A significant breakthrough. The creation of EADS constitutes a major step forward in Aerospatiale Matra's strategy. Large-scale cross-border consol- idation, Europe’s objective for many years to reduce overcapacity, has finally been achieved. Rupture and continuity. The creation of EADS re- presents both rupture and continuity: • Rupture in that EADS is the first genuinely large-scale cross-border merger in the aerospace and defense industry; • Continuity, because the creation of EADS to achieve the Group's near-term strategic goals: cements the alliance of three partners who have • Create value for our shareholders by increasing worked together for over thirty years across most profit margins. of their businesses, patiently building up a power- • Ensure the rapid consolidation of all our business ful pan-European aerospace and defense industry. lines and disciplines into single high-performance 6 7 Economic efficiency. The creation of EADS will entities. above all generate economic benefits. The merg- • Strengthen Airbus business through the cre- er of these major aerospace companies will gen- ation of the Airbus Integrated Company (AIC), erate synergies in a number of areas, notably by consolidating EADS and BAE Systems’ Airbus procurement, R&D, international sales and pro- operations in an independent company offering duction. superior profitability, efficiency and responsiveness. • Strengthen EADS's position in the military air- At an operational level, as a majority shareholder craft segment, based on the agreement with in a number of joint ventures, EADS will also be in Finmeccanica. a position to boost their efficiency and profitabil- • Develop our portfolio of defense systems and ity through rationalization and restructuring. consolidate the European missile sector around MBD, one of the world’s top two companies in this Opening up to the world. However, EADS should segment. in no way be seen as the embodiment of a Consolidate the European space industry "Fortress Europe" mentality. The new Group will • through the creation of Astrium, which will be maintain close relations with BAE Systems, its key expanded to include Finmeccanica and other partner in a number of programs, as well as with European and U.S. partners, and by reorganizing Thomson-CSF and Finmeccanica. In addition, devel- the launcher business around Ariane. oping transatlantic partnerships remains a prime Forge partnerships in the United States, meet- strategic goal for EADS in the years to come. • ing the common aspirations of all governments Future developments. The creation of EADS last and manufacturers concerned, building on promis- year marked a watershed in Aerospatiale Matra's ing contacts such as those with Lockheed Martin. strategy. In 2000, new initiatives will be launched RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 8

Corporate governance Supervisory Board Executive Committee

Jean-Luc Lagardère - Chairman 1 Philippe Camus General Managing Partner, Lagardère SCA Chairman of the Management Board, Chief Executive Officer Chairman of the Board of Directors of Lagardère SCA 2 François Auque Philippe Pontet - Deputy Chairman Member of the Management Board Chairman of the Board of Directors of Sogepa Chief Financial Officer Group Managing Director, Satellites Bernard Attali Vice President, European Investment Banking, Deutsche Bank 3 Jean-François Bigay Philippe Coq Member of the Management Board Assistant Director, Aircraft, Missiles and Space Group Managing Director, Aircraft Cooperation and International Affairs Division Joël Danto 4 Jean-Paul Gut Head of University/Industry Relations, Aerospatiale Matra Airbus Group Managing Director, Defense and Space Transport Didier Dernoncourt Chairman, Aerospatiale Matra Lagardère International Purchasing, Logistics and Sales & Marketing Department Manager, Aerospatiale Matra Airbus 5 Jean-Louis Gergorin Dominique D'Hinnin Group Managing Director, Strategic Coordination Chief Financial Officer, Lagardère SCA Pierre Graff 6 Denis Verret Director General of Civil Aviation Group Managing Director, Business Development Nicolas Jachiet 7 René Chabod Equity Investments Department Manager, Treasury Division Corporate Executive Vice President, Human Resources Daniel Jalouzet Head of Internal Communications, Matra BAe Dynamics 8 Jean-Marie Mir Arnaud Lagardère Corporate Secretary Senior Vice President and Chief Operating Officer of Arjil, Managing Partner of ARCO 9 Pierre Bayle Raymond H. Lévy Corporate Vice President, Communications and External Relations Chairman of the Supervisory Board of Lagardère SCA François Roussely 10 Marwan Lahoud Chairman of EDF Co-Group Managing Director, Defense and Space Transport Philippe Rouvillois Chief Tax Inspector 11 Jean Barrio Christian Saulnier Co-Group Managing Director, Strategic Coordination Foreman Aerospatiale Matra Airbus 12 Frédéric d’Allest Jean-Yves Helmer Special Advisor to the Management Board for Space Representing the State’s golden share Joseph Mailloux Government Commissioner, Controller Philippe Simon Secretary of the Board RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 9

Corporate Governance

Company Management Beyond legal obligations, shareholders demonstrated their commitment to establishing statutory principles of opera- The overall governance of Aerospatiale Matra is based on a dual tion for the Management and the Supervisory Boards. system which separates management and supervision. The Management Board comprises three members, including the The Management Board must request the opinion of the Chairman. It is responsible for the management and admini- Supervisory Board on certain operations which modify the stration of company affairs. The Supervisory Board, appointed share capital, impact on the Group's strategy, change the by the General Meeting of Shareholders, supervises the actions Group's financial structure or its scope of activity, or concern of the Management Board. No member of the Management industrial or financial strategic alliance or cooperation agree- Board may be a member of the Supervisory Board. ments. This supervision is notably based on a report on company operations by the Management Board, which is presented to the Supervisory Board at least quarterly. In addition, the Supervisory Board has created three Commissions: Each year, the Supervisory Board presents to the General Meeting of Shareholders a review of the Management Board • The International Strategy Commission studies the report and the financial statements. Group's international environment and analyzes the projects developed by the enterprise. This Commission meets at least The Supervisory Board comprises: twice a year. Chaired by Jean-Luc Lagardère, it also includes • Four members representing the French State as share- Philippe Coq, Arnaud Lagardère and François Roussely. It holder. reports to the Supervisory Board. • Two members representing the public sector. • Four members appointed by the General Meeting of Shareholders on the recommendation of Lagardère SCA, the • The Remuneration Commission makes recommendations core private shareholder. to the Supervisory Board concerning the remuneration of • An independent member, appointed by the shareholders and members of the Management and Supervisory Boards. It also exercising no management responsibilities in any Group com- issues recommendations on remuneration policies across the pany, nor representing any major shareholder in or a significant Group. It meets regularly under the chairmanship of Jean-Luc or regular manufacturing, commercial or financial partner of the Lagardère. The other members of this commission are Bernard 8 Group. Attali, Nicolas Jachiet, Raymond H. Lévy and Philippe Rouvillois. 9 In addition, in accordance with the provisions of French Law 86-912 of August 6, 1986, three members are elected to the • The Accounts and Audit Commission comprises Philippe Supervisory Board by all Group employees and another mem- Pontet (Chairman), Dominique D'Hinnin, Pierre Graff, Nicolas ber is elected by employee shareholders, designated by the Jachiet and Raymond H. Lévy. The Commission examines: General Meeting of Shareholders from a list of candidates elected by shareholder employees. annual and half-year accounts• annual budgets• Group accounting principles and methods• auditors’ schedules A representative of the French state, because of the golden • the Group's internal audit program• reports of the external share, and a State Controller also attend Board sessions. and internal auditors and the Group's action programs. Listed in the financial section are the responsibilities and terms of each member of the Management and Supervisory Boards, along with their age and the number of shares they hold in the company.

8 4

5 11 7 9 2 1 6 3 * Not pictured: Marwan Lahoud (10) and Frédéric d’Allest (12). RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 10

Financial and Operating Highlights

Sales (millions) 1998 1999 Francs Euros Francs Euros Airbus 28,626 4,364 35,887 5,471 Other aviation operations 5,084 775 5,581 851 Dassault Aviation (45.76%) 9,217 1,405 8,648 1,318 Eurocopter 11,139 1,698 11,500 1,753 Space 9,910 1,511 9,719 1,482 Missile Systems 10,931 1,666 7,567 1,154 Systems, Services and Telecommunications 5,651 862 5,643 860 Other 76 12 63 10 Total 80,634 12,293 84,608 12,899

Orders (millions) 1998 1999 Francs Euros Francs Euros Airbus 54,818 8,357 36,943 5,632 Other aviation operations 4,428 675 6,452 984 Dassault Aviation (45.76%) 15,087 2,300 10,233 1,560 Eurocopter 12,201 1,860 20,761 3,165 Space 12,719 1,939 8,999 1,372 Missile Systems 15,212 2,319 12,412 1,892 Systems, Services and Telecommunications 3,437 524 5,635 859 Total 117,902 17,974 101,435 15,464 RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 11

Sales Operating income millions of euros millions of euros

Airbus Other aviation operations Dassault Aviation**

Eurocopter 12,293 12,899

Space 494 Missile Systems 480 second half-year Systems, Services 1998* 1999 and Telecommunications Other 274 351 1998* 1999 1998* 1999

Orders Operating margin millions of euros (%) Airbus Other aviation operations 17,974 4 Dassault Aviation** 15,464 3.7

Eurocopter

Space second half-year Missile Systems 1998* 1999 Systems, Services and Telecommunications 4.1 4.9 10 1998* 1999 1998* 1999 11

Civil/Military share of sales Sales by geographic area (%) (%) South Africa/ Europe America Middle East

76 24 59 21 3 9 8 Civil Militairy North Asia/ America Pacific

Internally-financed* R&D to sales ratio (%)

6 6

* IAS

1998* 1999

Net cash (debt) position Net income, excluding minority interests millions of euros millions of euros

673

436 30

1998* 1999 1998* 1999 (28) * 1998 data: pro forma. ** Aerospatiale Matra holds a 45.76% equity stake in Dassault Aviation. RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 12

The Aerospatiale Matra Group RA 99 - COUV à P.13 - ANGLAIS 26/07/00 12:09 Page 13 Group

The Aerospatiale Matra Group is organized into four core businesses

AEROSPATIALE MATRA at December 31, 1999

SYSTEMS, SERVICES AIRCRAFT DEFENSE AND SATELLITES AND SPACE TRANSPORT TELECOMMUNICATIONS

AEROSPATIALE AEROSPATIALE MATRA AEROSPATIALE MATRA LANCEURS MATRA SYSTEMES MATRA MATRA MARCONI SPACE AIRBUS STRATEGIQUES ET INFORMATION MISSILES SPATIAUX

EUROSAM AIRBUS INDUSTRIE GIE ARIANESPACE MCN SAT EUROMISSILE STARSEM

AEROSPATIALE MATRA CELERG MATRA DATAVISION ATR 12 13

MATRA BAe MATRA NORTEL ATR GIE DYNAMICS COMMUNICATIONS

MATRA DASSAULT EUROCOPTER DEFENSE AVIATION

SOGERMA

SOCATA

Aerospatiale Matra: unrivaled expertise and a pivotal European partnership

The Aerospatiale Matra Group boasts a unique medley To facilitate the necessary consolidation of the French and of competencies encompassing the design, development European aerospace and defense industries in 1999, and integration of complex aerospace systems. For over Aerospatiale Matra reorganized its operations into subsidiaries 30 years, it has been an integral part of strategic European based on core businesses. alliances.

The Group will pursue its development in 2000:

Creation of New MBD Creation of Astrium Merger with in the Missile sector in the Space sector DASA and CASA to create EADS RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 14

1999 Highlights

At the 1999 Paris Air Show Aerospatiale Matra is born

CASA joins EADS on December 2, 1999 A340-600

Successful merger and privati- On October 18, the Astrium agree- zation ment was signed by Aerospatiale Matra, On January 13, the French govern- DaimlerChrysler Aerospace and ment issued a decree providing for Marconi Electronic Systems. On the privatization of Aerospatiale. October 20, a strategic agreement On January 15, the French State and was signed by Aerospatiale Matra, Lagardère SCA signed an agreement BAE Systems and Finmeccanica for defining the procedures for the merg- the creation of an integrated oper- er of Aerospatiale and Matra Hautes ating company for missiles and missile Technologies. systems. On June 4, Aerospatiale Matra was Development of transatlantic listed for the first time on the alliances Premier Marché, the Paris Bourse's During the Paris Air Show, two monthly settlement market. June 11 Aerospatiale Matra/Lockheed Martin saw the official birth of the new agreements were signed. On Aerospatiale Matra Group. The offi- October 25, Aerospatiale Matra, cial opening of the Paris Air Show Dassault Aviation, Snecma and took place on the following day, with Thomson-CSF signed an agreement the new group making its first with Embraer to take a 20-percent appearance as a united entity. On equity stake in the Brazilian company. November 18, the first General Meeting of Shareholders took place. First year of existence features By the end of the year, most inte- major successes gration steps had been completed to Aerospatiale Matra booked 15.5 bil- ensure a successful merger in record lion euros worth of orders in 1999, time. an excellent level after the record year of 1998. Exports accounted for European aerospace and 71 percent of the total. defense industry integration Excellent order intake (20 percent accelerates above sales) bolstered the order On October 14, Aerospatiale Matra book, which reached 38.4 billion and DASA announced in Strasbourg euros at December 31, 1999, equal the merger of their aerospace and to three years of business. defense businesses within a new group dubbed EADS. They are joined by CASA of Spain on December 2. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 15

Meteor Ariane 5 Helios Tiger Aircraft • Dassault: 48 Rafale fighters ond Nilesat satellite for Egypt (March • Airbus leads market in 1999 ordered 1999). Airbus is going from success to suc- Despite the transitional phase experi- Military communications: design stud- cess, as it moved ahead of its direct enced in the defense market (with a ies for the British MoD on the new- generation Skynet 5 satellite system. competitor in 1999 with 55 percent major export contract being complet- of orders for commercial jetliners over ed in 1998), Dassault maintained good Science: contract with the European 100 seats. In 1999, Airbus delivered business levels, with 1.6 billion euros Space Agency (ESA) for Mars Express, worth of orders in 1999. This was Europe's first Mars exploration vehicle. 294 aircraft, a 28-percent increase on largely thanks to excellent performance the previous record year. Firm orders Weather forecasting: Metop contract in the civil market (Falcon business jets (three satellites). were booked for 476 aircraft, including in particular) and the French govern- 120 for the new A318, which was ment order for 48 Rafale fighters, of Missiles: a record order book, launched in April and has proved an which 28 were firm orders. equal to 5 years of business instant hit with airlines. The order At year-end 1999, orders stood at 1.9 book continues to grow, reaching Space 14 billion euros. Business wins included the 15 1,445 aircraft by December 31, 1999 Orders worth 1.4 billion euros were Principal Anti-Air Missile System – fully half of the global market. booked, with a little over 60 percent (PAAMS) contract for around 1.1 billion in export markets. euros, announced on August 11 by the • Special-mission aircraft British MoD, and covering the needs of January 1999 saw the creation of the • Ariane and Starsem launchers: the United Kingdom, France and Italy. Airbus Military Company and the success in a difficult market Following France and Germany, the submission of their proposal for Highlights of the year included the British gave the green light in June for the FLA/A400M military transport remarkable achievements of both the European antitank missile program, to the seven countries concerned. Ariane 4, with 53 successful consecu- Trigat. In October, the Italian govern- tive launches by the end of the year, ment signed a major contract with • ATR: a promising year and Ariane 5, with its first commer- Matra BAe Dynamics to equip the cial flight on December 10, carrying Eurofighter and Tornado fighter aircraft Objectives were met with the deliv- the XMM scientific satellite. with Storm Shadow cruise missiles. ery of 35 aircraft and 30 orders. A Ariane feted its 20th anniversary in On October 20, Aerospatiale Matra, commercial agreement with Embraer December and retains its leadership in British Aerospace and Finmeccanica opens up new business opportunities. the commercial satellite launch market. signed an agreement to create a sin- In the same month, Arianespace award- gle missile company. • Eurocopter, the global leader ed a contract for 20 Ariane 5 launchers. with rising market share This new entity will be the leading Starsem, in which the Group holds a European and second-largest global Helicopter order intake reached an 35-percent equity stake, clocked up manufacturer of tactical missile systems. excellent 3.2 billion euros — 65 per- six successful launches in 1999 for the cent in export markets — compared Globalstar constellation. Systems, Services and with 1.9 billion euros in 1998. The first Telecoms: at the heart of flight demonstration of the EC 155 • Matra Marconi Space: Astrium tomorrow's technologies launched took place at the 1999 Paris Air Show. September 1 saw the creation of a France and Germany placed a first Nineteen-ninety-nine was a pivotal year new business unit, dubbed Systems, order for two lots of 80 Tigers. A total in the restructuring of the European Services and Telecommunications. Its of 382 helicopters were ordered during space industry, with the agreement to new organization was finalized in the year, and Eurocopter delivered 241 create the integrated space company December, based on the creation of aircraft, including the 100th EC 135, Astrium signed on October 18. Major an Integrated Systems Division and the the 500th Super Puma and the very contracts in 1999 underline the key grouping of all telecoms and Internet first EC 155, the most recent mem- role played by MMS in all space seg- subsidiaries with strong growth poten- ber of the Dauphin family. This impres- ments: tial. Highlights this past year included sive performance demonstrates that Earth observation: contract for the a business recovery in the telecoms Eurocopter's product line perfectly Helios 2 ground user segment. segment and implementation of matches the needs of its customers. Commercial telecommunications: sec- civil/military synergies. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 16

Aerospatiale Matra share performance

Shareholding structure

48% French State 33% Lagardère 17% Public 2% Employees

Stock Exchange Monthly Settlement

SICOVAM code 18379

Number of shares 403,687,775

Capitalization at December 31, 1999 8.6 billion euros RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 17

Investor relations The Investor Relations and Financial Communications Division was created in mid-1999 to provide information to retail and institutional investors, current and former employees, or sim- Share performance outpaces competitors ply anyone who has a passion for air and space. The privatization of Aerospatiale Matra was a huge success: the share offering was seven times oversubscribed Led by Marc Paganini, its mission is to listen to you among retail investors and more than 35 times and discover your needs in order to better respond oversubscribed by institutional investors. Privatization and to your questions. listing on the Paris Bourse also met with success among To keep you up to date on all Group developments, Group employees – over 82 percent now own shares in the division has developed a range of communica- the enterprise. tions resources, including newsletters and regular Since June 4, 1999, the Aerospatiale Matra share has been publications in the financial press. It has also listed on the Premier Marché, the monthly settlement launched a program of roadshows for sharehold- market of the Paris Bourse. The share was added to the ers in several French cities. CAC 40 stock market index on November 5, 1999. A financial information section has also been added At December 31, 1999, the share closed at 21.33 euros, up to the Group's corporate website 11 percent on its IPO level of 19.20 euros. This increase is (www.aeromatra.com). less than the average increase registered by CAC 40 companies (up 36 percent). However, the CAC 40 index 16 For more specific questions please don't hesitate was bolstered by strong growth in telecoms, media and 17 to contact us: Internet shares in the last two months of 1999. French Hotline: 0 800 01 2001 Aerospatiale Matra is on the other hand one of the top Email: [email protected] performers in its market. Over the same period, Thomson progressed by only 5 percent, and all other international aerospace and defense companies were significantly down: BAE Systems (down 1 percent), Boeing (down 6 percent) and above all Lockheed Martin (down 50 percent). For 2000, most analysts issued a buy recommendation, based on the enterprise's key strengths: Large order backlog at year-end, equal to three years of business• The commercial success of Airbus, which now boasts an order book equal to that of its direct competitor• The success and speed of the merger between Aerospatiale and Matra• Significant synergies generated through the merger of Aerospatiale Matra, DASA and CASA Share performance in EADS, and its strong positions in all markets.

140

130 CAC 40

120 Aerospatiale Matra 110

Index 100

90

80 Sector Index* 70

60 June 1999 July 1999 August 1999 September 1999 October 1999 November 1999 December 1999

* BAe, Boeing, Lockheed RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 18

476 294 1,445 30 48 9.5 Airbus Airbus Airbus ATR Rafale billion euros aircraft ordered aircraft delivered aircraft in order book aircraft ordered aircraft ordered in sales benchmarks

Aircraft The sustained growth of Aerospatiale Matra's Airbus aircraft business was confirmed in 1999. ATR With 476 firm orders, Airbus pulled ahead of Eurocopter its direct competitor. Dassault Aviation

Eurocopter retained its status as the world's Socata leading helicopter maker and won a first order Sogerma for 160 Tiger combat helicopters from France and Germany, worth over 3 billion euros. Other aircraft subsidiaries — ATR, Socata, Sogerma — improved their earnings and made significant progress in their markets.

Thanks to its complete offering of high-tech products that perfectly match market require- ments, Aerospatiale Matra enjoys a global rep- utation as a benchmark company in all aircraft segments. 58% Airbus 19% Helicopters 14% Dassault Aviation (45.76% interest) 9% Other aviation operations RA99 - P14 à 25 - ANGLAIS 26/07/00 12:14 Page 19

18 19

EC 155 AIRBUS RAFALE

A complete lineup of aircraft RA99 - P14 à 25 - ANGLAIS 26/07/00 12:15 Page 20

Aircraft

Airbus

Favorable market and airline traffic underscoring their growing importance in air growth transport and their confidence in medium-term The global economy is marked by renewed demand. Representing 26 and 12 percent of total confidence in growth. After a flattening off in orders booked, respectively, American and 1998 (+ 2.1 percent) due to the Asian crisis, European airlines continue to modernize their global GDP growth reached 2.8 percent in 1999 aging fleets. The Asian market (7 percent of and should exceed 3 percent in 2000. orders) also seems to be improving despite After bottoming out at only 2 to 3 percent continuing cancellations by airlines still on the growth in 1998 following the Asian crisis, road to recovery. global passenger traffic (outside the CIS) has Airbus: best seller in 1999 returned to annual growth of 5 to 5.5 percent. Aerospatiale Matra holds a 37.9-percent stake Asian airline traffic swung back to growth of in the Airbus Industrie consortium, equal to the 9 percent (following a one-percent decline in stake of DaimlerChrysler Aerospace of Germany. 1998), while the major American carriers con- The other partners are BAE Systems (20 per- tinued to progress, posting traffic growth of cent) of the United Kingdom and CASA (4.2 per- 2.3 percent in 1998 and 4.5 percent in 1999. cent) of Spain. European airlines performed even better, with Aerospatiale Matra's broad-based technologi- traffic growth of 7.5 percent. This growth was cal and industrial expertise, pooled within its supported by a sustained 71-percent passenger subsidiary Aerospatiale Matra Airbus, make up load factor. the core of the Airbus system. Aerospatiale Air cargo traffic has recovered strongly, espe- Matra Airbus's role as “industrial architect” cially in Asia where the economic turnaround means that it is responsible for the entire indus- drove growth of over 10 percent in 1999, fol- trial process concerning the aircraft family, from lowing the fall of 2 percent in 1998. The cargo design through to the final commercial flight. business in Europe has also returned to growth, rising 4 percent after a decline of 1 percent in Aerospatiale Matra Airbus enjoyed a string of 1988. In the United States, growth remains successes in 1999. steady at 3 percent. 55 percent of global orders Airline operating profits should decline With 476 firm orders placed by 34 customers, compared with the previous record years (over order intake was at its second-highest level ever $16 billion in 1997 and 1998). This decline is in 1999, following the extraordinary perfor- largely linked to rising costs (fuel and payroll) mance of 1998. Once again, orders largely and lower per-passenger revenues (price war outpaced deliveries (294 aircraft). following overcapacity linked to the Asian crisis). Airbus consolidated its positions in the global However, the passenger load factor remained high. market and was the world market leader for Following record levels in 1998 (1,222 orders), orders booked in 1999. the market for jetliners with over 70 seats Airbus attracted 17 new customers in 1999, and remained extremely buoyant and performed underscored the soundness of its family concept better than expected: 875 orders were placed, by booking additional orders from major clients with over 80 percent for single-aisle aircraft. such as British Airways. This performance is quite In 1999, 52 percent of all orders were placed remarkable considering the significant slowdown by leasing companies (versus 15 percent in 1998), in the global market (down 25 percent in a year). RA99 - P14 à 25 - ANGLAIS 26/07/00 12:15 Page 21

A340 cockpit

A400M The Airbus family

Innovation and enhanced productivity Strategic goals this past year included produc- The A320 family accounted for 408 firm orders, tion ramp-up, meeting contractual delivery dead- bolstered by the considerable success of the lines and the implementation of the CAP A318, for which 120 orders were placed in the 20 productivity improvement program. Meeting first year since its introduction. Sixty-eight 21 these goals was the focus of 13,000 employees A330/A340 aircraft were ordered, despite at Aerospatiale Matra Airbus's four production a flat global market for medium/long-haul sites: Saint-Nazaire, Toulouse, Méaulte and Nantes. jetliners. Aerospatiale Matra also pursued studies for the At December 31, the aggregate total of A3XX and A400M programs and ongoing devel- Airbus orders stood at 3,633 aircraft from 169 opment of the A318. Development and produc- customers. tion phases for the first subassemblies of the Intents to purchase 103 additional aircraft latest A340/500-600 were accelerated through In addition to the 476 firm orders, this past year the implementation of significant technological customers signed letters of intent to purchase innovations, such as the carbon keel beam, a a further 103 Airbus aircraft, underscoring the world first. dynamic commercial performance of Airbus and Thanks to a management policy tailored to pro- its perfect match with market requirements. fessional skills and human resources, as well as a Deliveries up 28 percent compared to 1998 work organization based on concurrent engi- The 294 aircraft delivered in 1999 — including neering, the SAP integrated management tool 222 single-aisle aircraft — represent an increase and integrated work teams involving over 400 spe- of more than 28 percent compared with the cialists and airline representatives, Aerospatiale previous year. This performance reflects the suc- Matra Airbus reduced the development cycle for cess of the Group's production policy based on the 340/500-600 program by over 30 percent. continuous improvement in terms of quality, costs and lead times. At December 31, 1999, Aerospatiale Matra Airbus, a subsidiary of the aggregate total of deliveries stood at 2,188 Aerospatiale Matra since 1999, is now gearing up Airbus aircraft. The number of Airbus users now for the integration of Airbus activities within stands at 178. EADS and the creation of an independent Order book: Airbus company. 49 percent of the global market Airbus's order book has reached record levels thanks to sustained performance. It now counts Our management principles are anchored in 1,445 aircraft to deliver, equal to more than four meeting customer expectations by being the years of production. In five years, Airbus's order best in all our core businesses, creating value book has almost doubled (615 aircraft in 1994), for our shareholders by continuously improv- while that of its direct competitor only increased ing our financial results, and providing our by 35 percent over the same period. employees with long-term security by prepar- ing for the future. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:16 Page 22

Flight deck maintenance TBM 700

Aircraft

Falcon 900EX Other Aviation Operations

ATR: meeting objectives Aircraft maintenance: Aerospatiale Matra is a key player in the ATR a growth business regional aircraft consortium formed with Through Sogerma and its subsidiaries, the Group Alenia/Finmeccanica in 1981. offers global repair and maintenance services for Its wholly-owned subsidiary Aerospatiale Matra airline fleets and air forces. It also handles con- ATR is responsible for this business and is in versions and major modifications, such as cargo charge of final assembly and wing structures. conversions. The Group's maintenance businesses are based in Bordeaux, Le Bourget, Rochefort, The ATR consortium, in which Aerospatiale Matra Toulouse and Caudebec-en-Caux in France, with has a 50-percent stake, markets the aircraft and further operations in the United States provides customer support. The new ATR 42- and Morocco. Sogerma and its subsidiaries 500 and ATR 72-500 versions boast significantly employ 3,630 people and posted sales of improved performance and passenger comfort. 3.7 billion francs in 1999, a significant advance Since the beginning of the program, ATR has on 1998, thanks to growth in Airbus and turbo- recorded 613 orders and delivered 591 aircraft, prop engine business. making the ATR regional aircraft fleet the largest in the world. The Group met all its objectives in 1999. The outlook is for continued growth in sales and The market. The regional aircraft market is income, in line with corporate strategic goals. growing strongly across the globe, driven large- Sogerma will notably develop its Airbus support ly by regional jet sales. The complementary activities, which constitute a core competency. turboprop market also remains healthy, repre- Construction of two hangers in 2000 should fur- senting some 60-70 aircraft per year, in line with ther bolster large jetliner capacity and keep pace ATR’s planned deliveries of 30 aircraft in 2000. with market growth. Market share. With 30 aircraft sold and Sogerma’s maintenance business is 35 delivered, ATR met all its objectives for 1999. Markets. developing in all maintenance and modification/ In the 40-70 seat segment, ATR's market share upgrade markets for both civil and military air- reached 69 percent of turboprop aircraft and craft, and includes global support, engineering 30 percent of the combined jet/turboprop market. and fleet technical management, as well as com- ATR continues to revamp Market potential. puter-aided design and manufacturing tools its organization and develop new cooperative (CAD/CAM). Competition is therefore highly projects (thanks notably to its alliance with diversified and segmented, and includes major air- Embraer). Asia and Europe both harbor signif- lines, independent maintenance firms, state-owned icant business opportunities. workshops, equipment suppliers and airframe manufacturers. Civil market. This concerns the maintenance and modification of airframes for Airbus, MDD, ATR, Lockheed L100 and other aircraft, as well as cargo conversions and equipment/engine maintenance and repair for regional aircraft, busi- ness jets and helicopters. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:16 Page 23

Rafale Falcon 2000 TB20

ATR 42-500

Military market. This concerns the mainte- It maintained its market share in the rest of the nance and modification of military aircraft world, notably in the government market, where (Lockheed Hercules C130, Transall) and combat it has strong positions (for pilot training in par- aircraft (Mirage, Jaguar, F5, etc.). ticular). Sogerma is also a manufacturing company: Industrial reorganization continued on sched- Interior installations: pilot seats, first-class pas- ule, and should be completed in 2000. senger seats, rest areas and galleys for Airbus As part of its reorganization, Socata has started 22 and Boeing. to install a SAP information system, which should 23 Aerostructures: Airbus, Galaxy (Israeli business be on line by the end of 2001. jet), Dassault, AST assembly (Airbus Super Transporter/Beluga) and cargo conversion kits. Equipment: test suitcases, smoke detectors, com- posite materials for aircraft, rail and ballistic appli- Dassault Aviation: cations. an exceptional year for Falcon jets Light aircraft: Socata confirms recovery Socata confirmed its recovery in 1999. Aerospatiale Matra holds a 45.76-percent stake in Dassault Aviation — listed on the Paris For the first time ever, the company posted Bourse — along with Groupe Industriale Marcel sales in excess of 1 billion francs and swung into Dassault (49.9 percent) and public investors the black, with income in line with objectives. (4.34 percent). It significantly reduced its debt load, thanks to Dassault Aviation won a French government solid results and a reduction in working capital order for 48 Rafale aircraft (of which 28 were requirements despite a significant increase in its firm orders) and sold 72 Falcon jets, under- operations (production cycles reduced through scoring the company's status as the world's industrial reorganization). The company also leading supplier of high-end business jets. This received a capital injection from its shareholder was the third consecutive year of extremely Aerospatiale Matra. robust business levels for corporate aircraft, The aerostructure business saw a rise of enabling Dassault Aviation to post excellent 8 percent in 1999 thanks to increased business sales and operating profits despite the hiatus from the A320 and A330/340 programs (up 12 in major military export contracts. to 18 percent), and stable Dassault business. The Along with Aerospatiale Matra, Snecma and light aircraft business grew very strongly (up Thomson-CSF, Dassault Aviation took a 50 percent), particularly the TBM 700 program 20-percent equity stake in the Brazilian (up 80 percent) and the TB range. manufacturer Embraer in November 1999. At December 31, 1999, the order book for light aircraft represented 200 million francs. In line with its strategy, Socata bolstered its presence in the United States (70-80 percent of the global market) and is developing a distri- bution network in the country. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:17 Page 24

TigerCougar-SAR AS532 EC 135

Aircraft Helicopters

Eurocopter, No. 1 worldwide Exceptional order intake The Eurocopter Group, owned 70 percent and 3 percent sales growth by Aerospatiale Matra of France and 30 percent The Eurocopter Group enjoyed an exceptional by DaimlerChrysler Aerospace of Germany, year in 1999, booking orders for 382 helicopters: designs and manufactures a wide range of civil 160 Tigers, 22 Super Pumas, 18 Dauphins, and military helicopters. The world’s leading 95 single-engine Ecureuils, 10 twin-engine maker of helicopters, it further strengthened Ecureuils, 11 BK 117s, 30 EC 135s, and 36 EC 120s. this position in 1999. Total orders amounted to 20.8 billion francs, Eurocopter offers helicopters from the 2-ton to including new helicopters (15.3 billion francs), the 10-ton class, covering virtually all international R&D contracts (500 million francs), customer demand. The range is constantly upgraded and services (3.9 billion francs) and miscellaneous incorporates a number of advanced technologies, (1.1 billion francs). including the Fenestron shrouded tail rotor, wide Eurocopter posted sales of 11.5 billion francs use of composite materials, advanced avionics, in 1999, up 3.3 percent on 1998. The civil/state fly-by-wire controls, etc. agency sector accounted for 52 percent of sales, Eurocopter has two plants in France (La and the military sector 48 percent. Sales to Courneuve and Marignane) and two in Germany export markets accounted for 84 percent of the (Ottobrünn and Donauwörth). It also has 14 total. subsidiaries around the world, in the United States, Brazil, Singapore, Canada, etc., including Income stable despite heavy investments several production facilities. Operating income for 1999 remained steady at FF 499 million, while Eurocopter invested in The civil helicopter market (including sales to new SAP computer management systems, plus state agencies) was generally stable in 1999, the service entry and production ramp-up of its despite the significant impact of the Brazilian new-generation helicopters (EC 120, EC 135, EC 155). financial crisis. Thanks to the success of its expanded product range, Eurocopter increased As in previous years, it invested extensively in its market share by 6 percent over 1998. developing new products and improving current products, independently financing part of these This past year also saw the start of a new growth investments. trend in the military helicopter market, driven by attack helicopter acquisition programs and At the same time, Eurocopter continued to above all by the need to replace several aging improve its cash position, which stood at nearly fleets. Eurocopter is particularly well positioned one billion francs at the end of the year. in these markets, with its Tiger and NH 90 helicopters. A large proportion of these military Focus on partnerships contracts should be in Europe. For example, While continuing its joint arrangements with Eurocopter logged the first orders from France international partners (on the EC 120, with China and Germany for 160 Tiger helicopters, giving and Singapore, and the BK 117, with Kawasaki it world leadership in the military helicopter Heavy Industries, for example), Eurocopter also market (in both quantity and value). actively focused on other international collaboration initiatives to grow its market share and provide solid foundations for the future. RA99 - P14 à 25 - ANGLAIS 26/07/00 12:18 Page 25

Super Puma AS 332 EC 155 NH 90

Ecureuil B3 EC 120 B AS 350 Dauphin A365

Building on its long teaming experience, Market demand for an EC 145 type (BK 117C2) Eurocopter successfully implemented several helicopter was also confirmed during the year, overseas co-production programs, for the Cougar with a second major order. The French in Turkey, and for the BO 105 in South Korea. Gendarmerie ordered eight of these enhanced In addition, several new projects are now being versions. negotiated as part of major acquisition programs, Eurocopter also tripled deliveries of the EC 120, most notably in Spain, Australia and Poland. produced jointly with Singapore Technologies 24 Last year also saw Eurocopter confirm its Aerospace and Catic/Hamc of China. 25 intention of assessing in-depth the tilt-rotor aircraft concept. Along with several European Tiger partners it launched a joint initiative aimed at France and Germany placed an order with the construction of a tilt-rotor demonstrator. Eurocopter for a first batch of 160 Tiger helicopters (80 + 80) at the 1999 Paris Air A modernized, renewed range Show. Development tests of the weapon systems The success of the Eurocopter product line, now were successful for both the antitank and escort largely modernized, was confirmed worldwide in versions of this helicopters. The antitank version 1999. carried out successful day/night firing tests of Over 2,900 Ecureuil helicopters have been sold four Hot missiles. since the start of this very popular program. Its success was further consolidated with the higher NH 90 Five NH 90 prototypes are now flying. This past performance B3 version, certified in 1997. The year saw the maiden flight of the PT4 prototype 100th B3 was delivered in 1999. (TTH tactical transport version) in Germany, The EC 155 was off to an excellent start, with and the PT5 prototype (NFH naval version) in eight ordered in 1999. At the same time, interest Italy. in the high-performance N3 version of the The four partner nations in this program also Dauphin was confirmed, with orders for ten renewed their commitment to launching aircraft. production of a first batch of aircraft, increased The EC 135 was certified for single-pilot IFR from 151 to 196, within the scope of an agree- operation and production was stepped up to ment signed in Bonn in March 1999. meet demand. A contract for nine aircraft at the end of the year by the Portuguese army enabled Customer support and production Eurocopter to launch the military variant, resources designated EC 635. The results of Eurocopter’s customer support An order by the French air force in 1999 enabled business were positive in 1999, in terms of both Eurocopter to launch the enhanced performance revenues and customer satisfaction. From a “MK2+” version of the Super Puma. This new production standpoint, Eurocopter continued to version is especially well suited to civil and military improve its facilities and optimize its skills base, missions requiring higher payload capacity and for example, by increasing production staff and longer range. streamlining its organization. RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:24 Page 26

9 First 20 6 Creation Ariane 4 Ariane 5 Ariane 5 Soyuz of Astrium launches commercial ordered launches launch benchmarks

Space Commercial launchers Ballistic missiles Satellites 1999 was a pivotal year for the European space industry. Ariane 5, with Aerospatiale Matra Lanceurs as industrial architect, made its first commercial flight in 1999, and MMS and DASA merged operations to create a new satellite company, Astrium.

The merger of Aerospatiale Matra, DASA and CASA in 2000 will make the new entity, EADS, the European space industry leader. But we are aiming even higher, by capitalizing on our technological excel- lence, greater economic efficiency and expanded partnerships. RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:24 Page 27

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HELIOS II ARIANE 5 METOP

A full line of space products RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:24 Page 28

Space

International Space Station Soyuz M51

World leader in commercial launchers In addition to these major domestic programs, Aerospatiale Matra’s launcher business was very Aerospatiale Matra Lanceurs sells space prod- successful in 1999, with the launch of nine Ariane ucts to outside customers. For example, its dis- 4 rockets and the first Ariane 5 commercial flight. pensers operated flawlessly on the six Starsem Operating in a market shaken by the uncertain launches this past year for Globalstar. These dis- future of constellations and shrinking business pensers are designed to carry and release clus- volumes, Arianespace nonetheless bolstered its ters of satellites for constellations. leadership by winning 12 out of the 15 satellite Aerospatiale Matra also signed a multiyear agree- launch contracts up for bid worldwide in 1999. ment with Alcatel Space to supply antenna reflec- This performance was underpinned by tors and other composite satellite structures. Arianespace’s service excellence, reliability and Aerospatiale Matra Lanceurs’ industrial facilities flexibility. At December 31, 1999, Arianespace’s are grouped at Les Mureaux near Paris and in the backlog stood at 40 satellites to be launched. Aquitaine region near Bordeaux, and employ a Aerospatiale Matra Lanceurs Stratégiques et total of 3,450 people. Spatiaux (Aerospatiale Matra Lanceurs), a whol- ly-owned subsidiary, is industrial architect for Satellites: creation of Astrium Ariane 4 and 5, with responsibility for the design On October 18, 1999, the two equal share- and manufacture of the main stages. Aerospatiale holders in Matra Marconi Space, Aerospatiale Matra Lanceurs is also prime contractor for Matra and BAE Systems, signed an agreement space vehicles, such as the Automated Transfer with DASA to create a new company, Astrium, Vehicle (ATV), the “cargo ship” for the interna- by transferring the satellite operations of DASA tional space station. to MMS. On December 2, 1999, this agreement was extended to encompass CASA of Spain, mak- During the year, Aerospatiale Matra signed a ing Astrium a quadrilateral company. Alenia production contract with Arianespace for the Spazio was immediately invited to join Astrium. P2 batch of 20 Ariane 5 launchers. This contract also includes a cost reduction clause to enable MMS’s business was jolted in 1999 due to diffi- Ariane 5 to maintain its competitive edge over culties – since resolved – with the solar panels American launchers. produced by one of its subcontractors. Working closely with customers and suppliers, and with a Starsem, the joint Franco-Russian subsidiary of constant focus on the customers’ interests, MMS Aerospatiale Matra (35 percent), Arianespace was able to develop solutions to limit as much as (15 percent), the Samara Space Center (25 percent) possible the impact of this incident on satellites and the Russian space agency RKA (25 percent), in orbit, and guarantee zero defects for satel- successfully launched six Soyuz rockets from the lites still to be launched. Baikonur cosmodrome for Globalstar. The space business signed a number of contracts Strategic ballistic missiles in 1999, including scientific spacecraft (signature Aerospatiale Matra Lanceurs is the prime con- of the Metop contract, selection as prime con- tractor for French strategic ballistic missiles, in tractor for Mars Express), the military sector charge of design, production, installation and (Helios 2 ground segment) and commercial maintenance. The M51 program successfully telecommunications (signature of the Intelsat passed its No. 2 preliminary system design 102 contract, and in early 2000, signature of review, while two M4/M45 acceptance firing tests the N1 Alpha contract with Intelsat, launching were also successful. the Eurostar 3000 platform). RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:25 Page 29

Ariane 5 Metop ATV - Automated Transfer Vehicle

Matra Marconi Space offers three main product Space transport and orbital infrastructure: lines: Earth observation satellites (62 percent technological expertise of 1999 sales), telecommunications satellites MMS is in charge of the design and production (19 percent) and launchers and orbital infra- of Ariane’s vehicle equipment bay, the “brains” of structures (19 percent). the launcher. Production continued at a sustained pace, as it supplied VEBs for the nine Ariane 4 Leadership in scientific launches during the year. and observation satellites 28 Matra Marconi Space is also involved in the con- MMS produces both civil and military observation 29 struction of the international space station, as satellites, as well as the associated ground seg- supplier of the computer systems for the ments. The civil sector accounted for about 70 Columbus Orbital Facility and the ATV cargo percent of business in 1999, and the military sec- vehicle, both financed by the European Space tor the remaining 30 percent. Agency. MMS is also developing advanced space MMS won several major French and international rendezvous technologies for this program. competitions in 1999, reflecting its technologi- cal excellence and confirming its leadership. Astrium: No. 1 in Europe The creation of Astrium took effect on March Promising satcom contracts 21, 2000, when the project was approved by Not only is the communications satellite market the European Commission. highly competitive, but it was affected in It is the third largest space company in the world, 1998-99 by the Asian crisis and the failure of with operations in three countries, France, the various constellation programs. However, MMS United Kingdom and Germany. It will soon has been selected as prime contractor for expand to five countries, following the addition Intelsat’s N1 Alpha satellite. This is the launch of the space businesses of CASA (Spain) and the contract for the new-generation Eurostar 3000 Finmeccanica group (Italy). Astrium is the cul- platform, which augurs well for the technical and mination of a process that began back in 1990, commercial competitiveness of this platform. and the reflection of an unrelenting commitment Egypt also placed an order with MMS for a sec- by its shareholders to develop their presence in ond direct broadcast satellite. this sector. MMS is the leader in the military satcom Astrium will be a space industry “major”, with market, and was chosen by the British Ministry the enabling technologies and vast experience of Defence to carry out a major design study needed for continued growth. Furthermore, for Skynet 5. this merger should generate major com- It was also chosen by the Turkish Ministry of mercial, industrial and human synergies. Defence to develop the complete military telecommunications satellite system ground seg- ment, the largest in the world to date. RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:25 Page 30

6.1 1.1 240 200 Launch billion euros billion euros million euros million euros of “New MBD” order book PAAMS contract Storm Shadow contract Rapier contract benchmarks

Missile Systems

The merger creating the new Aerospatiale Matra Group took place in June 1999. This merger also led to the consolidation of the missile systems operations of Aerospatiale Matra Missiles (AMM) and Matra British Aerospace Dynamics (an equally-owned joint venture of Aerospatiale Matra and BAE Systems). The new entity logged sales of 1.2 billion euros in 1999, down 30 percent on 1998, as expected, because of an exceptional export contract that was completed in 1998. Business was sustained however, ensuring excellent long-term viability. Orders were booked for 1.9 billion euros, bringing the year-end order book to a new record of 6 billion euros, equal to five years of work. Furthermore, the new orders booked in 1999 were fundamental, since they enabled the launch of key European programs, in particular PAAMS, an air defense system using Aster missiles, to be deployed by new-generation British, Italian and French frigates. Major export contracts included Rapier missiles for the U.K. and Turkey, and the Storm Shadow for Italy. In domestic markets, contracts were signed for new phases of programs already under way (Aster FSAF, upgraded Roland, ASMP, etc.).

With the advent of EADS, and the agreement providing for the creation of a new joint missile systems com- pany by Aerospatiale Matra, BAE Systems and Finmeccanica, temporarily dubbed “New MBD”, this new company will be the leading missile-maker in Europe and Number 2 worldwide, just behind Raytheon. With New MBD, Aerospatiale Matra – and soon EADS – will be able to offer a real alternative to U.S. missiles. RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:25 Page 31

30 31

PIVER CL 289 METEOR APACHE RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:25 Page 32

Missile Systems

Apache AS 30 Kaiser

The group’s Missile Systems business includes Order book expected to expand in 2000 Matra BAe Dynamics, in which it has a 50-percent Several major contracts are expected this year, stake, and the former Aerospatiale Missiles. in particular the Medium Range Trigat antitank weapon and especially the future air-to-air missile Sustained orders ensure future growth for the Eurofighter. The British government has Following exceptional deliveries and orders in already issued a request for proposals (RFP) for 1998, especially export orders, this past year this missile, and MBD has responded by setting up once again saw healthy orders. Missile Systems the Meteor consortium along with Marconi, orders totaled 1.9 billion euros, outpacing sales Alenia, LFK, CASA and Saab. The objective of this by 58 percent. consortium is to focus European energies and Although there were no major new domestic provide a common solution for the air forces of programs, the group garnered additional funding the U.K., Germany, Italy, Spain and Sweden, as for existing programs, in particular for counter- well as the French air force, which recently joined measure systems and development contracts for the program. In a major development at the end missile integration on Rafale and Mirage 2000-5 of 1999, Boeing also joined the consortium, aircraft. which should facilitate American market access. Business in Britain, on the other hand, was buoy- ant, and the group is now a key player in major Improved productivity Missile Systems productivity continues to pan-European programs. The highlight was the improve, driven by two major factors: announcement by the British MoD on August 11 of the PAAMS contract for 1.1 billion euros, cov- • Synergies generated by the merger of the ering requirements by France, the U.K. and Italy. former Aerospatiale Missiles with MBD. This contract is the first concrete reflection of • The continuation of productivity enhance- the successful integration of MBD and the former ment initiatives launched in each company Aerospatiale Missiles. The organization set up for before the merger. this program provides for a clear distribution of In particular, the profitability of the former responsibilities and cooperation on cost reduction. Aerospatiale part of this business has improved substantially due to restructuring and cost reduc- The British government awarded another major tion actions implemented in recent years. These contract, worth 320 million euros, for Rapier productivity improvement initiatives are pursued Mark 2 short-range surface-to-air missiles. within the scope of the “Perf 2001” plan. Two major export contracts were signed in 1999. Restructuring of the workforce also continued, The Italian government selected Storm Shadow with the number of employees reduced from cruise missiles for its Eurofighter and Tornado 3,184 at the beginning of the year to 2,964 at aircraft in a contract worth 240 million euros. December 31, 1999 (full-time equivalent, includ- In addition to the supply of a substantial num- ing consortiums). Profitability will continue to aug- ber of missiles, along with ground support equip- ment in 2000 and beyond, based on the ment and maintenance systems, the contract continuation of these restructuring plans and pro- provides for the establishment of a wide-rang- ductivity improvement measures. New synergies ing partnership with Italian industry on the Storm are expected starting in the second half of 2000, Shadow/Scalp-EG program. The second con- due to the creation of EADS, and above all to the tract was awarded by Turkey: an order for Rapier integration of Aerospatiale Matra Missiles within missiles worth 200 million euros. the future European missile company. RA 99 - P26 à 33 - ANGLAIS 26/07/00 12:26 Page 33

Meteor Trigat The NSM medium-range antiship missile

Technical milestones Starting this year, the company will encompass the • Demonstration of the trouble-free operation following entities: Aerospatiale Matra Missiles, of equipment in the Vesta ramjet, intended for Alenia Marconi Systems-Missiles and Matra the ASMP-A missile. BAe Dynamics. Once consolidated, stock in the • Start of qualification firing tests for the Aster 15 new company will be owned by Aerospatiale Matra system, to be installed on the Charles-de-Gaulle and BAE Systems, each with 37.5 percent, and by aircraft carrier. Finmeccanica, with 25 percent. It may also incor- 32 • Integration of the first upgraded Roland firing porate LFK, in which it already has a 30 percent pages 33 station, equipped with the Glaive sight. stake, with the remaining 70 percent held by DASA. • Success, on schedule, of all functional inte- gration operations and on-wing carriage tests of Once completed, this consolidation will create the Storm Shadow/Scalp-EG cruise missile. the world’s second largest missiles company. A •The operational effectiveness of the second full-fledged missile systems prime contractor, it will version of the Mica missile, with infrared guid- offer an attractive alternative to American com- ance, was proven in flight tests. petitors. The new entity will have annual sales Other milestones are expected in 2000, of about 2.5 billion euros, a solid order book including: and 10,000 skilled employees. It will be either prime contractor or main partner in all main Start of volume production of Apache, • joint European programs. In addition, it will offer Europe’s first cruise missile. products for all segments of the market, and all First flight of the Storm Shadow/Scalp-EG • branches of the armed forces, and will have the cruise missile. resources needed to ensure sustained compet- Qualification of the French Aster antimissile • itiveness. Furthermore, “New MBD” will enjoy missile. structural access to the four largest European The No. 2 missile company in the world markets: France, the United Kingdom, Italy and Right from the time of its creation in 1996, MBD Germany. shareholders intended it to be the consolidation hub for the European missile industry. These partners’ own growth paths – creation of Aerospatiale Matra, then the advent of EADS and BAE Systems in 1999 – created the condi- tions necessary for a new expansion of Matra BAe Dynamics. On October 20, 1999, Aerospatiale Matra, BAE Systems and the Italian group Finmeccanica announced that they were creating a jointly owned missile and missile systems company, to be called “New MBD”. RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:30 Page 34

860 67 5,936 million euros million euros employees sales independently-financed R&D benchmarks

Systems, Services and Telecommunications

The Systems, Services and Telecommunications (SST) Sector was created on September 1, 1999, reflecting the Group's commitment to energizing and organizing its internal telecoms, services, test and Internet capabilities. These activities put Aerospatiale Matra at the heart of the dynamic New Economy and enables the enterprise to offer its traditional military customers leading-edge technologies from the civil sector. To leverage synergies between civil and military activities, a new organization was implemented in the last quarter of 1999, 62% Telecoms based on five core businesses: C4ISR (secure transmission sys- 12% C4 ISR tems in particular for armed forces), Services & Tests, 11% Services & Tests Computer-aided Design and Manufacturing (CAD/CAM), 10% CAD/CAM Internet Services and Telecommunications. 5% Internet These units will enable the Group to leverage the synergies created by blending the assets of Aerospatiale and Matra Hautes Technologies and to benefit from the strong growth potential of new information technologies. RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:31 Page 35

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Systems, Services and Telecommunications Services & Tests: meeting growing demand by armed forces and airlines for outsourced services This business unit offers outsourced testing and other services, and is based on specialized Leveraging civil/military synergies engineering companies such as APSYS, CRIS Defense markets offer remarkable growth and G2I. potential for SST, but the technologies used The advent of professional armies is now a global (telecoms, secure Internet networks, etc.) are • reality. In Europe, this has led chiefs-of-staff to often developed in the civil sector. Aerospatiale outsource a number of tasks to industry. The aim Matra's objective is to leverage civil expertise in of SST's Outsourced Services Division is to build its Group subsidiaries — such as Matra Nortel business in the aviation and defense segments for Communication, Sycomore, Matranet and governments, state agencies and private customers. Matra-Datavision — to develop new applications The target market is experiencing burgeoning for traditional clients, notably armed forces. It growth, with annual sales in France of over was this dual military/civil strategy which drove 10 billion francs. Aerospatiale Matra boasts the the reorganization of the business. comprehensive expertise needed to offer From January 1, 2000, all Systems, Services and outsourced services, since it benefits not only from Telecoms activities were grouped into five the technical resources of the SST sector, but is business units and rounded out by an Integrated also the preferred partner of airlines and armed Systems Division, the aim of which is to cross- forces across the globe. fertilize disparate skills to develop a unified Aerospatiale Matra is also a leader in service offering. • equipment test stands, notably for avionics C4ISR: secure telecommunications equipment. Test stands and benches are sold to systems for armed forces airlines, armed forces, aircraft and equipment The C4ISR business unit (Command, Control, manufacturers, etc. In the civil sector, Communications, Computers, Intelligence, Aerospatiale Matra's Services & Tests unit holds Surveillance, Reconnaissance) constitutes the an 80-percent share of the global market with core of SST for information technologies and sales of 150 million francs, including to 19 of the control systems. It encompasses the subsidiaries 20 largest airlines. In the military sector, the MS&I, APIC, Fleximage and ISTAR. unit is a European leader with 40 percent of the market and 450 million francs in sales. This As the defense market continues to shrink across segment harbors strong consolidation potential the globe, the C4ISR segment is experiencing in Europe and is moving towards comprehensive relative growth, as demonstrated by recent full-service offerings. Our leadership in test stands multinational military operations (Kosovo in and our understanding of customer needs puts particular) that count on C3I and observation us in an excellent position in this market. systems (satellites, drones, etc.). Aerospatiale Matra is a key player in this market segment in CAD/CAM: strengthening France, with a 15 to 20 percent market share our leadership in a market growing depending on the application. It also boasts by 20 percent per year promising growth potential in the global The global market for computer-aided design marketplace. and manufacturing (CAD/CAM) and data management services and software is estimated at $5 billion, and the services business is growing at over 20 percent per year. While the software segment is being rapidly consolidated and is restricted to a few suppliers, the service offering RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:31 Page 37

remains highly scattered. Matra Datavision, a In 1999, Matra Nortel Communications returned wholly-owned subsidiary of Aerospatiale Matra, to break-even following the sale of its loss-making is a European leader in this market with GSM terminal business, and maintained revenue 720 employees in 12 countries. levels despite the divestment. On March 30, 2000, Aerospatiale Matra and Internet and Operator Services: a booming market with significant Nortel announced the creation of twin opportunities in aerospace and defense companies spun off from MNC: This business unit is based around Internet • A company specialized in professional mobile Protocol services and includes subsidiaries radio (PMR) held 55 percent by Aerospatiale Sycomore (secure Internet network architecture), Matra and 45 percent by Nortel; Matranet (software for Internet network security • A company grouping MNC's other civil and e-business applications), MGN (hosting of communications activities, held 55 percent by websites) and Multicom (Internet protocol Nortel and 45 percent by Aerospatiale Matra. applications via satellite services). This reorganization reflects Aerospatiale In 1999 these subsidiaries posted relatively Matra's strategic ambitions in the telecoms modest sales of 45 million euros. However, they sector. enjoy excellent growth potential, with the largest of them, Sycomore, doubling its sales in two Integrated Systems Division: years. Originally developed for civil applications, leveraging synergies between their offer essentially targets major civil groups. the five business units However, a contract in 1999 for a secure email An Integrated Systems Division has been created to handle more general "systems system" system for the French army demonstrates the 36 responsibilities, as opposed to the more potential for developing applications for its 37 traditional clientele in the aerospace and defense conventional C31 missions of the other SSI sectors. business units. This Division proposes a holistic approach for the coordination, integration and For each of these subsidiaries, Aerospatiale Matra optimization of technologies and systems is currently reviewing the most appropriate management services. means of financing development, from alliances to the total or partial listing of certain subsidiaries. Within this new context, the Systems, Services Telecoms: huge potential, particularly and Telecommunications sector is pursuing the in the secure digital radio market following objectives: This business unit comprises Intecom (a wholly- •establish itself as a major supplier of operating owned subsidiary) and Matra Nortel and telecom systems; Communications (50-percent stake, along with • develop C4ISR systems and services, by Nortel). It operates in the following segments: leveraging leading-edge information technologies; • Professional mobile radio: MNC is a global • seize opportunities to develop outsourcing leader in secure digital networks with 30 services for the armed forces; networks in 15 countries. MNC currently holds capitalize on the growth opportunities of this a 17-percent share of the global digital market, • market to boost profit margins. and aims to boost this figure to 25 percent by 2003. Growth of the global PMR market is To prepare for the future growth of these estimated at 5 percent per year. The digital businesses, Aerospatiale Matra significantly segment in which MNC operates should grow boosted independently-financed R&D expendi- fourfold between 1999 and 2003. tures in 1999, up 65 percent on the previous year, and representing 8 percent of sales in this Operators, transmission and voice/data access • sector. technologies for fixed and wireless networks. MNC is the leading supplier of telecom equipment in France, following the deregulation of the national market. It holds an 8-percent market share, with a target of 15 percent by 2002. In the business communications systems segment, MNC enjoys a 30-percent share of the French market and a 10 percent share in Europe. This market is characterized by burgeoning growth in voice-over-IP and high-value-added services. RA 99-P34à44ANGLAIS26/07/0012:31Page38 and Development Research

ft RA 99-P34à44ANGLAIS26/07/0012:31Page39 Significant achievements in1999Significant organization andeffective efforts Sustained strategic missiles. strategic upgrade Ariane5’s payload capacityandfor certain combined withenhancedperformance). on theAirbusA340-500/600 (weight reduction demonstrator. viability. technological innovation, thekey to long-term to itattaches staying onthecuspof importance the reflect R&Defforts The Group's substantial European Commission. European affair, undertheauspicesof particularly skills.R&Disincreasingly apan- complementary public andprivatehighly bodiesoffering Research is alsocarriedoutincooperationwith Technologies. the strengthsofAerospatiale andMatraHautes By rationalizingR&Dactions,thisorganization unites entities andwiththeJointResearch Center. initiatives enhancessynergies between Group different An organization basedonnetworked research 1.5 billionfrancs,or2percent ofGroup sales. of R&D,grew by 10 percent in1999, reaching Research and technology (R&T),theupstreampart previousthe year. expenditure wasup20percent (pro forma) on equivalent to15 percent ofsales.R&D The Group spent13 onR&Din1999, billionfrancs • Chanson" Award). mission missile(winnerofthe"Ingénierie General • • • future Structural integration ofacomposite keel beam Development of a new flight controlDevelopment system, to ofanew flight Flight tests ofanew-concept silenthelicopter Fiberoptic multi- guidanceofnew-generation efforts focus onfour strategicgoals: efforts Aerospatiale Matra'sResearch andDevelopment Long-range research goals New informationtechnologies production methods. recognition inenvironments subjectto interference. commerce applications. high resolution. applications, etc. medicalandmilitary observation, images for Earth propulsion systems. • • architectures. • • video andmultimediaIPtransmission. • reducing scrap. fuselages, leadingto lower by costs significantly concepts for theproduction of new-generation • • • • • • •maintain the Group's technological leadand Group's technological the •maintain •improve product performance environment•respect the •reduce product development costsandcycles Technologies for atilt-rotor system. Space-borne optical withextremely instruments Scramjet technologies for hypersonic air-breathing New telephony concept withinnovative switching Digital enterprise,Digital concurrent engineering,new Technologies for very large jetliners (A3XX). Development oftechnologies for voice Design ofsecure for software electronic Development ofanew for server high-speed New concepts for fusionand synthetic data Deployment ofnew non-destructive testing strengthen areas ofexcellence.strengthen and competitiveness

technoly 39 38 RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:31 Page 40

Human Resources

Aerospatiale Matra experienced major changes in 1999. This included the spin- off of its businesses in April, the Aerospatiale/Matra Hautes Technologies merger and privatization in June, agree- ments on the creation of EADS in October and December, and negotia- tions on the reduction of the work week, another key issue in 1999. These mile- stone events engendered deep organiza- tional changes, successfully accomplished through careful Human Resources man- agement. The Group's approach has been to combine respect for its people with a future-focused dynamic, anchored in high-quality labor relations. RA 99-P34à44ANGLAIS26/07/0012:31Page41 Dynamic, flexible employment policy Dynamic, flexible Employee shareholding, Integrating peopleandculturesIntegrating a majornew development plan withenthusiasmand Employees greeted Aerospatiale Matra'sbusiness motivation. lever forerful staff reserved for Group employees, apow- constituting Aerospatiale Matra'sIPO through internal mobility. on thecareer development ofitspeople,notably skills-building initiatives withintheenterprise, nor groups hasinnoway impinged uponcontinuous ment ofGroup employees. Themerger ofthetwo geared to thequantitative andqualitative manage- Aerospatiale Matrahasdeployed resources specific Within thecontext ofongoingintegration, ent work groups andinitiatives. intranet site, featuring information from thediffer- in-house publicationsandadedicated "integration" make solidprogress, resulting in inseveral articles the internal communicationsproject continues to theoretical basefrom whichto launchEADS.Lastly, group recommendations shouldprovide anexcellent formance ofwork solutions.Theimplementation tices, reviewing andproposing innovative, high-per- harmonizing HumanResources values andprac- Over 80peoplefrom thetwo cultures worked on been integrated inthenewly-merged enterprise. ed and70peoplefrom theLagardère group have project isnow complet- communications. Thefirst Human Resources values andpractices,internal gration ofGeneralManagement, harmonizationof tosense ofattachment theirenterpr vation ofAerospatiale Matraemployees andtheir These remarkable results themoti- demonstrate for lineworkers). and67over percent staff 80percent for supervisory (nearly 95percent subscription for management, privatizationofamanufacturingcompanythe level highest 82.25percent,reached the ever for ing apivotal role majorprojects: inthree in 1999, HumanResources the with Divisionplay- Seventeen initiatives integration were launched blending cultures. in theenterprise proved to meansof beaneffective network over approach nurtured several years with- processes to fundamental any merger project. The integration ed allthesocial,culturalandindustrial in 1999, theHumanResources Divisioncoordinat- Rising to thechallenge ofthedeepchanges wrought have beencompleted well aheadofschedule. record allintegration initiatives timeandalmost challenge. Thisintegration was accomplishedin important agement commitmentandaparticularly Hautes Technologies teams akey constituted man- The successfulintegration ofAerospatiale andMatra included ashare offering subscription levels ise. inte- and contractualpolicy work weekReduction inthe Aerospatiale MatraInstitute improve the efficiency and profitability oftheGroup. andprofitability improve theefficiency ties andfoster thecreation ofinternal networks to These initiatives bringtogether managers from allenti- 2,000 peoplein1999. systems basedonmultimediaapplications,involving training aknowledgeestablished network andflexible 4. whom 301 in1999. tional networks: 4,500peopletrainedto date, of 3. trained, ofwhom289in1999. strengthen European integration:1,282 people 2. 1999. 1,956specialists: peopletrained,ofwhom328in 1. to achieve several objectives: During 1999, Instituteinitiatives enabledtheGroup petitiveness. and com- high-qualityperformance tegy to support hasdeployedInstitute aprogress-oriented stra- For anumberofyears theAerospatiale Matra 1,January 2000. ment ofanewremuneration system applicable from implemented from thisperiodledto theestablish- andMissilessubsidiaries in Launcher 35-hourwork ofthe weekmentation asofAugust subsidiaries andprovides aframework for the reduction ofthework week appliesto allGroup both unions.Theagreement signedby onthe five mittee andAerospatiale Matrauniondelegates, 7 onthenew group employee-management com- workof the week agreement onMarch30,1999 reduction onthe were signed,includingthe Committee were heldin1999. Eleven agreements committee and12 meetings oftheCentral Four meetings oftheGroup employee-management at developing employee versatility. bysupported numerous traininginitiatives aimed are also the intranet. Theserestructuring efforts MHT subsidiaries,are now opento everyone via throughout theGroup, includinginex- to befilled program implemented inprevious years. Positions oftherestructuring jobs innew locations,aspart At thesametime,around 500 peoplemoved to young graduates. Group attracted theinterest ofalarge numberof for career developmentOpportunities withinthe of2,212A total peoplewere hired in1999 47,078 ayear later. rose from 46,841 atDecember31, 1998, to ees, expressed inequivalentfull-timepositions, numberofconsolidatedGroup employ-The total Enhance competitiveness inglobalmarkets and Strengthen functionthrough thestrategic func- Develop theprofessionalism ofmanagers and In addition,theAerospatiale has MatraInstitute , andtheagreement signedonJuly Aerospatiale framework . Theactions imple- . 40 people 41 RA 99-P34à44ANGLAIS26/07/0012:31Page42 Policy three strategicgoals: three ers. To Group isfocusing on the achieve this, in onekey objective: create value for sharehold- policyisanchored Aerospatiale Matra'sfinancial • Efficiently manage the economicfactors involved managethe in Efficiently • • the towhich risks variousfinancial Manage the • whilereducing capital Improve profitability launching new programs. launching exchange raterisks. Group isexposed,inparticular employed. Financial

fi bili RA 99-P34à44ANGLAIS26/07/0012:31Page43 Managing economic criteria for program launches Managing economiccriteria capital employedcapital andreducing Improving profitability create value for theGroup. program, for whichadecisionisexpected in 2000,willonlybelaunchedifwe are convinced thatitwill as muchpossibleby to bringinginventure cover partners capital 40percent oftotal The costs. inherent to thistypeofproject. Inadditionwe have soughtto return oninvestment and the riskpremium required tax after isinlinewiththeGroup's costs capital NH90orthe growth asAriane5,the potential,such of core programs harboringsignificant renewal isrequired long-term to development sustain andmarket leadership. Faced withanincreasingly competitive andfast-evolving technological environment, product constant and to seekthemeansofreducing employed. impactoncapital For aprogram suchasthe investment andmarket potential. Therole of theFinancialDivisionisto evaluate return oninvestment For eachnew program we decisioncriteria have very for strict technical established feasibility, return on

(since resolved) inthesatellite business. in majordefense contractsandtechnical difficulties 1999 was onaparwith1998, despite thehiatus margins. Infact,operatingincomein tional profit byboosted contractwithexcep- adefense export profitabilitylower thantheprevious year, whenincomewas that operatingincomein1999 would besignificantly the occasionofourIPOinJune1999 we indicated tive ofan8-percent operatingmargin by 2003.On We are aheadofschedule ofsynergies in2000. see theconcrete benefits to these plansare onscheduleandwe shouldstart dueto costs salesgrowth.tion offixed To date, synergies generated by themerger, andamortiza- tiations ofprocurement contractswithoursuppliers, ing optimization ofproduction processes, renego- The savings plansare adirect outgrowth ofongo- ranges inallouractivities. for product pletion phase ofamajorupgradeeffort expenditures, sincewe are currently inthecom- research anddevelopmentindependently financed million euros insavings derives from areduction in to productivity improvement 150 plans.Afurther recurrent basis 600millioneurosachieving inannualsavings ona target, oflaunchingtheA3XX).Toing thecosts meet this double thatof1998 onapro forma basis(exclud- of achieving an8-percent operatingmargin by 2003, Paris Bourse,we set aclearandambitioustarget At thetimeofAerospatiale onthe Matra'slisting we have deployed measures aimedat , including450millioneuros linked in meeting ourobjec- reduce the independently financed part independentlyfinanced reduce the Managing exchange raterisk higher levels ofbetween 6.20and6.30francs. have begunto cover at projected dollarfluctuations dollar, withaceilingof5.60francs.For 2003,we rate willbe0.40francshigherthanthemarket 5.60 francsfor 2000and2001. In2002,thehedging point: 5.50francsin1999 andbetween 5.50and break-evena muchhigherrate thantheindustrial enabledtheGroupstrategy to cover at dollarflows Market conditionsandscrupulouslyfollowing our fourfor years. atleast does not expectto make any additionalexpenditure shareholders withmaximumvisibility. TheGroup this expenditure was designedto provide its strategy. Recorded underextraordinary items, restructure itshedgingarrangements 1999, theGroup spent401 millioneuros to break-eventhan theindustrial point(5francs).In atratesdesigned to higher guarantee dollarflows whichis ahedgingstrategy Matra hasestablished inthevalue ofthedollar,fluctuations Aerospatiale Faced withexchange rate risks,dueprimarilyto requirements.ing capital due to a504millioneuro improvement inwork- by 700millioneuros more in1999 than tives, sincetheGroup's net cashposition employedcapital In addition,we have pursued This involves launch the , where we alsoexceeded objec- A3XX A3XX A3XX our efforts toreduce our efforts , the . , inlinewith improved , largely growth 43 42 RA 99-P34à44ANGLAIS26/07/0012:31Page 31402 Toulouse Cedex4 31, ruedesCosmonautes Matra Marconi Space Toulouse 78146 VélizyVillacoublay 37, Avenue LouisBréguet B.P.1 Matra Marconi Space Vélizy SATELLITES 78133 LesMureaux Route deVerneuil -B.P. 96 etSratégiques Spatiaux Aerospatiale MatraLanceurs Les Mureaux 78141 VélizyVillacoublay B.P. 150 20-22, rueGrange DameRose Matra BAe Dynamics Vélizy 92260 Fontenay auxRoses 12, ruedelaRedoute Euromissile (GIE) Fontenay 92323 ChâtillonCedex 2-18, rueBéranger -B.P. 84 Aerospatiale MatraMissiles Châtillon AND SPACE TRANSPORT DEFENSE duBourget93362 Aéroport Le Terminal Bât.413 Socata Le Bourget 33701 MérignacCedex Bordeaux Mérignac-B.P. 2 Internationalde Aéroport Sogerma Bordeaux 31060 Toulouse cedex03 316, route deBayonne Aerospatiale MatraATR Toulouse 13725 Marignane Provence InternationalMarseille Aéroport Eurocopter Marignane 31060 Toulouse cedex03 316, route deBayonne Aerospatiale MatraAirbus Toulouse AIRCRAFT 75016 Paris 6, rueLaurent Pichat AMLI (GIE) Paris 92152 Suresnes cedex 12, ruePasteur -B.P. 76 Centre CommundeRecherche Suresnes 75781 Paris Cedex16 37, boulevard deMontmorency Aerospatiale Matra Paris FRANCE les adresses headquarters) (Corporate B 1130 Brussels Rue delaGrenouillette 2B Communications Matra Nortel 1780 Wemmel 224, rueIsidore Meyskens Parc Astrid Matra Datavision 1000 Brussels 53, avenue desArts Aerospatiale Matra BELGIUM Bankstown NSW 2200 P.O. Box 51 Bankstown Airport 616 Street Comper Eurocopter InternationalPacific Canberra Act 2601 GPO Box 3221 Level 1, 10 Moore Street Aerospatiale Matra AUSTRALIA AND OFFICES SUBSIDIARIES WORLDWIDE 42, rueGallieni-92601 Asnières Matra Grolier Network Asnières 78392 Boisd'Arcy Rue Jean-Pierre TimbaudB.P. 26 Communications Matra Nortel Bois d'Arcy 91954 LesUlisCedex Parc d'activitédeCourtabœuf 31, avenue delaBaltique Matra Datavision Les Ulis 78147 VélizyVillacoublay 6, alléeLatécoère -B.P. 280 M CNSAT Service Vélizy 78142 VélizyVillacoublay 6, rueDewoitine -B.P. 14 Matra Systèmes et Informations Vélizy TELECOMMUNICATIONS SYSTEMS, SERVICES AND Fort Erie-Ontario Fort P.O. Box 250 1100 Gilmore Road Eurocopter CanadaLtd K1R7X9 Ottawa -Ontario 275 SparksStreet -Suite902 Aerospatiale MatraCanadaInc. CANADA 37500 MinasGerais Itajuba Caixa Postal 184 Distrito IndustrialdeItajuba 200 Rua SantosDumontn° Helibras (Helicopteros doBrasil) 70300-500 Brasilia-DF A/C BancoCidade andar 1° SCS, Q.3.B1. 74/78 A.lj Aerospatiale Matra BRAZIL ITALY 10220 Jakarta JL JendSudirmanKav 1 Level 43Wisma 46Kota BNI INDONESIA New Delhi110011 10 PrithvirajRoad A, Aerospatiale House Liaison Office Aerospatiale MatraIndia INDIA Mavili Square -11521 Athens 22 TimoléontosVassou Street Andromeda Hotel GREECE D-89081 Ulm Wilhem Runge Strasse 11 Communications Matra Nortel D-28361 Bremen P.O. Box 286156 Matra Marconi Space 81829 Munich Schatzbogen 62 GmbH Matra Datavision 81663 Munich Ottobrünn Donauwörth Eurocopter Deutschland D 53123 Bonn Schieffelingsweg 12 Aerospatiale MatraDeutschland GERMANY Cairo Garden City 5 DarElShifa, Aerospatiale Matra EGYPT 100020Beijing HU JINLOU ChaoYang District Jing GuangCentre Bureau 3108 Aerospatiale Matra CHINA Saint-Laurent QuébecH4T1V6 Transcanadienne Bureau 5007575 route Inc. Matra Datavision 50450 Kuala50450 Lumpur 19 JalanPinang UOA BusinessSuite 19A-14/3 Aerospatiale Matra MALAYSIA Minato-Ku -Tokyo 107 1-9 MinamiAoyama 4-Chome Bldg 5f Akimoto MinamiAoyama Aerospatiale Matra 10149 Turin Corso Svizzera185 SPaMatra Datavision 00187 Rome 35 Via Ludovisi Aerospatiale Matra JAPAN Kangnam-KU -Seoul 702-13, Yeoksam-Dong Heights Building Suite 1104, Sung-Jee Aerospatiale Matra SOUTH KOREA Block E,3 & Grosvenor Streets Cnr Arcadia Gardens Hartfield Aerospatiale Matra SOUTH AFRICA Singapore 9152 P.O. Box 0326 Tampines South 48, Loyang Way South EastAsiaPteLtd Eurocopter Singapore 0923 541, Orchard Road 14-04 LiatTowers Aerospatiale Matra SINGAPORE Riyadh 11533 P.O. Box 50602 Aerospatiale Matra SAUDI ARABIA 121002 Moscow Dom 27, Kv10 -UlitsaArbat Matra Datavision 109004 Moscow 66/20 Zemlyanoy Val Aerospatiale Matra RUSSIA 00828 Warsaw Jana Pawla II15 Ilmet BusinessCenter Aerospatiale Matra POLAND Casablanca 12, rueLécrivain Maroc Aviation MOROCCO 15620 MexicoCityD.F. Internacionales Hangares Aeropuerto Hangar n°1 ZonaG Eurocopter MejicoS.A. MEXICO Barcelona Llobregat 147-149 8940 -Cornelladi Edif C-Carretera deHospitalet City Parc Ronda deDalt Matra deComunicaciones 28020 Madrid C/Orense 70-Piso11 Matra Datavision 28020 Madrid 15 Master's1-Planta Edificio General Peron, 38 Helicopteros Eurocopter 28015 Madrid 6A Calle SerranoJover n°5-Planta Aerospatiale Matra SPAIN Hatfiel 0028Pretoria Hatfiel rd Floor Miami, Florida33142 4101 NW29 Barfield Dallas Texas 5057 Keller Springs Intecom View,Mountain 940040 CA 1172 Castro Street Matranet Inc. 1810 Andover Tech Centre 1 Tech. Drive Andover Inc. Matra Datavision MD21701Maryland, 540 HighlandSt Frederick, Fairchild MatraAerospace Texas Grand Prairie,75051 2701 Forum Drive Corporation AmericanEurocopterA.E.C. Washington DC20005 Suite 800 THAILAND Taipei 205 Tuan Road HuaNorth Suite 1403 14, FloorBankTower TAIWAN 1101 15 1101 Aerospatiale MatraInc. UNITED STATES SG1 2ASStevenage Hertfordshire Gunnels Wood Road Matra Marconi SpaceUK Coventry CV47EZ Sir William Lyons Road Science Park University ofWarwick UKLtd Matra Datavision WC 2N5HR 11 Strand -London Matra BAe Dynamics London W1X3DB 16, OldBondStreet Aerospatiale MatraLtd UNITED KINGDOM Abu Dhabi P.O. Box 46429 Aerospatiale Matra UAE ABUDHABI GOP -06700 Ankara Turan EmeksizSokA3/3 Aerospatiale Matra TURKEY Bangkok 10330 Lumpini Pathumwan Floor Wireless Tower2/4 Nailert 5 Development International Matra Hachette th Street NW th Street th RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:31 Page 45

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Photos: Aerospatiale Matra Lanceurs - Aerospatiale Matra Missiles - Airbus Industrie - ATR - Ariaplan: F. Robineau - Bechennec - Eurocopter: G. Deulin - Fotogram-Stone: Tim Brown, John Chard, Myrleen Cate, K. Horgan, Derke O’Hara Stuart Westmorland - Guigui - Jullien - Kongsberg - Knapp - McCann - Matra BAE Dynamics - Matra Marconi Space - Matra Systèmes Information - Penna - Pix: Steve Bloom, Gérard Fritz, Fruchet - Erhardt Maurice - Sirpa Air Socata - Starsem - Stock Image - Tokunaga - Toineau. RA 99 - P34 à 44 - ANGLAIS 26/07/00 12:31 Page 46

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