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Société Anonyme Belgede Constructions Aéronautiques

Annual Report 2005

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2005 Report of the Board of Directors Ordinary General Meeting of 1st June 2006

Part One

Statutory Bodies 6Corporate Governance 7Company Profile 10

Management Report

Outstanding Events 13Key Figures 17Environment and Prospects for 2006 18Research and Development 21Financial Aspects 24Human resources 28Resolution Proposals 30

Part Two

Annual Accounts

Consolidated balance sheet i.a.w. IFRS 32Auditor’s Report 47Non consolidated balance sheet 50Auditor’s Report 74

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The positive trend in earnings continued in 2005, permitting the resumption of dividends to income shareholders.I express my sincere thanks to all staff members; their hard work has enabled us to improve our efficiency and hence to achieve the results required to expand our activities.A profit-sharing scheme, in accordance with the law of 22 May 2001 will permit everyone to partake in the fruits of their endeavours.

There are prospects for growth in our three sectors.

In the aerospace sector, the successive Ariane 5-ECA flights (10 T in geostationary orbit) qualify the launcher. Its competitiveness is moreover promoted by the measures adopted by all the actors. In a market that is seeing the signs of a recovery, it is a question of retaining market share in order to take profit from the performance of the new launcher and develop its production. Our company will be able to make the best possible use of our major stake in the Ariane family. The company has designed integrated nozzle positioning systems and structures for the Vega launcher (1.5 T in low orbit). The first components have been supplied and permitted the first test of a Vega engine to take place at the end of 2005. Commercial exploitation is scheduled for 2008. In Civil Aviation in which S.A.B.C.A. is involved, production rates are continuing to rise. The A380 programme in particular is proving to be a success since the first deliveries of the airliner to aviation companies will be made at the end of 2006 and more new orders have been placed at Airbus, bringing the number of units in the order book to 159 at the end of 2005. S.A.B.C.A. expects to achieve 10% turnover from the increasing volumes of work it obtains from the Dassault Aviation Falcon programmes. In the Defence sector, the Belgian market has stabilised, but long-term prospects continue to decline in terms of the maintenance and modernisation of fighters. The extension of the useful life of the existing equipment and its continuous upgrading are creating export opportunities and it is expected that new contracts will be signed in 2006.The A400M programme is progressing and the first deliveries of the flap mechanisms will take place in 2006 which will give S.A.B.C.A. an opportunity to carve a new niche for itself. Our subsidiary, SABCA Limburg has experienced rapid growth in its operations as a result of its participation in the A400M and A320 programmes. Managing this growth and the level of the dollar gave rise to difficulties in 2005 and measures were adopted immediately. They are expected to show influences in 2006. In view of the markets that offer prospects for growth, it is important for us to continue to focus on cost control and to offer our clients imaginative and competitive solutions. I am relying on the staff and partners of S.A.B.C.A. to work towards this objective and accordingly ensure the expansion of our company.

R. PELLICHEROChairman and Managing Director

“In view of the markets that offer good prospects for growth, it is important for us to continue to focus on cost control and to offer our clients imaginative and competitive solutions”.

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Annual R ep ort 2005

L. SegaLen

S. VoLLebregt

r. SpaanS

b. reVeLLin-FaLcoz

c. edeLStenne

r. peLLichero

J. detemmerman

Statutory Bodies

S.A.B.C.A. BoArd of direCtorS (and the expiry date of the mandate)

Chairman Remo PELLICHERO

Managing Director Remo PELLICHERO (2007)

DirectorsJacques DETEMMERMAn a (2009)Charles EDELSTEnnE, Chairman and Managing Director Dassault Aviation b (2010) Bruno REVELLIn-FALCOz, Vice-Chairman and Managing Director Dassault Aviation b (2010)Loïk SEgALEn, Chief Financial Officer Dassault Aviation, from 1 April 2005 b (2008)guy SERVOLLE, Managing Director for European Affairs Dassault Aviation, until 31 March 2005 b

Kees de KOnIng, President Stork Aerospace Industries, until 30 April 2005 c

Rob SPAAnS, President Stork Aerospace Industries, from 1 May 2005 c (2010)Sjoerd VOLLEBREgT, President, Chief Executive Officer Stork N.V. c (2010)

Honorary ChairpersonsBaron Jacques gROOTHAERTJacques DETEMMERMAn AuditornORBERT PInTIAux, Member of the Institute of Company Auditors

SABCA L imburg BoArd of direCtorS (and the expiry date of the mandate)

Chairman Remo PELLICHERO (2007)

DirectorsJacques DETEMMERMAn a (2007)Loïk SEgALEn, Chief Financial Officer Dassault Aviation, from 1 April 2005 b (2009)guy SERVOLLE, Managing Director European Affairs Dassault Aviation, until 31 March 2005 b Kees de KOnIng, President Stork Aerospace Industries, until 28 February 2005 c

Robert DOEKES, Executive Vice-President Finance Stork Aerospace Industries, from 1 March 2005 c (2010)

AuditorLuc TOELEn, member of the Institute of Company Auditors

a Independent Directorb Elected on presentation by the Dassault groupc Elected on presentation by the Stork group

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Corporate Governance

1. CompoSit ion of the BoArd of d ireCtorS of S.A.B.C.A .

1.1. On 1 January 2005, pursuant to the decision of the Board of Directors of 17 December 2004, Mr Remo Pellichero, assumed the chairmanship of the Board of Directors and replaced Mr Jacques Detemmerman who continued in his role of director. As stated in the Annual Report 2004, Mr Loïk Segalen, Chief Financial Officer Dassault Aviation, and Mr Rob Spaans, President of Stork Aerospace Industries, became directors in 2005 on 1 April and 1 May respectively.

1.2. There are currently seven members on the board; the list of these members, the description of their main role outside S.A.B.C.A. and the name of the principal shareholder on whose recommendation they were elected, can be found on page 6 of this Annual Report. Mr Remo Pellichero, Managing Director, is in charge of the day-to-day management. All the members of the Board, with the exception of the Managing Director, are non-executive directors.

1.3. The Board has not adopted any specific rules on a possible age limit for its members or any rules on the exercise of office of director.

2. funCtioning of the BoArd of d ireCtorS

2.1. Frequency of meetingsThe Board of Directors met three times in 2005. Meetings are held whenever they are required in the interest of the company. This frequency provides, among other things, an opportunity to examine the half-yearly (September) and annual (March)

accounts, as well as the investments (December).Meeting of 23 March: 7 participantsMeeting of 30 September: 6 participantsMeeting of 15 December: 7 participants

2.2. CompetenceIn the absence of statutory restrictions, the Board has all the powers that are assigned to it by law.

The Board determines the strategic and short-term objectives of the company and approves and determines their means of implementation with a view to achieving these objectives. At each meeting, the Board reviews, generally speaking, all the operational issues which are of interest to the company.

2.3. Control of day-to-day managementAt each meeting the Managing Director reports to the Board on the state of business, market research and market prospects, workload, financial situation and the opportunities for investment or disinvestment.

2.4. Invited participantsThe managers are traditionally invited to attend the Board Meetings.

2.5. Remuneration of the Board of Directors and the Auditor Remuneration for the Board of Directors, with the exception of the Managing Director, is set in accordance with the decisions taken at the general meetings in 1990 and 1995, and totals 96,518.00 euro for the financial year 2005.

The pay for the Auditor amounted to 39,662.96 euro for the same financial year.

The application at S.A.B.C.A. of corporate governance takes into account the size and situation of the company as well as the structure of its shareholding. As of January 1st 2006, the company has not yet published a corporate governance charter. Consultation is ongoing within the company and with its shareholders with a view to ensuring the best possible coordination.

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3. CommitteeS eStABLiShed By the BoArd of direCtorS

3.1. Standing CommitteeA Standing Committee has been in existence since 1970. This committee currently comprises the Chairman of the Board and Managing Director, the independent director and two directors chosen from those nominated on the recommendation of each of the principal shareholders, the financial manager and any adviser whom this committee deems advisable to appoint. The Standing Committee meets at least before each meeting of the Board of Directors and more frequently if required by circumstances. The Standing Committee assists the Board of Directors in its decision making.

3.2. Audit CommitteeThe Audit Committee comprises representatives from the two principal shareholders. It met twice in 2005 in order to examine the company accounts prior to publication of the half-yearly and annual results. Mr Loïk Segalen (Dassault Aviation) and Mr Robert Doekes (Stork Aerospace Industries) are on this committee.

4. dAy-to-dAy mAnAgement

The Board chooses the delegate for day-to-day management from among its members or from outside.Day-to-day management is exercised by the Managing Director (Articles 11 and 20 of the Articles of Association).

In 2005, the Board of Directors, on the recom-mendation of its Chairman, decided to create the position of Deputy Managing Director and to entrust Mr Daniel Blondeel, the current Director of the Brussels plant with this position. A Committee of Managers and a Management Committee, both chaired by the Managing Director, meet twice a month and contribute to the day-to-day management of the company.

The members of the Committee of Managers are: Mr Daniel Blondeel, Mr Raymond De Dobbeleer, Mr Marc Humblet and Mr Jean-Marie Lefèvre. The members of the Management Committee are: the members of the Committee of Managers plus the divisional managers for Quality Control, Human Resources and Information: Mr Jean-Michel Sonkes, Mr André ghysens and Mr Roland Soyez as well as the Adviser to Senior Management, Mr Armand Fournier.

5. AppropriAtion of retAined eArningS poLiCy

In its proposals to the general meeting, the Board of Directors aims to reconcile the traditional high level of investments needed for the aerospace operations undertaken by the company, on the one hand and a reasonable return on capital, on the other hand.

6. ShArehoLderS

Dassault Belgique Aviation, a virtual 100% subsidiary of the Marcel Dassault Industrial group, holds 52.96% of the capital of the company. The Dutch company Stork N.V. holds 43.57% of the capital, in particular through its subsidiary Fokker Aerospace BV.

7. CompoSit ion of the BoArd of d ireCtorS of SABCA L imburg

Mr Remo Pellichero has assumed the chairmanship of the Board of Directors. Mr Loïk Segalen, Chief Financial Officer of Dassault Aviation, and Mr Robert Doekes, Executive Vice President Finance of Stork Aerospace Industries, became directors in 2005, replacing Mr guy Servolle (Dassault Aviation) and Mr Kees de Koning (Stork Aerospace Industries).

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R. PELLICHEROChairman and Managing

Director

D. BLONDEELDeputy Managing Director

A. FOURNIERAdviser to Senior Management

A. GHYSENSHead of the Human

Resources Department

JM. SONKESHead of the

Quality Control Department

R. SOYEZHead of the

Information Department

M. HUMBLETMarketing and Sales

Manager

D. BLONDEELManager of the Brussels plant

JM. LEFEVREManager of the Charleroi plant

R. DE DOBBELEERFinancial Manager

5 S.A.B.C.A. plant in Brussels 5 S.A.B.C.A. plant in Charleroi 5 SABCA Limburg plant in Lummen

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• During its expansion, the S.A.B.C.A. group (S.A.B.C.A., Société Anonyme Belge de Construc-tions Aéronautiques and its subsidiary SABCA Limburg) diversified into the three markets which now constitute its core activities, namely, aerospace, civil aviation and defence markets. • The S.A.B.C.A. group conducts its activities on three operational sites spread over three regions of the country. It participates in Belgian and international programmes, as project manager, partner or subcontractor.

• In the aerospace and civil aviation sectors, the group researches, designs and manufactures structural components, equipped subassemblies and actuators. In the defence sector, it conducts its activities in the maintenance and modernisation of military aircraft, as well as in the production of sub-assemblies. The group has always been in a position to customise its products to meet the individual requirements of its clients. • The nature of its activities necessitates, in addition to manufacturing, considerable work in the areas of Research, Development and Industrialisation, as well as in Quality Assurance. All departments have a duty to ensure continuous compliance with the national and international standards required in the civil and military spheres. • The high level of skills required of our personnel are maintained by training programmes organised by the human resources department.

• The group is adapting to an increasingly globalised market. It works with numerous partners and has gradually established a network of international relations.

• The group is characterised by a flexibility of operation based on the autonomy of each of its

sectors and effective teamwork with its clients where appropriate, ranging from design to production, delivery and after-sales service.

• The group continuously focuses on cost control.

• The group pursues a policy of investing in and developing technologies in its areas of excellence and simultaneously enlists subcontractors, where appropriate.

Group Profile

Part One

Management Report

Outstanding Events Key Figures

Environment and Prospects for 2006Research and Development

Financial AspectsHuman Resources

Resolution Proposals

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Civ iL AviAtion

This sector is experiencing an upward trend in the level of activity for the majority of products developed and manufactured by our company. The order book for the A380 at Airbus reached 159 aircraft at the end of 2005. The aircraft was first flown in April 2005 and the schedule of tests in progress should result in certification of the passenger version for first delivery to the aviation companies at the end of 2006. At the end of 2005, 20 samples of the floor with which S.A.B.C.A. was commissioned, had been delivered to Airbus Saint nazaire. The development of the freight version was begun in 2005, delivery to Airbus of the first unit for this version is scheduled for March 2007.The vast assembly hangar of this floor at S.A.B.C.A. was inaugurated by his Royal Highness Prince Philippe of Belgium on 12 December 2005. The launch of a new aircraft in the Airbus range the A350 also deserves a mention. Following an initial invitation to tender, the S.A.B.C.A. was selected together with a partner to participate in predefini-tion studies for the undercarriage box in Toulouse. The selection of one supplier for this component will take place in the first six months of 2006.

In the Dassault business jet sector, S.A.B.C.A. is continuing its work on the production of structural components and accessories designed for these aircraft.

defenCe

In 2005, our Charleroi plant continued its work in the area of maintenance and modernisation of fighters, helicopters and accessories for the Belgian Armed Forces and foreign armed forces. 2005 saw in particular the delivery of the 1000th F16 that came out of the assembly, repair and mo-dernisation facilities in Charleroi.

The presence at the ceremony of the Defence Minister, Mr André Flahaut and the Chief of Defence, general August Van Daele is proof of the importance that they attach to the work undertaken in our factories for the aviation division of the Belgian Armed Force. The market for modernising fighters for export is picking up after a slowdown due to the international situation. A major contract is close to finalisation. Development of the flap deployment me-chanisms for the A400M entered its final phase in 2005. The detail drawings and nC-programing of the primary components have been launched. Production of the first components has started and delivery of the first set of mechanisms to Airbus is scheduled for September 2006.

AeroSpACe

The 17 Member States of the ESA held their Ministerial Conference on 5 and 6 December 2005. It concluded with substantial resources being made available to the European Space Agency for its future developments. Moreover, a preference for Europe was affirmed for the launch of the ESA satellites.

Ariane 52005 saw 3 successful launches of Ariane 5 in the generic version and 2 in the ECA version (10 tons in geostationary orbit). For the new fase of production for 30 rackets, S.A.B.C.A. produced structural elements (front and rear skirts) designed for the solid propellant boosters, nozzle activation group and engine activation group servocontrols and pneumatic snatch-off connectors in 2005. S.A.B.C.A. also produces and delivers the ARF (Acceleration Rocket Frame) for the ECA version for which an order was placed in 2005.Deliveries of the servo-motor hydraulic groups

Outstanding events 2005

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that had been used for Ariane 4 were continued to complete the nozzle activation system for the 3rd stage of Ariane 5. With regard to this last ECA version of Ariane 5, it should be noted that S.A.B.C.A will henceforth supply all the servocontrols for each stage of the launcher.

vegaThroughout 2005, S.A.B.C.A. continued deve-loping integrated positioning systems for TVC (Thrust Vector Control) nozzles for the four stages of this launcher (1.5 tons in low orbit). The company has in particular successfully com-pleted the challenging task involving delivery in 2005 of the TVCs designed for test bench firing of the z9 engine in the 2nd stage of the launcher. Advancements have also been made in the equipment for the engines at other stages, enabling the commencement of development tests. S.A.B.C.A. is broadening its technical responsibility for this launcher by designing and producing the positioning systems of the nozzles for the four stages as well as the supply of power to the entire system. Energy source, power electronics, control and servo digital electronics as well as the actuator are now part of the S.A.B.C.A. capacities. In 2005, S.A.B.C.A. also produced the first two inter-stage structures designed for the qualification tests.

SABCA L imburg

In 2005, SABCA Limburg continued its work on the Airbus A340-500/600 civil aircraft and Falcon business jets (top panels for horizontal tail assemblies, ventral surfaces for the Karman 6, and engine cowling for the Falcon 900).In 2005, the company obtained its first contract for composite components for Airbus single-aisle aircraft for which the delivery rates are high. The first deliveries took place in 2005.

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SABCA Limburg has also completed the industrialisation of specific composite components for the A400M and the first deliveries will take place in 2006.

The scope of the contracts awarded has resulted in the launch of an ambitious investment programme which will take several years to complete. It will be funded a.o. by selling unused ground.

fLuCtuAtionS in the priCe of the doLLAr

Although the company has been able to cope with the collapse of this currency due to a prudent policy of limiting exchange rate risks for its contracts in progress, the company remains very sensitive to the sustained low level of this currency in terms of obtaining new contracts.

fuSa (future Safe) AdAptAtion pLAn

Adaptation of the staff to the accessible market and a successful wage restraint policy have restored a positive financial situation that is required to keep the company going.

pLACement of orderS

The orders placed with S.A.B.C.A. attained 111 million euro in 2005, increasing the amount in the order book to 359 million euro. This order book includes a sum of 102 million euro for the contractual involvement by S.A.B.C.A. with firm orders placed with its clients and for which confirmation is only made shortly before deliveries.5 (from top to bottom): A�00M flap covering in Lummen,

milling the first A�00M component in Brussels and F�� modification programme (Falcon Star) in Charleroi.

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Key Figures

(In million EuR)

Turnover

net equity

Investments

Results- operational - financial - current - extraordinary items - before taxes - taxes - after taxes

Total dividends

Profit per share(EuR)

Profit per share for the financial year (EuR)

net dividend per share (EuR)

2001

144,43

48,47

30,37

4,572,437,000,857,85

- 4,063,79

1,34

2,92

1,58

0,42

2002

121,64

37,18

23,78

2,62- 0,06

2,56- 14,02- 11,46

0,17- 11,29

0

1,07

- 4,71

0

2003

98,63

33,57

19,62

3,240,283,52

- 7,36- 3,84

0,11-3,73

0

1,47

- 1,55

0

2004

103,05

36,45

14,75

3,74- 0,10

3,64- 0,47

3,170,093,26

0,38

1,52

1,36

0,12

2005

105,42

38,87

11,76

2,531,534,06

-0,503,560,023,58

1,15

1,69

1,49

0,36

CONSOlIDATED INCOME STATEMENT - ( IN MEUR) FOllOwING THE STANDARDS IFRS ( INTERNATIONAl F INANCIAl REPORTING STANDARDS)

31.12.2004 31.12.2005

Turnover 107,43 111,80 Result from continuing operations 1,78 2,27net finance result 0,89 1,61Result from continuing operations post finance result 2,67 3,88Income tax expense 0,39 -0,13Net result of de period 3,05 3,75Share of the group 3,05 3,75Share of the minority interests PM PM

Result Group per share 1,27 1,56(number of shares : 2.400.000)

Employees on 31/12 1.015 983

2. S.A .B.C.A .

1 . group S.A.B.C.A .

STATUTORy ACCOUNTS IN ACCORDANCE wITH BElGIAN ACCOUNTING PRINCIPlES

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AeroSpACe

Ariane 5The new PA fase of production of structural elements (front and rear skirts), for the nozzle and Engine Activation groups and the Servo-Engine Hydraulic groups for 30 Ariane 5 launchers, which started up in 2005, will be extended until 2010. The company has proposed numerous cost-cutting measures to its client and improvement in the technical data with a view to increasing the competitiveness and strength of the launcher; in particular for the ARF (Acceleration Rocket Frame), S.A.B.C.A. has proposed a new, more efficient and economical design.

vegaDelivery by S.A.B.C.A. to the project manager at E.L.V. (Italy) of the structure for the first stage and the TVC (Thrust Vector Control) systems designed

for the flight model will take place in 2006. The qualification flight of Vega is scheduled for the end of 2007, commercial exploitation will begin in 2008 and will be entrusted to Arianespace. From this date onwards, production will not only have an impact on the activity at the S.A.B.C.A. site in Brussels (skirts and TVC for the engines for the four stages) but on the Charleroi site as well, which will be responsible for applying thermal protection.

Civ iL AviAtion

The growth in output set in 2005 for the aircraft in the Airbus range and Dassault Aviation business jets will continue in 2006, and will have a positive ef-fect on production and assembly operations for the majority of programmes in progress at S.A.B.C.A. S.A.B.C.A. will channel its development and industrialisation efforts on upgrades of the Airbus family, mainly the HgW (High gross Weight)

Environment and Prospects for 2006

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version of the A340-500/600 and the A380 freight version. S.A.B.C.A. has been selected to participate in the predefinition phase of the A350 programme. This will, however, require a considerable amount of work if it is to be successful. Cooperation with Messier Bugatti on the direct command low output valve used in the bra-king circuit for the A340-500/600 and the A320 could be extended to the new Airbus airliners.

defenSe

Exporting our expertise in the areas of main-tenance and modernisation of fighters is vital for our company, particularly taking into account the drop in orders as a result of the reform of the Belgian Armed Forces. The helicopter replacement programme for the Belgian Armed Forces continues to be of im-portance to our company due to its potential for generating direct or indirect offsets. 2006 will see the commencement of produc-tion for our company of the first flap mechanisms for the A400M. Firm orders for aircraft at the end of 2005 were 192 and 3 at the negotiation stage.

5 A3�0

5 Dassault executive aircraft

5 A�00M

5 NH�0

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SABCA L imburg

Our SABCA Limburg plant should successfully complete the challenge of managing for the first time the mass production for the A320 and meet the start-up costs for such large-scale production. The new contracts for the A400M will increase load on research and industrialisation. Meeting our commitments will require a great deal of hard work

turnover

Turnover for 2006 is expected to be higher than for 2005.

5 ARF (Acceleration Rocket Frame)

5 New mechanical machining Centre in Brussels

5 Turning a shroud for a GEnX engine

5 Covering a flap for the A�00M

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Research and Development

in mechanism technology and managing composites. This will result in new niches.

NEURON Belgium intends to participate in the Eu-ropean drone demonstrator programme launched by France to develop a uCAV (unmanned air vehicle). S.A.B.C.A. will collaborate with other Bel-gian and foreign companies in this programme and has proposed electronic flight controls, at the request of Dassault Aviation. The government is expected to give the re-quisite authorisation for Belgium to participate in the programme any time now.

AeroSpACe ACtiv it ieS

Ariane5Design changes following the A5 generic and A5 ECA flights were completed in 2005. S.A.B.C.A. is participating in the consolidation programme (ACEP – Ariane Consolidation & Evolution Preparation) of the ESA and after signing the MOA with the instructing party in 2005, it is continuing its

Civ iL AviAtion ACtiv it ieS

A340-500/600WP15The certification documents for the versions 500 and 600 were supplied in 2005.

A380WP12223Definition and dimensioning of the freight version is in progress.

PiezoelectricDirectDriveValveThis programme to develop a piezoelectric di-rect drive valve is part of the COVAn (new Aircraft Flight Control) programme managed by Airbus France. Its objective is to evaluate the piezoe-lectric motor technology for hydraulic servovalves in civil aircraft. The prototype was assembled at the end of 2005 and will undergo initial testing during the first six months of 2006.

defenCe ACtiv it ieS

A400MResearch and development activities undertaken to meet the requirements of the contracts awarded are strengthening the competence of the company

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work in progress by researching and proposing design developments.

FLPP(FutureLauncherPreparatoryProgram)This programme is still in a transitional phase and S.A.B.C.A. proposes that it participates in specific preliminary studies designed for experimental vehicles and new generation launchers (ngL).

EXPERTIn 2005, S.A.B.C.A. collaborated on the development of the pre-chilling structure of an experimental vehi-cle designed to re-enter the atmosphere. Production of the first prototype is scheduled for 2006.

VEGALAUNCHERThe development, qualification and prototyping of the nozzle orientation systems for the four stages of the launcher will continue, extending the know-how of S.A.B.C.A. to the complete process of positioning the nozzles.

ORIENTATIONSYSTEMFORAHIGH-PERFORMANCEELECTRICNOZZLEFORASOLIDROCKETPROPELLANTOFAHEAVYLAUNCHERThis important programme is being conducted as part of the gSTP3 programme of the ESA. It is concerned with control and power electronics. The prototypes are scheduled for the first six months of 2006.

pLAn «marshal l»priority meASureS for the future of WALLoniA

S.A.B.C.A. has enrolled in this plan and has proposed several innovative projects in collaboration with other actors in the sector. The Walloon government has announced rigorous selection criteria. Our participation will depend on these criteria and the budget resources provided by the Public Authorities.

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1. S.A .B.C.A . group (pursuant to the ifrS)

The S.A.B.C.A. achieved a turnover of 112 million EuR; it was 107 million EuR in 2004. The operating result is 2.27 million EuR, i.e. an increase of 0.49 million EuR. In 2004, this result was affected by the reduction in the value of our Arianespace shares. net financial results are 1.61 million EuR, i.e. an increase of 0.72 million EuR. The increase in average revenue and the effect of forward covers for uSD are the reasons. The operating result after the financial results thus totals 3.88 million EuR, i.e. an increase of 1.21 million EuR. The group records a net profit of 3.75 million EuR for 2005, compared with a profit of 3.05 million EuR in 2004.

2. S.A.B.C.A. StAtutory ACCountS ( in accordance with the Belgian accounting principles)

Turnover increased slightly to 105 million EuR. The operating result totals 2.53 million EuR in 2005; it was 3.74 million EuR last year. This fall is explained by the “final results” principle as well as by the effect of the developments associated with the start-up of new programmes. The financial result comes to 1.53 million EuR. The average level of revenue and forward covers are the reasons. Extraordinary items for 2005 include a reduction of 0.60 million EuR for our investment in SABCA Limburg, following the bearing by this plant of the risks inherent in the development of new programmes. Profit for the financial year 2005 amounts to 3.58 million EuR, compared with 3.26 million EuR in 2004.

Financial Aspects

354359

100

186136

321

253234

0

50

100

150

200

250

300

350

400

2001 2002 2003 2004 2005

224

111

27%

66%

7%

25


Belgium

Europe

Outside Europe

Order Book

Orders received

g Geographical distribution of sales

g Orders (Million EUR)

4235

23

49

32

19

41

2831

2136

43 3536 29

0

10

20

30

40

50

2001

2002

2003

2004

2005

2001

2002

2003

2004

2005

2001

2002

2003

2004

2005

24,3

14,5915,96

11,2

5,07

9,19

3,63

1,951,6

0,031

00

5

10

15

20

25

30

2001 2002 2003 2004 2005

0,04

3,83

7,89

2�


Defence Space Civil Aviation

Financial

Intangible

Equipment

g Investments (Million EUR)

g Turnover according to field of activity (in %)

2�


Human Resources

perSonneL trendS

The group employed 983 people as at 31 December 2005. This development is due to the implementation of the FuSa (Future Safe) plan. Alternative employment in Brussels was able to be found for members of the Charleroi workforce also as part of the FuSa plan and thanks to appropriate training programmes. The optimalisation of the benchmark skills that was begun in 2004 was continued in 2005; this important programme has enabled the positions within the company to be better described and the skills required for the jobs to be defined in details.

AdAptAtion of humAn reSourCeS

Due to its development, S.A.B.C.A. occasionally requires qualification profiles that differ from the existing profiles within the company. External recruitment is essential. To meet these require-ments, S.A.B.C.A. has adopted a variety of measu-res aimed at increasing its visibility, in particular through contacts made with schools, collaboration with professional training institutions, and relations

maintained with specialist media on the labour market. This has resulted in a great number of sponta-neous applications which is proof of the company’s proactive and dynamic image.

trAining

The year 2005 marks an additional step towards the integration of training in the Human Resources process. From now on training requirements will be more closely linked to the benchmark skills deter-mined by the operating managers. Recruitment in 2005 was accompanied by induc-tions and training measures linked to the develop-ment of key skills. Transfers of staff between branches has been dealt with training and retraining programmes developed in cooperation with specialist training centres. The focus on vocational training in all techni-cal sectors was continued in addition to seminars on safety, management, languages and office proce-dures.

1015 9831169

12181183

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005

2�


Technological developments and corporate projects were specifically incorporated in internal as well as external training courses.

Synergy With SChooLS

In addition to its presence on the labour market, S.A.B.C.A. conveys its message to the “new gene-ration” through encounters in schools and univer-sities and by organising traineeships or vocational courses.

heALth And SAfety

Throughout 2005, the Management Board conducted a campaign to make members of the workforce aware of the detrimental effects to the health of smoking on the premises. This campaign prepared the way for the introduction of a complete ban on smoking in the workplace, in accordance with Belgian legislation. The measure came into force on first January 2006. Further, the focus has also been on the importance of workers protecting their eyes and hands in the workshops.

g Personnel trends

30


StAtutory AppointmentS

Mr guy PIRAS was nominated as Director by the Board of Directors on 29 March 2006, in order to fill the vacancy due to the resignation of Mr Bruno REVELLIn-FALCOz.

His definitive nomination will be proposed to the Meeting.

AppropriAtion of retAined eArningS

The allocation account included in the annual accounts submitted to the meeting is set out as follows:

using the power granted to it by Article Twenty nine of the Articles of Association and in compliance with it traditional policy that aims to ensure a fair distribution between the return on capital and the self-financing capacity, and taking the short-term needs of the company into consideration, the Board proposes that the Meeting approve the following appropriations:

Subject to approval of the allocation by the Meeting, the net dividend of 0.36 EuR shall be payable against submission of coupon no. 12 presented at the Fortis Bank from 16 June 2006 onwards.

profit ShAring

The company is examining the possibility of involving its personnel in profit sharing , according to the law of 22 May 2001, and negotiations are currently in progress on this matter.This law limits the amount of profit sharing to 20% of the profit for the financial year after taxes.Profit distribution could accordingly be modified by reducing the earnings carried forward increasing short-term liabilities..

1. Profit for the financial year to be appropriated EuR 3,572,527.25

2. Profit carried forward from the previous financial year EuR 9,994,187.09

3. Profit to be appropriated EuR 13,566,714.34

Resolution proposals fo r presenta t ion to the Genera l Meet ing

1. Profit to be carried forward EuR 12,414,714.34

2. Return on capital EuR 1,152,000.00

or for each of the 2,400,000 shares:

a gross dividend of EuR 0.48

a standard securities deduction of EuR 0.12

a net dividend of EuR 0.36

3. Other beneficiaries (see the paragraph on ‘profit sharing’ below)

31


Part two

Annual Accounts

Consolidated balance sheet i.a.w. IFRS* Auditor’s Report

* IFRS : International Financial Reporting Standards

32


Consolidated balance sheetFollowing the standards IFRS (International Financial Reporting Standards)

86,020 80,991

36,926 32,973

48,316 47,274

118 61

Other non-current financial assets 660 683

127,736 128,346

20,262 18,785

Contracts in progress 19,256 20,621

Trade receivables 30,138 29,006

2,610 2,653

Cash and cash equivalents 54,846 56,764

Deferred liabilities 624 517

Total assets 213,756 209,337

43,179 39,818

43,179 39,817

PM 1

120,666 122,899

36,775 39,094

Amounts payable at long term 83,891 83,805

38,803 35,558

2,281 1,429

Trade payables 26,409 24,277

Other current payables 10,113 9,852

11,108 11,062

Total liabilities 213,756 209,337

Provisions and deferred taxation

Current liabilities

Financial debts in short-term

Accrued liabilities

Capital and reserves

Minority interests

Non-current liabilities

31.12.05

Non-current assets

Other receivables

Total equity

Investments in related parties

Assets

Liabilities

Current assets

Inventories

Intangible assets

Property, plant and equipment

(in thousand EUR)

31.12.04

33


Consolidated income statement

(in thousand EUR)

118,897 125,094

Turnover 111,799 107,425

Increase (+), decrease (-) in contracts in progress (1,161) (606)

Own construction capitalised 6,617 9,527

Other operating income 1,642 8,748

(-) (116,634) (123,320)

Raw materials and consumables used 20,448 21,204

Services and other goods 35,615 31,952

Wage and salaries, social security costs and pensions 55,862 54,690

Depreciation and amortisation of which write down of intangible and tangibleassets

7,186 15,562

Depreciation in amounts written off stocks, contracts in progress and tradedebtors

(922) 2,391

Provisions for liabilities and charges (2,907) (4,899)

Other operating expenses 1,352 2,420

(+) 2,263 1,774

3,637 4,934

Income from current assets 1,059 447

Other finance income 2,578 4,487

(-) (2,024) (4,042)

Debt charges 69 77

Other finance costs 1,955 3,965

(+) 3,876 2,666

(130) 387

(+) 3,746 3,053

Share of the Group 3,746 3,053

Share of the minority interests PM PM

Income tax expense

Finance income

31.12.0431.12.05

Profit of the period

Operating income

Operating expenses

Profit from continuing operations

Finance costs

Profit from continuing operations post finance result

34


(in thousand EUR)

Assets

Non-current assets 86,020

Intangible assets 36,926

Property, plant and equipment 48,316

Investments in related parties and other non-current financial assets 778

Current assets 127,736

Inventories 20,262

Contracts in progress 19,256

Trade receivables 30,138

Other receivables 2,610

Cash and cash equivalents 54,846

Deferred liabilities 624

Comments on the consolidated balance sheet

This item includes the activiation of the expenses of development relating to the programs of civilaviation for which Group S.A.B.C.A. is a partner.

Light growth due to the investments realized in our subsidiary SABCA Limburg.

Increase of the participation of the Group in FLABEL CORPORATION S.A.

Increase following the purchases relating to the civil programs.

Decrease noted in space applications works.

Light increase resulting of invoicing at the end of the exercise.

Reduction due to the financing of tangible assets in our subsidiary SABCA Limburg.

35


Liabilities

Total equity 43,179

Capital and reserves 43,179

Result of the period 2005 3,746

Dividends 2004 -384

Movement during the period 3,362

Non-current liabilities 120,666

Provisions and deferred taxes 36,775

Amounts payable at long term 83,891

Current liabilities 38,803

Financial debts in short-term 2,281

Trade payables 26,409

Other current payables 10,113

Accrued liabilities 11,108

Reduction due to the decrease for costs related to the restructuration plan.

The advance payments received from the authorities balance the reduction of the customers advances.

Increase following the lengthening of the terms of payment for the A330-340 programs.

Increase due to acquisitions at the end of exercise.

Light growth generated by the refundings of the advance payments to the authorities relating tocivil programs.

36


STATEMENT OF CHANGES IN EQUITY(in thousand EUR)

CapitalRevaluation

reservesOrdinaryreserves

Consolidatedreserves

Resultcarriedforward

Resultof theperiod

ReservesIFRS

TOTALGROUP

Minorityinterest

At 31/12/2004 12,400 525 14,145 2,479 3,900 3,316 3,052 39,817 PM

Dividends -384 -384

Transfer of results 2,932 -2,932

3,364 3,364 PM

Fair value adjustments

- Intangible assets 6,262 6,262

- Property, plant & equipment -522 -522

- Contracts in progress -4,637 -4,637

-525 -525

- Deferred taxe IFRS 2005 -196 -196

At 31/12/2005 12,400 525 14,145 2,479 6,832 3,746 3,052 43,179 PM

CASH FLOW STATEMENT(in thousand EUR)

Cash flows relating to operating activities 9,828 49,154

Consolidated profit 3,746 3,053

Depreciation and amortisation 7,186 15,563

Change in working capital requirements 1,129 7,649

Change in minority interests P.M. P.M.

Change in provisions -2,319 -5,938

Change in amounts payable after more than one year 86 28,827

Net cash flows relating to investing activities -12,214 -14,851

Acquisition, sales of intangible, tangible and financial non-current assets -12,214 -14,851

Net cash flows relating to financing activities 468 -1,462

Change in short-term financial liabilities 852 -1,462

Dividends paid to shareholders -384

Net increase (decrease) in cash and cash equivalents -1,918 32,841

Net cash and cash equivalents, beginning of the period 56,764 23,923

Net cash and cash equivalents, ending of the period 54,846 56,764

31.12.04

Result of the period before fairvalue adjustments

- Provisions(increase - decrease)

31.12.05

NOTES(Except contrary indication, all the data are in thousands of euros)

INFORMATION ABOUT CONSOLIDATION

Subsidiary SABCA LimburgDellestraat, 32, 3560 - LUMMENcompany number : BE 0438.215.146

% of ownership interest 99.99

Capital 12,394,676.24 EUR

EMPLOYMENT

Total in units FTE * Total in units FTE *

Average number of employees 1,001.2 979.9 1,025.2 1,007.6

Total employment at the end of the period 983.0 960.3 1,015.0 994.8

* FTE = full time equivalent

PROPERTY, PLANT AND EQUIPMENT NOTE

Land andbuildings

Plant, machineryand equipment

Furniture andvehicles

Leaseholdimprovements

Assets underconstruction and

advancepayments

TOTAL

Beginning balance

Gross amount 52,426 80,310 15,017 304 148,057

Depreciation -43,224 -76,154 -13,966 -19 -133,363

Adjustments IAS/IFRS- Value 11,288 11,288

- Fair value adjustments 18,138 3,154 21,292

Beginning balance 27,340 18,598 1,051 285 47,274

Movements during the periodAcquisitions 822 2,453 1,342 142 722 5,481

Disposals -1,856 -956 -2,812Transfers from oneheading to another 16 110 -126

Depreciation expenses -1,318 -1,915 -602 -4 -80 -3,920

Depreciation on disposals 1,856 956 2,812

Depreciation transfers -1 -10 11

Adjustments IAS/IFRS -183 -339 -522

Ending balance

Gross amount 53,264 81,017 15,404 142 900 150,727

Depreciation -44,543 -76,223 -13,612 -4 -88 -134,470

Adjustments IAS/IFRS

- Third party assets 11,288 11,288

Fair value adjustments 17,955 2,815 20,770

Ending balance 26,676 18,897 1,792 139 812 48,316

Period Preceding period

37


NOTES(Except contrary indication, all the data are in thousands of euros)

INFORMATION ABOUT CONSOLIDATION

Subsidiary SABCA LimburgDellestraat, 32, 3560 - LUMMENcompany number : BE 0438.215.146

% of ownership interest 99.99

Capital 12,394,676.24 EUR

EMPLOYMENT

Total in units FTE * Total in units FTE *

Average number of employees 1,001.2 979.9 1,025.2 1,007.6

Total employment at the end of the period 983.0 960.3 1,015.0 994.8

* FTE = full time equivalent

PROPERTY, PLANT AND EQUIPMENT NOTE

Land andbuildings

Plant, machineryand equipment

Furniture andvehicles

Leaseholdimprovements

Assets underconstruction and

advancepayments

TOTAL

Beginning balance

Gross amount 52,426 80,310 15,017 304 148,057

Depreciation -43,224 -76,154 -13,966 -19 -133,363

Adjustments IAS/IFRS- Value 11,288 11,288

- Fair value adjustments 18,138 3,154 21,292

Beginning balance 27,340 18,598 1,051 285 47,274

Movements during the periodAcquisitions 822 2,453 1,342 142 722 5,481

Disposals -1,856 -956 -2,812Transfers from oneheading to another 16 110 -126

Depreciation expenses -1,318 -1,915 -602 -4 -80 -3,920

Depreciation on disposals 1,856 956 2,812

Depreciation transfers -1 -10 11

Adjustments IAS/IFRS -183 -339 -522

Ending balance

Gross amount 53,264 81,017 15,404 142 900 150,727

Depreciation -44,543 -76,223 -13,612 -4 -88 -134,470

Adjustments IAS/IFRS

- Third party assets 11,288 11,288

Fair value adjustments 17,955 2,815 20,770

Ending balance 26,676 18,897 1,792 139 812 48,316


38


INTANGIBLE ASSETS NOTE

Beginning balanceGross amount 112,669Amortisation -94,946Adjustments IAS/IFRS- Fair value adjustments 15,250

Beginning balance 32,973

Movements during the periodAcquisitions 7,900

Amortisation expenses -10,291Adjustments IAS/IFRS 6,344

Ending balanceGross amount 120,569Depreciation -105,237Adjustments IAS/IFRS- Fair value adjustments 21,594

Ending balance 36,926

FINANCIAL ASSETS NOTE

PeriodPreceding

period

Shares held by S.A.B.C.A.Affiliated enterprises- S.A.B.C.A. (CDR) 11 11

- FLABEL Corporation 89 51

Other participations- Arianespace Participations 585 585

- Others PM PM

Shares held by SABCA Limburg- FLABEL Corporation 18 24

PROVISIONS NOTE

Provisions forpension &equivalent

Restructuringprovisions

Legalproceedingprovisions

Onerouscontractsprovisions

Otherprovisions

TOTAL

Beginning balance 10,361 6,160 28 2,294 20,715 39,558

Fair value adjustments and reprocessingIFRS 5,655 -2,167 -5,714 -2,226

Provisions, beginning balance 16,016 6,160 28 127 15,001 37,332

Increase 3,343 2,662 289 6,294

Decrease -1,897 -4,224 -2,294 -868 -9,283

Other movementsFair value adjustments and reprocessingIFRS -45 -21 579 513

Ending balance 11,807 1,936 28 2,662 20,136 36,569


Provisions, ending balance 17,417 1,936 28 474 15,001 34,856

Research and developmentexpenses

HEDGING AND RISKS NOTE

The exposure on USD is covered by hedging : (in thousand USD)

S.A.B.C.A. 13,250 in 20065,000 in 2007

SABCA Limburg 5,273 in 2006

BORROWINGS AND PAYABLES NOTE

up to1 year

1 to 5years

over5 years

TOTALup to1 year

1 to 5years

over5 years

TOTAL

I.

Leases 19 115 134

Bank overdrafts 2,281 2,281 1,429 1,429

II. Other information

19 115 134

24 126 1505 11 16

III. Trade and other payablesaccording to their maturity

Trade payables 14,592 14,592 12,419 12,419

Advances received 11,817 23,450 35,267 11,859 20,945 4,039 36,843

Other payables 10,094 2,841 57,485 70,420 9,851 4,355 54,466 68,672

- of which payables to employees 5,199 5,268

49,221 42,064

INVENTORIES NOTE

Beginning balanceGross amounts 18,785 52,620 71,405

Fair value adjustments -31,999 -31,999

Net value at the beginning 18,785 20,621 39,406

Movements during the periodChange work in progress 2,788 2,788

Change stocks 1,477 1,477

Depreciation 522 522


Ending balanceGross amounts 20,262 55,930 76,192


Net value at the ending 20,262 19,256 39,518

Interest-bearing borrowings according to their maturity


Stocksmerchandise and raw

materialsWork in progress

Total stocksand W.I.P.

Finance leases, minimum lease paymentspayabel, present value

- minimum lease payments payable, gross- minimum lease payments payable, interest

- of which payables to Public Administrations

The difference between the rate at the end of the period and the hedging rate is booked in the statutory P/L of the two companies.

39


INTANGIBLE ASSETS NOTE

Beginning balanceGross amount 112,669Amortisation -94,946Adjustments IAS/IFRS- Fair value adjustments 15,250

Beginning balance 32,973

Movements during the periodAcquisitions 7,900

Amortisation expenses -10,291Adjustments IAS/IFRS 6,344

Ending balanceGross amount 120,569Depreciation -105,237Adjustments IAS/IFRS- Fair value adjustments 21,594

Ending balance 36,926

FINANCIAL ASSETS NOTE

PeriodPreceding

period

Shares held by S.A.B.C.A.Affiliated enterprises- S.A.B.C.A. (CDR) 11 11

- FLABEL Corporation 89 51

Other participations- Arianespace Participations 585 585

- Others PM PM

Shares held by SABCA Limburg- FLABEL Corporation 18 24

PROVISIONS NOTE

Provisions forpension &equivalent

Restructuringprovisions

Legalproceedingprovisions

Onerouscontractsprovisions

Otherprovisions

TOTAL

Beginning balance 10,361 6,160 28 2,294 20,715 39,558


Provisions, beginning balance 16,016 6,160 28 127 15,001 37,332

Increase 3,343 2,662 289 6,294

Decrease -1,897 -4,224 -2,294 -868 -9,283

Other movementsFair value adjustments and reprocessingIFRS -45 -21 579 513

Ending balance 11,807 1,936 28 2,662 20,136 36,569


Provisions, ending balance 17,417 1,936 28 474 15,001 34,856

Research and developmentexpenses

HEDGING AND RISKS NOTE

The exposure on USD is covered by hedging : (in thousand USD)

S.A.B.C.A. 13,250 in 20065,000 in 2007

SABCA Limburg 5,273 in 2006

BORROWINGS AND PAYABLES NOTE

up to1 year

1 to 5years

over5 years

TOTALup to1 year

1 to 5years

over5 years

TOTAL

I.

Leases 19 115 134

Bank overdrafts 2,281 2,281 1,429 1,429

II. Other information

19 115 134

24 126 1505 11 16

III. Trade and other payablesaccording to their maturity

Trade payables 14,592 14,592 12,419 12,419

Advances received 11,817 23,450 35,267 11,859 20,945 4,039 36,843

Other payables 10,094 2,841 57,485 70,420 9,851 4,355 54,466 68,672

- of which payables to employees 5,199 5,268

49,221 42,064

INVENTORIES NOTE

Beginning balanceGross amounts 18,785 52,620 71,405


Net value at the beginning 18,785 20,621 39,406

Movements during the periodChange work in progress 2,788 2,788

Change stocks 1,477 1,477

Depreciation 522 522


Ending balanceGross amounts 20,262 55,930 76,192


Net value at the ending 20,262 19,256 39,518

Interest-bearing borrowings according to their maturity


Stocksmerchandise and raw

materialsWork in progress

Total stocksand W.I.P.

Finance leases, minimum lease paymentspayabel, present value

- minimum lease payments payable, gross- minimum lease payments payable, interest

- of which payables to Public Administrations

The difference between the rate at the end of the period and the hedging rate is booked in the statutory P/L of the two companies.

40


CASH AND CASH EQUIVALENTS NOTE

Short-term deposits 52,400 52,682

Bank balances 2,439 4,072

Cash and other 7 10

54,846 56,764

AMOUNTS RECEIVABLE WITHIN ONE YEAR NOTE


Other receivables 2,610 2,653

GOVERNMENT GRANTS NOTE

Carrying amount of capital grants recognised 2,685 2,501

Amount of income grants netted against reported expenses -2,392 -2,166

Assets Liabilities Assets Liabilities

1,919 1,762


Provisions 1,956 2,059

Post employment benefit obligations 2,003 2,048

Revaluation of non-current assets 823 823

Other 3,336 1,163





DEFERRED TAXATION ON BALANCE SHEET

RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES NOTE

DEFINED BENEFIT PLANS


Present value of wholly or partially funded obligation 13,333 12,470

Fair value of plan assets (-) -5,596 -4,889

Present value of wholly unfunded obligation 7,737 7,581

Unrecognised actuarial gains (losses) -777 -886

6,960 6,695

1,025 948

Current service cost 826 701

Interest cost 586 550

Expected return on plan assets (-) -204 -173

Contributions by personnel (-) -183 -130

Defined benefit plan obligation, beginning balance 6,695 6,335

Contributions paid (-) -760 -588

Expense recognised 1,025 948

Defined benefit plan obligation, ending balance 6,960 6,695

Principal actuarial assumptions

Discount rate used 4.50 4.50

Expected return on plan assets 4.00 4.00

Expected return of salary increase 4,1 / 3,25 4,1 / 3,25

Future defined benefit increase 2.00 2.00Expected rate of return on reimbursement rights recognised as anasset N/A N/A

Medical cost trend rate N/A N/A

Movements in defined benefit plan obligation (asset)

Components of defined benefit plan assets and liabilities

Defined benefit plan obligation (asset), total

Expense recognised in income statement for defined benefit plan

41


CASH AND CASH EQUIVALENTS NOTE

Short-term deposits 52,400 52,682

Bank balances 2,439 4,072

Cash and other 7 10

54,846 56,764

AMOUNTS RECEIVABLE WITHIN ONE YEAR NOTE


Other receivables 2,610 2,653

GOVERNMENT GRANTS NOTE

Carrying amount of capital grants recognised 2,685 2,501

Amount of income grants netted against reported expenses -2,392 -2,166

Assets Liabilities Assets Liabilities

1,919 1,762


Provisions 1,956 2,059

Post employment benefit obligations 2,003 2,048

Revaluation of non-current assets 823 823

Other 3,336 1,163





DEFERRED TAXATION ON BALANCE SHEET

RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES NOTE

DEFINED BENEFIT PLANS


Present value of wholly or partially funded obligation 13,333 12,470

Fair value of plan assets (-) -5,596 -4,889

Present value of wholly unfunded obligation 7,737 7,581

Unrecognised actuarial gains (losses) -777 -886

6,960 6,695

1,025 948

Current service cost 826 701

Interest cost 586 550

Expected return on plan assets (-) -204 -173

Contributions by personnel (-) -183 -130

Defined benefit plan obligation, beginning balance 6,695 6,335

Contributions paid (-) -760 -588

Expense recognised 1,025 948

Defined benefit plan obligation, ending balance 6,960 6,695

Principal actuarial assumptions

Discount rate used 4.50 4.50

Expected return on plan assets 4.00 4.00

Expected return of salary increase 4,1 / 3,25 4,1 / 3,25

Future defined benefit increase 2.00 2.00Expected rate of return on reimbursement rights recognised as anasset N/A N/A

Medical cost trend rate N/A N/A

Movements in defined benefit plan obligation (asset)

Components of defined benefit plan assets and liabilities

Defined benefit plan obligation (asset), total

Expense recognised in income statement for defined benefit plan

42


APPLICATION OF IFRS STANDARDS(IFRS: International Financial Reporting Standards)

Like all listed European companies, S.A.B.C.A. is required to apply the new IFRS accounting standards to itsconsolidated accounts from the financial year 2005 onwards.

Implementation of these new standards adheres to the principle of prudence applied by S.A.B.C.A. whendrawing up its accounts. The group has chosen to make use of the exemption allowing it to substitute the fairvalue of certain capital assets for their cost on the IFRS transition date, for plots of land but not for other capitalassets.

The principal aspects of the IFRS standards applicable to S.A.B.C.A. are outlined below.

A detailed and annotated review of the differences between Belgian standards (Belgian Gaap) and the IFRSframe of reference affecting the opening equity capital at January 1st 2004 was published in the press release ofSeptember 30th 2005 relating to the period ending on June 30th 2005.

IAS 2 – Inventories

Inventories are stated at the lower of cost and net realisable value.Cost of inventories comprises the purchase, conversion and other costs incurred to bring the inventories to theirpresent location and condition.Cost of inventories is determined by the first-in, first-out method (FIFO).Provisions for amounts written off on stocks are accrued in charges of the exercise:- for parts related to production or maintenance programs, unusable or whose tolerances, norms, technicalconfiguration, conception have changed;- for parts not moved during the 24 previous months.Amounts written off will be decreased in case of later use of the non destructed parts.

IAS 7 – Presentation of financial statements

Receivables and payablesReceivables and payables are stated at the balance sheet at their nominal value.The credits are the subject of reductions of value if their refunding at the limit, is in all or partly, dubious orcompromise.The accounting of the reductions of value will be done on individualised basis.

Cash and cash equivalentsCash includes cash in hand and deposits with banks.Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts ofcash and are not subject to an important risk of change in value.Cash and cash equivalents are carried on the balance sheet at nominal value.

DividendsDividends are recorded in the income statement in the year of their attribution.Dividends declared in respect of the period are no more accrued on the balance sheet as short-term payablesbut included at the end of the financial year in a special heading of shareholders’ equity.

Minority interestsMinority interests consist in third party shareholder’s interests in the equity of subsidiaries and the appropriateproportion of profits or losses.

IAS 10 – Subsequent events

Post balance sheet events that contribute to confirm changes in circumstances or position which existed at thebalance sheet date (adjusting events) are reflected in the financial statements.

43


APPLICATION OF IFRS STANDARDS(IFRS: International Financial Reporting Standards)

Like all listed European companies, S.A.B.C.A. is required to apply the new IFRS accounting standards to itsconsolidated accounts from the financial year 2005 onwards.

Implementation of these new standards adheres to the principle of prudence applied by S.A.B.C.A. whendrawing up its accounts. The group has chosen to make use of the exemption allowing it to substitute the fairvalue of certain capital assets for their cost on the IFRS transition date, for plots of land but not for other capitalassets.

The principal aspects of the IFRS standards applicable to S.A.B.C.A. are outlined below.

A detailed and annotated review of the differences between Belgian standards (Belgian Gaap) and the IFRSframe of reference affecting the opening equity capital at January 1st 2004 was published in the press release ofSeptember 30th 2005 relating to the period ending on June 30th 2005.

IAS 2 – Inventories

Inventories are stated at the lower of cost and net realisable value.Cost of inventories comprises the purchase, conversion and other costs incurred to bring the inventories to theirpresent location and condition.Cost of inventories is determined by the first-in, first-out method (FIFO).Provisions for amounts written off on stocks are accrued in charges of the exercise:- for parts related to production or maintenance programs, unusable or whose tolerances, norms, technicalconfiguration, conception have changed;- for parts not moved during the 24 previous months.Amounts written off will be decreased in case of later use of the non destructed parts.

IAS 7 – Presentation of financial statements

Receivables and payablesReceivables and payables are stated at the balance sheet at their nominal value.The credits are the subject of reductions of value if their refunding at the limit, is in all or partly, dubious orcompromise.The accounting of the reductions of value will be done on individualised basis.

Cash and cash equivalentsCash includes cash in hand and deposits with banks.Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts ofcash and are not subject to an important risk of change in value.Cash and cash equivalents are carried on the balance sheet at nominal value.

DividendsDividends are recorded in the income statement in the year of their attribution.Dividends declared in respect of the period are no more accrued on the balance sheet as short-term payablesbut included at the end of the financial year in a special heading of shareholders’ equity.

Minority interestsMinority interests consist in third party shareholder’s interests in the equity of subsidiaries and the appropriateproportion of profits or losses.

IAS 10 – Subsequent events

Post balance sheet events that contribute to confirm changes in circumstances or position which existed at thebalance sheet date (adjusting events) are reflected in the financial statements.

Post balance sheet events that represent charges in circumstances or position appeared after the balance sheetdate (non-adjusting events) are disclosed in the notes when material.

IAS 12 – Income taxes

Current taxesCurrent taxes include expected tax charges based on the accounting profit of the current year and adjustmentsto tax charges of prior years.

Deferred taxesDeferred taxes are calculated using the liability method, on temporary differences arising between the tax basesof assets and liabilities and their carrying amounts in the financial statements.

Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be availableagainst which the temporary differences can be utilised.

IAS 14 – Segment information

Business segmentAll the activities of the group S.A.B.C.A. are exercised in the sector of aeronautical construction and all theresources are affected to this one sector only.

Further relevant information is given in the management report the percentage of net sales for each activityplatform: civil aviation, defence and aerospace.

Geographical segmentThe total of activities of the group is located on the national territory.

The sales geographical breakdown between Belgian, Europe and out of Europe is also given in percentage,upon further relevant information, in the management report.

IAS 16 – Tangible fixed assets

Tangible fixed assets are recorded at historical cost, less accumulated depreciation and impairment losses.

Cost includes all direct costs and appropriate allocation of indirect costs incurred to bring the asset to workingcondition for its intended use. There are non borrowing costs capitalised in the costs of the assets.

Repair and maintenance costs are expensed in the period in which they are incurred, if they do not increase thefuture economic benefits of the asset. Otherwise, they are classified as separate components of items of tangiblefixed assets.

The plots of land were valued at their fair value, taking account of their use, geographic situation and any legalobligations attached to them. This value was determined within the framework of IFRS 1 and will be maintainedfor the whole useful life of these plots of land.

Tangible assets received from third parties or acquired on behalf of third parties and held by the company foruse in the production of goods are posted as tangible fixed assets, insofar as the company bears their risk andbenefits from advantages relating to these assets.

The cross-entry for these tangible fixed assets is posted as a long-term debt in liabilities: they are not amortisedbut valued every year at their fair value.

Depreciation of tangible fixed assets is provided over assets’ estimated useful economic lives: the method ofdepreciation, chosen “straight-line or decreasing” is the method which reflects the best the pattern of economicbenefits associated with the asset considered.

44


Useful life is defined as follows per main type of tangible fixed assets:

- Land non depreciable- Buildings 30 years straight-line depreciation- Roofs 10 years straight-line depreciation- Heavy machines tools 10 years straight-line depreciation- Plant, machinery and equipment 10 years decreasing depreciation- Furniture and office equipment 10 years decreasing depreciation- Vehicles 5 years straight-line depreciation- Computer equipment 5 years decreasing depreciation

Improvements to leased buildings are capitalised and depreciated over the remaining term of the lease or theirexpected useful life if shorter.Gains and losses on disposals are included in the operating result.

IAS 17 – Financial leasing contracts

Leases under which a substantial part of the risks and rewards of ownership are effectively retained by the lenorare classified as operating leases.Payments under operating lease are considered as an expense in the income statement.

Leases under which the group assumes a substantial part of the risks and rewards of ownership are classified asfinance leases.

Financial leasing contracts are recognised at the fair value of the minimum lease payments at the inception ofthe lease term and classified as leased tangible asset and are depreciated on their useful life, in line with thepolitic of depreciation applicable to the assets owned by the company. Lease payments are apportionedbetween the financial charges and the repayment of the lease liability so as to achieve a constant rate of intereston the remaining balance of the liability.The corresponding rental obligations, net of finance charges, are included in long-term payables.The reimbursements are allocated between finance charges and the liability of the leasing. It exists so a constantperiodic rate of interest on the finance balance outstanding.

IAS 18 - Revenue

Work in progress(also IAS 11 – Construction contracts and IAS 21 – Effects of Changes in Foreign Exchange Rates)

The cost of work in progress comprises direct and indirect costs of production; the indirect costs other thanproduction are charged to the income statement over the period when incurred.The costs are distributed to production programs as follows:- direct booking of raw materials, parts, consumer goods, direct costs and specific subcontract costs,depreciation of specific equipments and relocation, lay-out costs proper to a program;

- booking of indirect costs through hour rates based on the work of the production personnel.

Revenue and charges are booked, in the statutory statements, following the completed contract method.Concerning all consolidated financial statements, revenue and charges of contracts in progress are recognisedusing the percentage of completion method in line with IAS 18.At the closing date we fix the estimated total costs for the contract and the costs incurred for work performed todate.When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs arerecognised by using the stage of completion method to measure the amount of these products and charges tobe booked during the exercise and the expected losses are charged as expenses immediately.

In connection with the nature of contracts and services the stage of completion method is measured:- or comparing contract costs incurred for work performed to date and the estimated total costs for the contract;- or by reference to the material progress of works estimated for the contract.

When an outcome of a contract cannot be estimated reliably, contract revenue booked is limited to the amount ofrecoverable contract costs charged without profit.

IAS 19 –Employee benefit obligations

According to our auditor, the company’s pension plan is a benefit to which IAS 19 does not apply.For reasons of prudence, the company has decided to create a provision calculated on the basis of the rules ofIAS 19. The company may review its position, once the situation regarding its obligations has been clarified.

As a result, it posts:- a liability where a member of staff has rendered services in return for employee benefits, which will be paid tothe latter at a future date,- an expense where the company makes use of the economic benefit resulting from services rendered by amember of staff in return for employee benefits.

The defined benefit obligation is calculated by independent qualified actuaries using the "Projected Unit Credit"-method and the obligations between the expected costs of any past service (Defined Benefit Obligation) and anyplan assets are recognised in the balance sheet.

Actuarial gains and losses which exceed more of 10 % the difference between the higher amount of the presentvalue of the retirement benefit obligations and the fair value of the assets of the plan at balance sheet closingdate could be amortized on a period equal the expected average remaining working life of the workingpopulation.In accordance with I.F.R.S. 1, the group has opted to recognize all actuarial gains and losses and past servicecosts at the date of transition to I.F.R.S. as an adjustment to equity.

IAS 20 – Government grants

Government grants related to assets are, after transfer to deferred taxes, recognised as deferred income andafter that as income over the periods necessary to match them with the depreciation expense of the asset theyrelate to.

IAS 21 – Foreign currency transactions(cf. also IAS 39 – financial instruments)

Foreign currency transactions are recorded initially at the internal exchange rate prevailing at the transactiondate.

The internal exchange rate is based on the best estimation of mid-term forecasts and is injected during the yearin case of strong variation or official revaluation / depreciation.

Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate at the balancesheet date.

Gains and losses resulting from the settlement of foreign currency transactions are recognised in the incomestatement as financial result.IAS 36 – Impairment of assets

The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine ifthey may be subjected for impairment losses.

An impairment loss is recognised in income whenever the carrying amount exceeds its recoverable amountwhich corresponds to the higher of an asset’s net selling price and value in use such as defined in IAS 36.

Reversal of impairment losses recognised in prior years is recorded in income when there is an indication thatthe impairment losses recognised for the asset no longer exist or have decreased.

45


Useful life is defined as follows per main type of tangible fixed assets:

- Land non depreciable- Buildings 30 years straight-line depreciation- Roofs 10 years straight-line depreciation- Heavy machines tools 10 years straight-line depreciation- Plant, machinery and equipment 10 years decreasing depreciation- Furniture and office equipment 10 years decreasing depreciation- Vehicles 5 years straight-line depreciation- Computer equipment 5 years decreasing depreciation

Improvements to leased buildings are capitalised and depreciated over the remaining term of the lease or theirexpected useful life if shorter.Gains and losses on disposals are included in the operating result.

IAS 17 – Financial leasing contracts

Leases under which a substantial part of the risks and rewards of ownership are effectively retained by the lenorare classified as operating leases.Payments under operating lease are considered as an expense in the income statement.

Leases under which the group assumes a substantial part of the risks and rewards of ownership are classified asfinance leases.

Financial leasing contracts are recognised at the fair value of the minimum lease payments at the inception ofthe lease term and classified as leased tangible asset and are depreciated on their useful life, in line with thepolitic of depreciation applicable to the assets owned by the company. Lease payments are apportionedbetween the financial charges and the repayment of the lease liability so as to achieve a constant rate of intereston the remaining balance of the liability.The corresponding rental obligations, net of finance charges, are included in long-term payables.The reimbursements are allocated between finance charges and the liability of the leasing. It exists so a constantperiodic rate of interest on the finance balance outstanding.

IAS 18 - Revenue

Work in progress(also IAS 11 – Construction contracts and IAS 21 – Effects of Changes in Foreign Exchange Rates)

The cost of work in progress comprises direct and indirect costs of production; the indirect costs other thanproduction are charged to the income statement over the period when incurred.The costs are distributed to production programs as follows:- direct booking of raw materials, parts, consumer goods, direct costs and specific subcontract costs,depreciation of specific equipments and relocation, lay-out costs proper to a program;

- booking of indirect costs through hour rates based on the work of the production personnel.

Revenue and charges are booked, in the statutory statements, following the completed contract method.Concerning all consolidated financial statements, revenue and charges of contracts in progress are recognisedusing the percentage of completion method in line with IAS 18.At the closing date we fix the estimated total costs for the contract and the costs incurred for work performed todate.When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs arerecognised by using the stage of completion method to measure the amount of these products and charges tobe booked during the exercise and the expected losses are charged as expenses immediately.

In connection with the nature of contracts and services the stage of completion method is measured:- or comparing contract costs incurred for work performed to date and the estimated total costs for the contract;- or by reference to the material progress of works estimated for the contract.

When an outcome of a contract cannot be estimated reliably, contract revenue booked is limited to the amount ofrecoverable contract costs charged without profit.

IAS 19 –Employee benefit obligations

According to our auditor, the company’s pension plan is a benefit to which IAS 19 does not apply.For reasons of prudence, the company has decided to create a provision calculated on the basis of the rules ofIAS 19. The company may review its position, once the situation regarding its obligations has been clarified.

As a result, it posts:- a liability where a member of staff has rendered services in return for employee benefits, which will be paid tothe latter at a future date,- an expense where the company makes use of the economic benefit resulting from services rendered by amember of staff in return for employee benefits.

The defined benefit obligation is calculated by independent qualified actuaries using the "Projected Unit Credit"-method and the obligations between the expected costs of any past service (Defined Benefit Obligation) and anyplan assets are recognised in the balance sheet.

Actuarial gains and losses which exceed more of 10 % the difference between the higher amount of the presentvalue of the retirement benefit obligations and the fair value of the assets of the plan at balance sheet closingdate could be amortized on a period equal the expected average remaining working life of the workingpopulation.In accordance with I.F.R.S. 1, the group has opted to recognize all actuarial gains and losses and past servicecosts at the date of transition to I.F.R.S. as an adjustment to equity.

IAS 20 – Government grants

Government grants related to assets are, after transfer to deferred taxes, recognised as deferred income andafter that as income over the periods necessary to match them with the depreciation expense of the asset theyrelate to.

IAS 21 – Foreign currency transactions(cf. also IAS 39 – financial instruments)

Foreign currency transactions are recorded initially at the internal exchange rate prevailing at the transactiondate.

The internal exchange rate is based on the best estimation of mid-term forecasts and is injected during the yearin case of strong variation or official revaluation / depreciation.

Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate at the balancesheet date.

Gains and losses resulting from the settlement of foreign currency transactions are recognised in the incomestatement as financial result.IAS 36 – Impairment of assets

The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to determine ifthey may be subjected for impairment losses.

An impairment loss is recognised in income whenever the carrying amount exceeds its recoverable amountwhich corresponds to the higher of an asset’s net selling price and value in use such as defined in IAS 36.

Reversal of impairment losses recognised in prior years is recorded in income when there is an indication thatthe impairment losses recognised for the asset no longer exist or have decreased.

46


IAS 37 – Provisions, contingencies

ProvisionsProvisions are recognised in the balance sheet when:- there is a present obligation (legal or constructive) as a result of a past even;- it is probable that an outflow of resources will be required to settle the obligation;- a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties which affect unavoidable many events and circumstances are taking into account toprovide at the balance sheet date the best estimate of the expenditure required to settle the obligation.

RestructuringA provision for restructuring is only recognised when a detailed and formal restructuring plan has been approvedand the restructuring has either commenced or has been announced publicly before the balance sheet date.

The restructuring provision only includes the direct expenditure arising from the restructuring which isnecessarily entailed and is not associated with the ongoing activities of the enterprise.

IAS 38 – Intangible assets

Research and DevelopmentResearch costs are recognised in the income statement as an incurred expense.

Development costs are capitalised if and only if all the conditions disclosed under IAS 38 are met.

The valuation of development costs takes account not only of expenditure incurred but also insurance,guarantees, grants and finance obtained from public authorities as well as the certainty of sales to clients.

The proportion of development costs for a programme to be included in the trading figures over the course of thefinancial year is determined by the degree of progress of the particular programme, in accordance with theprinciple of prudence.

Amortisation of development costs is determined in accordance with the recovery of expenditure, pro rata tocontractual deliveries, and development costs are re-evaluated every year on the basis of certain recoveries ofexpenditure.

IAS 39 – Financial instruments

Financial instrumentsThe group uses derivative financial instruments to hedge exposure arising from its industrial and commercialoperations. These derivative financial instruments are treated as « free-standing instruments held for trading” inaccordance with IAS 39 and are not qualified for “hedge accounting”.

Derivative financial instruments are initially recorded in the balance sheet at cost and are re-measured at theirfair value at every closing date.

Changes in the fair value of any such derivative instruments are recognised immediately in the incomestatement.For financial instruments, S.A.B.C.A. has applied IAS 39 from the financial year 2005.

Financial assets available for saleFinancial assets available for sale are carried at fair value and changes in the fair value are recognised directlyin the income statement.

For financial assets in non-quoted companies for which fair value cannot be reliably established, fair value isdetermined by the purchase price, and adjusted for potential impairment losses.

47


IAS 37 – Provisions, contingencies

ProvisionsProvisions are recognised in the balance sheet when:- there is a present obligation (legal or constructive) as a result of a past even;- it is probable that an outflow of resources will be required to settle the obligation;- a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties which affect unavoidable many events and circumstances are taking into account toprovide at the balance sheet date the best estimate of the expenditure required to settle the obligation.

RestructuringA provision for restructuring is only recognised when a detailed and formal restructuring plan has been approvedand the restructuring has either commenced or has been announced publicly before the balance sheet date.

The restructuring provision only includes the direct expenditure arising from the restructuring which isnecessarily entailed and is not associated with the ongoing activities of the enterprise.

IAS 38 – Intangible assets

Research and DevelopmentResearch costs are recognised in the income statement as an incurred expense.

Development costs are capitalised if and only if all the conditions disclosed under IAS 38 are met.

The valuation of development costs takes account not only of expenditure incurred but also insurance,guarantees, grants and finance obtained from public authorities as well as the certainty of sales to clients.

The proportion of development costs for a programme to be included in the trading figures over the course of thefinancial year is determined by the degree of progress of the particular programme, in accordance with theprinciple of prudence.

Amortisation of development costs is determined in accordance with the recovery of expenditure, pro rata tocontractual deliveries, and development costs are re-evaluated every year on the basis of certain recoveries ofexpenditure.

IAS 39 – Financial instruments

Financial instrumentsThe group uses derivative financial instruments to hedge exposure arising from its industrial and commercialoperations. These derivative financial instruments are treated as « free-standing instruments held for trading” inaccordance with IAS 39 and are not qualified for “hedge accounting”.

Derivative financial instruments are initially recorded in the balance sheet at cost and are re-measured at theirfair value at every closing date.

Changes in the fair value of any such derivative instruments are recognised immediately in the incomestatement.For financial instruments, S.A.B.C.A. has applied IAS 39 from the financial year 2005.

Financial assets available for saleFinancial assets available for sale are carried at fair value and changes in the fair value are recognised directlyin the income statement.

For financial assets in non-quoted companies for which fair value cannot be reliably established, fair value isdetermined by the purchase price, and adjusted for potential impairment losses.

Report of the legal auditor on the consolidated financial statements for the yearended 31 December 2005 and presented to the annual general meeting of

shareholders of the Société Anonyme Belge de Constructions Aéronautiques(S.A.B.C.A.).

_______________________________________________________________________________________________

In accordance with legal and statutory requirements, we have the honour to report to you on the auditassignment that you have entrusted to us.

We have personally examined the consolidated financial statements prepared in accordance withInternational Financial Reporting Standards as adopted by the European Union and with the legal andregulatory requirements applicable in Belgium. Those consolidated financial statements comprise theconsolidated balance sheet as at 31 December 2005, the consolidated income statement, the consolidatedstatement of changes in equity and the consolidated cash flow statement for the year ended, as well as thesummary of significant accounting policies and other explanatory notes. The consolidated balance sheetshows total assets of 213,756 thousand EUR and a consolidated profit for the year then ended of3,746 thousand EUR. We have also performed those specific additional audit procedures required by theCompanies Code.

The Board of Directors of the company is responsible for the preparation of the consolidated financialstatements and the directors’ report on the consolidated financial statements, for the assessment of theinformation that should be included in the directors’ report on the consolidated financial statements, and forthe company’s compliance with the requirements of the Companies Code and the Articles of Association.

Our audit of the consolidated financial statements was conducted in accordance with legal requirements andauditing standards applicable in Belgium, as issued by the “Institut des Reviseurs d’Entreprises/Instituut derBedrijfsrevisoren”.

The financial statements of our subsidiary SABCA Limburg, consolidated under global integration and with abalance sheet total of 20,137 thousand EUR and with an income statement resulting of -814 thousand EUR,have been audited by another auditor. Our opinion on the accompanying consolidated financial statements,insofar as it relates to the amounts contributed by those entities, is based solely upon the report of this otherauditor.

Unqualified audit opinion on the consolidated financial statements.

The forementioned auditing standards require that we plan and perform our audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatements.

In accordance with these standards, we considered the accounting organization as well as its internal controlprocesses. We have obtained the explanations and information required for our audit. We have examined,on a test basis, the evidence supporting the amounts in the consolidated financial statements. We haveassessed the basis of the accounting methods used, the consolidation policies and significant estimatesmade by management as well as evaluating the presentation of the consolidated financial statements takenas a whole. We believe that our audit, together with the report of another auditor on which we have relied,provides a reasonable basis for our opinion.

In our opinion, and based, to the extent necessary upon the report of another auditor, the consolidatedfinancial statements give a true and fair view of the group’s financial position as of 31 December 2005, andof its results and its cash flow for the year then ended, in accordance with International Financial ReportingStandards as adopted by the EU and with the legal and regulatory requirements applicable in Belgium.

48


Additional attestations

We supplement our report with the following attestations which do not modify our audit opinion on theconsolidated financial statements :

- The directors’ report on the consolidated financial statements includes the information required by lawand is in agreement with the consolidated financial statements. However, we are unable to express anopinion on the description of the principle risks and uncertainties confronting the group, or on the status,future evolution, or significant influence of certain factors on its future development. We can,nevertheless, confirm that the information given is not in obvious contradiction with any informationobtained in the context of our appointment.

Brussels, April 25, 2006

Pintiaux Norbert

Reviseur d'entreprises, Lic.sc.écon. Ulg. A.E.M.D.S., 41-42 bld Frère-Orban, 4000 Liège Tél: 32 (0)4 252 43 97 Fax: 32(0)4 254 36 00

49


Part two

Annual Accounts

Non consolidated balance sheet* Auditor’s Report

* Statutory accounts according to the Belgian accounting policies

50


Non consolidated balance sheetStatutory accounts according to the Belgian accounting policies

Codes

20/28 36,328 38,586

II. 21 15,291 17,591

III. 22/27 10,962 10,360

A. Land and buildings 22 5,569 5,911

B. Plant, machinery and equipment 23 2,907 3,222

C. Furniture and vehicles 24 1,674 941F. Assets under construction and advance

payments 27 812 286

IV. 28 10,075 10,635

A. Affiliated enterprises 280/1 9,415 9,977

1. Participating interests 280 9,415 9,977

C. Other financial assets 284/8 660 658

1. Shares 284 643 6432. Amounts receivable and cash

guarantees 285/8 17 15

29/58 154,645 150,408

V.29 245 277

B. Other amounts receivable 291 245 277

VI. 3 67,551 63,362

A. Stocks 30/36 18,780 18,178

1. Raw materials and consumables 30/31 5,341 4,992

4. Goods purchased for resale 34 13,380 13,128

6. Advance payments 36 59 58

B. Contracts in progress 37 48,771 45,184

VII. 40/41 31,259 30,023

A. Trade debtors 40 24,895 27,801

B. Other amounts receivable 41 6,364 2,222

VIII. 50/53 52,400 52,682

B. Other investments and deposits 51/53 52,400 52,682

IX. 54/58 2,410 3,580

X.490/1 780 484

20/58 190,973 188,994

after appropriation

(in thousand EUR)

Amounts receivable after more thanone year

Financial assets

31.12.04Assets 31.12.05

Total assets

Fixed assets

Cash at bank and in hand

Deferred charges and accruedincome

Stocks and contracts in progress

Amounts receivable within one year

Investments

Intangible assets

Tangible assets

Current assets

51


Codes

10/15 38,874 36,448

I. 10 12,400 12,400

A. Issued capital 100 12,400 12,400

IV. 13 14,059 14,054

A. Legal reserve 130 1,240 1,240

B. Reserves not available for distribution 131 595 595

2. Other 1311 595 595

C. Untaxed reserves 132 464 459

D. Reserves available for distribution 133 11,760 11,760

V. 140 12,415 9,994

16 36,524 39,513

VII. A. Provisions for liabilities and charges 160/6 36,494 39,464

1. Pensions and similar obligations 160 11,808 10,361

2. Taxation 161 447 503

3. Major repairs and maintenance 162 1,135 1,370

4. Other liabilities and charges 163/6 23,104 27,230

B. Deferred taxation 168 30 49

17/49 115,575 113,033

VIII.

17 70,893 70,732C. Advances received on contracts in

progress 176 23,450 24,984

D. Other amounts payable 178/9 47,443 45,748

IX. 42/48 36,144 34,004A. Current portion of amounts payable after

more than one year 42 764 676

B. Financial debts 43 2,281 1,429

1. Credit institutions 430/8 2,281 1,429

C. Trade debts 44 12,305 11,716

1. Suppliers 440/4 12,305 11,716

D. Advances received on contracts in progress 46 10,781 10,899

E. Taxes, remuneration and social security 45 8,042 8,039

1. Taxes 450/3 1,397 1,317

2. Remuneration and social security 454/9 6,645 6,722

F. Other amounts payable 47/48 1,971 1,245

X. 492/9 8,538 8,297

10/49 190,973 188,994Total liabilities

Creditors

Amounts payable after more than oneyear

Amounts payable within one year

Accrued charges and deferred income

Capital

Reserves

Profit carried forward

Provisions and deferredtaxation

Liabilities 31.12.05 31.12.04

Capital and reserves

52


Income statement non consolidated

Codes

I. 70/74 118,141 121,768

A. Turnover (notes XII, A) 70 105,421 103,048B. Increase (+); decrease (-) in stocks of

finished goods, work and contracts inprogress 71 3,202 (392)

C. Own construction capitalised 72 7,890 11,176D. Other operating income

(notes XII, B) 1,628 7,936

II. 60/64 (115,607) (118,032)A. Raw materials, consumables and goods

for resale 60 19,612 20,791

1. Purchases 600/8 19,143 16,687

2. Increase (-); decrease (+) in stocks 609 469 4,104

B. Services and other goods 61 33,381 30,718C. Remuneration, social security costs and

pensions

(notes XII, C2) 52,881 52,011

D. Depreciation of and other amounts written offformation expenses, intangible and tangiblefixed assets 630 13,414 15,509

E. Increase (+); decrease (-) in amounts writtenoff stocks, contracts in progress and tradedebtors(notes XII,D) 631/4 (1,637) 2,548

F. Increase (+); decrease (-) in provisions forliabilities and charges(notes XII, C3 & E) 635/7 (3,215) (4,610)

G. Other operating charges

(notes XII, F) 1,171 1,065

III. 70/64 2,534 3,736

IV. 75 3,270 3,735

B. Income from current assets 751 1,217 446

C. Other financial income

(notes XIII, A) 2,053 3,289

V. 65 (1,741) (3,834)A. Interest and other debt charges 650 49 76

C. Other financial charges

(notes XIII, E) 1,692 3,758

VI.

70/65 4,063 3,637

Financial charges

752/9

652/9

before taxes

Profit on ordinary activities

Financial income

74

640/8

Operating profit

62

Operating charges

Operating income

(in thousand EUR)

31.12.0431.12.05

(-)

(+)

(-)

(+)

53


Codes

VII. 76 111 748C. Adjustments to provisions for extraordinary

liabilities and charges 762 700

D. Gain on disposal of fixed assets 763 21 6

E. Other extraordinary income 764/9 90 42

VIII. 66 (614) (1,214)B. Amounts written off financial fixed

assets661 600 1,033

D. Loss on disposal of fixed assets 663 5E. Other extraordinary charges 664/8 14 176

IX.70/66 3,560 3,171

Loss for the period66/70

Transfer from deferred taxation (+) 780 23 88

B. Transfer to deferred taxation (-) 680 (5) (1)

X. 67/77

A. Income taxes (note XV) (-) 670/3 (56)B. Adjustment to income taxes and write-back of

tax provisions 77 56

XI. 70/67 3,578 3,258

Loss for the period 67/70

XII. 789 45 172

689 (50) (80)

XIII.70/68 3,573 3,350

68/70

A. 70/69 13,567 10,3781. Profit for the period available for

appropriation 70/68 3,573 3,350Loss for the period available forappropriation 68/70

2. Profit brought forward 790 9,994 7,028

C. 691/2

2. to legal reserve 6920

D.1. Profit to be carried forward (-) 693 (12,415) (9,994)

F. 694/6 (1,152) (384)

1. Dividends 694 1,152 384

Extraordinary income

Extraordinary charges

31.12.05 31.12.04

Profit for the periodbefore taxes

Income taxes

Profit for the period

IX.bis A.

before taxes

Distribution of profit

Transfer from untaxed reservesTransfer to untaxed reserves

Profit for the period available for

Appropriation account

appropriationLoss for the period available for

Transfers to capital and reserves (-)

Profit to be appropriated

Result to be carried forward

appropriation

(-)

(-)(+)

(+)(-)

(+)

(-)

(-)

(-)

(-)

54


55


BE

BE

BE

56


22,487

57


58


59


60


61


62


63


64


65


SUMMARY OF THE RULES OF VALUATION(Art. 15, paragraph 2 of the Royal Decree of October 8,1976)

The rules of valuation were deposited on June 7, 1978 at the 6th Registration Office in Brussels – Volume 131, folio 66 section 18

INTANGIBLE FIXED ASSETS

These fixed assets are valued according to art. 25 of the Royal Decree of October 8, 1976. The board of directors decides,depending on the case, on the amount to be passed to the assets side as well as the depreciation rates to be applied. Theycan be the subject of accelerated or exceptional depreciation, in accordance with the fiscal prescriptions in this matter, if dueto their alteration or modifications of the economic circumstances, the book value exceeds the usage value.The research and development costs are depreciated according to the straight-line method over a three year period, thesoftware costs over a five year period.The intangible fixed assets purchased or produced since 2003 are subjected to a daily pro rata applicable to the first periodof depreciation.

TANGIBLE FIXED ASSETS

The ACCOUNTING BOOK VALUE is defined in accordance with art. 21/22 and 23 of the Royal Decree of October 8, 1976.ADDITIONAL COSTS AND NON-RECOVERABLE TAXES .Additional ancillary costs are depreciated in the same time and in the same way as the amount in principal of the purchaseprice or the production cost of the equipment (art. 196, § 2,2° CIR new).. The ancillary costs related to old tangible fixedassets continue to be written off, following the depreciation plan in the same way as in the past.

DEPRECIATION

(a) methodThe straight-line method is applied for the former investments while the decreasing method is used for the investmentsthat have been made since 1977, with the exception of any other fiscally authorized method within the context ofinvestment stimulation. In that case, the board of directors examines the appropriateness of these depreciationmethods case per case, as well as the additional depreciation rates related to economic and/or technological reasons(art. 28, paragraph 2), and the extent to which they should be applied. Since 1977, the whole of the depreciation rulesauthorized by the various government measures, have been applied (100% and sometimes even 110% of the value).The depreciation rules were applied for the whole year and for the first time during the year when the purchase takesplace until end 2002In accordance with the fiscal law dated December 24, 2002 the new rules related to the daily pro rata depreciation areapplied to the new tangible and intangible fixed assets purchased or produced since the fiscal year 2004. The assetspurchased or produced before the financial period 2003 can be continued to be depreciated following the old procedure.The advance payments and assets under installation and construction benefit of a specific accounting and fiscaltreatment.

(b) applied depreciation ratesBuildings: 5% or more is fiscally allowed, mainly for buildings erected on lands

granted by third persons for a determined period and for the lay-out of therented buildings.

Installations, machines, tooling: 10% generally speaking; yet, a rate of 20 or 25% is applied for laboratoryor electronic material, numeric control machines i.e. high precisionequipment or machines in a sector undergoing a rapid technologicalevolution; as well as for equipment used in shift working. Tooling andequipment, templates and numeric control software proper to a programare depreciated at 100% or during the period of the contract in conformitywith the allowed fiscal rules.

Furniture, office and rolling stock: 10% except for vehicles and trailers, office machines, computers, camerasand copiers (20%).

Depreciation recoveries can be applied up to the taxed surplus depreciation as well as for the tax exempted depreciationsexceeding above mentioned rates; also in case of transfer, sale, catastrophe or compulsory purchase.With effect from the beginning of 2003 the daily pro rata was applied as well as to the straight-line method as to thedecreasing or accelerating method of depreciation.

FINANCIAL FIXED ASSETS

STOCKS AND SHARES VALUES

The acquisition, subscription costs are booked as exceptional financial charges. The losses in value of non-quoted shares are considered only if the loss is important and lasting.

RECEIVABLES: (see below)

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STOCKS

PURCHASE PRICE of materials, supplies and goods, suppliers invoices plus import, delivery, insurance and commissioncosts.

VALUATION OF STOCKS AT THE END OF THE FINANCIAL YEAR as well as RAW MATERIALS CONSUMPTION: FIFOmethod (First In, First Out).

AMOUNTS WRITTEN OFF ON STOCKS: Up to 100%.

(a) for parts related to completed production or maintenance programs, unusable or whose tolerances, norms,technical configuration, conception have changed.

(b) for parts that have not moved during the 24 previous months.

In case of later use of the non destructed parts, amounts written of are decreased.

CONTRACTS IN PROGRESS

ELEMENTS CONSTITUTING THE COST PRICE

Cost prices are determined taking into account all direct production costs on the one hand, as well as thewhole of indirect costs on the other hand. For the latter, however, the board of directors reserves the right tobook only part of these costs to cost price, individualized by a production program or not, the other part beingbooked directly to the result of the year or spread over several years. This right will only be used in case ofexceptional disruptive and temporary circumstances (such as strikes, important and prolonged under-activityperiods, restructuring and lay-outs) having such an impact on the cost price of works that they wouldconsiderably alter its image.

Method of distribution by individualized production programs

(a) direct booking of raw materials, parts, consumer goods, direct costs and specific subcontract costs,depreciation of specific equipments and relocation, lay-out costs proper to a program.

(b) booking of indirect costs through hour rates based on the work of the production personnel and/or certainmachines. These hour rates include all direct and indirect remuneration and related charges as well asoverheads and the financial industrial usage cost of the equipment. The latter can be spread overindividualised production programs by derogating from the depreciation method and amount booked to thebalance sheet on an economic and fiscal basis.

VALUATION OF THE WORK IN PROCESSThey include unfinished works regarding a same group of contracts, or for which the cost price elements are notcomplete, or for which definitive acceptance quality controls (possibly to be carried out by the customer) are not yetcompleted. These work in process are valuated at the cost price after deduction of the already invoiced works.

AMOUNTS WRITTEN OFF

(a) on works carried out: they are automatically and fully implemented up to the amount of the incurred costsexceeding the possible total contract invoicing.

(b) on works left to be carried out: the estimated costs of these works are added to reductions described in (a)only if the progress of work is higher than 75% and if the estimation of these costs and of the invoicing to bemade can be sufficiently accurate (usual works). In the other cases, provisions for risks on received ordersshould be made with the greatest care and on an individual basis.

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RECEIVABLES

(a) Valuation of receivables (and payables) in foreign currencies at the internal standard exchange rate percurrency, which is modified during the year only in case of important and lasting fluctuation of average rates orin case of official revaluation/devaluation.

(b) Amounts written off in the following cases:- fluctuation of the exchange rate of a minimum of 5 % ( and 1,250 euros, was 50,000 BEF) in proportion to

the internal standard rate;- bankruptcy, composition, nationalization (high political risks), subordination of receivables with risks;- important, lasting and in nature and amount determined litigation of which the recovery is very precarious,

the negotiations being concluded;- very negative economical, financial or political information concerning exports.

(c) Provision for risks and costs on litigation in negotiations(d) Decrease in amounts written off if the effective decrease can reasonably be envisaged during the first months

of the following year or if the previous reductions were inappropriate or exaggerated.

ACCRUED OR DEFERRED CHARGES OR INCOME (assets - liabilities)

They are used only for amounts that can considerably influence the result of the year on the one hand and that arepart of the usual activities of the company on the other hand. The board of directors individually analyzes theelements that are not part of the usual activity.

PROVISIONS FOR LIABILITIES AND CHARGES

They are systematically but very carefully established particularly when they can be fiscally harmful to the company orin case of loss superior to 50% of the capital.

PROVISIONS SET UP FOR TAX PURPOSESThey are determined according to fiscal rules, taking into account increases, advance payments, real and fictitiouswith-holding taxes on investment income, taxes credit, withholding taxes on real estate and chargeable foreign taxes.The exceeding part of the previous provisions will be considered only if three booking years have passed after theirconstitution without complementary enrolment, unless the board decides otherwise.

MISCELLANEOUS RIGHTS AND COMMITMENTS NOT REFLECTED IN THE BALANCESHEET

They are valued at the maximum amount mentioned in the commitment documents. If there are no such documents,the reasonably estimated economic value of the goods they concern will be taken into account. This value will beconsidered as the net booking value for the goods belonging to the company.

Adaptation to the valuation rules chosen by the companies (art. 17 paragraph 3 of the Royal Decree of October 8, 1976)

- Tooling, small equipment and small tooling constituting full individual sets of less than 250 euros (was 10,000 BEF) areno longer included in assets but in the cost price or in overheads depending on the fact that they are specific or not to acontract. This modification of the 1978 rules is dealt with in the new fourth paragraph of section 04,5 of the rules ofvaluation (Financial year 1979).

- Modification of the first paragraph of section 14 of the rules of valuation.

- At the end of each social financial year, investments granted will be progressively reduced by booking to the profit andloss account, in deduction of:a. either the depreciation regarding fixed assets for the acquisition of which they were obtained; or;b. the loan costs (Financial year 1981).

Starting from 1991, the deferred taxes have been deducted from investments granted and realized gains if necessary.They will be reduced at intervals by booking to the profit and loss account at the rate of the reduction of investmentsgranted and, in the case of realized gains at the rate of the inclusion in the taxable result of the concerned gains.

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Limburg

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70


71


decrease 4 increase for preretirement

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74


Report of the legal auditor on the annual accounts closed on 31 December 2005and presented to the annual general meeting of shareholders

of the Société Anonyme Belge de Constructions Aéronautiques (S.A.B.C.A.)._______________________________________________________________________________

In accordance with legal and statutory requirements, we have the honour to report to you on the auditassignment that you have entrusted to us.We have personally examined the annual accounts based on the legal and statutory requirements applied inBelgium for the year closed on the 31 December 2005 ending with a balance sheet total of EUR 190,973,316.40and with an income statement resulting in a profit for the year available for appropriation of EUR 3,572,527.25.We also proceeded under specific complementary examinations required by law.

The establishment of the annual accounts, the appreciation of information to be included in the Directors Report,as well as the respect by the company of the Code of the Companies and of the Statutes come under theresponsibility for the body for management.Our control of the annuals accounts has been accomplished in accordance with the legal provisions and theapplicable standards of revision in Belgium, as issued by the Belgian Institute of Recognised Auditors.

Attestation without qualification of the annual accounts.

The standards of above mentioned revisions require that our control is organized and carried out so as to obtaina reasonable insurance that the annual accounts do not comprise significant inaccuracies.

In accordance with those standards we have taken into consideration the administrative and accountingorganisation of the company as well as the internal audit system. The management has replied clearly to ourrequests for explanations and information. We have examined, on a test basis, evidence supporting theamounts and disclosures in the annual accounts. We assessed the accounting principles used and thesignificant estimates made by the company and the overall annual accounts presentation. We believe that thoseduties provide a reasonable basis for our opinion.

In our opinion, taking into account the legal and statutory requirements applied in Belgium, the annualstatements for the year 2005 give a true and fair view of the assets and liabilities, the financial position and theresults of the company and the supplementary information given in the notes is adequate.

Complementary attestation.

We complete our report by the following attestations which do not modify our opinion on the annual accounts.

- No other remunerated mission was given to us by the Board.- The Directors'Report includes all information required by law and correspond with the annual accounts.- However, we are not able to pronounce us on the description of the principal risks and uncertainties with

which the company is confronted as well as its situation of its foreseeable evolution or influence of certainfacts on its future development. We can nevertheless confirm that the provided information does not presentobvious contradictions compared with the information of which we are informed relating to our mandate.

- Without any harm on explicit aspects of minor importance, accountancy is held in accordance with theprovisions of the legal and statutory requirements applied in Belgium

- We can not have to report any transaction concluded in violation of the Articles of Association or CompanyLaws.

- The appropriation of the results proposed to the general meeting is in conformity with legal and statutoryrequirements.

Brussels, April 25, 2006

Pintiaux Norbert

Reviseur d'entreprises, Lic.sc.écon. Ulg. A.E.M.D.S., 41-42 blrd Frère-Orban, 4000 Liège Tél: 32 (0)4 252 43 97 Fax: 32(0)4 254 36 00

The photographs and illustrations in the S.A.B.C.A. 2005 report have been supplied

by S.A.B.C.A., Arianespace, ESA, E.A.D.S, Airbus, Dassault Aviation and the Ministry of

Defence. we would like to thank them.

Graphic lay-out: J-M Delatinne

Registered Office at 1130 Brussels, Chaussée de Haecht 1470

Factories in Brussels and Charleroi

Factory at 6041 Charleroi, rue des Fusillés 11

RPM Brussels V.A.T. BE 0405 770 992

Consolidation includes the subsidiary: SABCA limburg N.V.

Registered Office at 3560 lummen, Dellestraat 32

RPR Hasselt V.A.T. BE 0438 251 146

S.A.B.C.A.

SOCIéTé ANONyME BElGE DE CONSTRUCTIONS AéRONAUTIqUESCHAUSSéE DE HAECHT, 1470B-1130 BRUSSElSBElGIUM

Tel. +32 2 729.55.11Fax +32 2 [email protected]

www.sabca.com

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