A significant portion of EADS’ revenues are denominated in U.S. Dollars (approximately U.S.$25 billion for 2005), with approximately half of such currency exposure ‘naturally hedged’ by U.S. Dollar- denominated costs. The remainder of costs is incurred primarily in Euro, and to a lesser extent, in Pounds Sterling. Consequently, to the extent that EADS does not use financial instruments to hedge its net current and future exchange rate exposure from the time of a customer order to the time of delivery, its profits will be affected by market changes in the exchange rate of the U.S. Dollar against these currencies. Consistent with EADS’ policy of generating profits principally from its operations, EADS uses hedging strategies to manage and minimise the impact on its EBIT* from the volatility of the U.S. Dollar. See “Measurement of Management’s Performance — EBIT* Performance by Division — Hedging Impact on EBIT*”. See also “Financial Market Risks — Exposure to Foreign Currencies”.

As EADS uses financial instruments to hedge only its net foreign currency exposure, the portion of its U.S. Dollar-denominated revenues not hedged by financial instruments (approximately 30% of total consolidated revenues) is exposed to changes in exchange rates. Of this non-hedged portion of revenues, a certain percentage (relating to customer pre-delivery payments) are converted into Euro at the spot rate effective at the time the payment was received by EADS. The remainder of non-hedged U.S. Dollar-denominated revenues (corresponding to payments upon delivery) are subject to changes in the spot rate at the time of delivery. See “Critical Accounting Considerations, Policies and Estimates — Accounting for Foreign Currency Denominated Operations in the Financial Statements”.

Exposure on aircraft sales. For products such as aircraft, EADS typically hedges forecasted sales in U.S. Dollars related to firm commitments and forecasted transactions for the following year through 2011. The hedged items are defined as the first forecasted highly probable future cash inflows for a given month based upon final payments at delivery. The amount of the first flows to be hedged is decided by a treasury committee and typically covers up to 100% of the equivalent of the net U.S. Dollar exposure. For EADS, a forecasted transaction is regarded highly probable if the future delivery is included in the firm order book or is very likely to materialise in view of contractual evidences (e.g., a letter of intent). The coverage ratio is adjusted to take into account macroeconomic movements affecting the spot and interest rates, as applicable.

Exposure on project related business. For project-related business, EADS generally hedges 100% based on specific flows arising out of firm and individual contracts. Hedging is implemented on an individual project basis.

Exposure on treasury operations. In connection with its treasury operations, EADS headquarters enters into foreign exchange swaps (notional amount of €0.7 billion at year-end 2005) to adjust for short-term fluctuations of non-Euro cash balances at the BU level. Year-to-year changes in the fair market value of these swaps is recorded on the consolidated statement of income in the line item “other financial result”. These changes may have a material impact on EADS’ net income.

Hedge Portfolio. EADS manages a long-term hedge portfolio with a maturity of several years covering its net exposure to U.S. Dollar sales, mainly from the activities of Airbus (and to a lesser extent, of the Eurocopter Division, ATR, the DS Division and the MTA Division). The net exposure is defined as the total currency exposure (U.S. Dollar-denominated revenues), net of the part that is “naturally hedged” by U.S. Dollar-denominated costs. The hedge portfolio covers the vast majority of the Group’s hedging transactions. As hedging instruments, EADS primarily uses foreign currency forwards and, to a lesser extent, option contracts.

The contract or notional amounts of EADS’ foreign exchange derivative financial instruments shown below do not necessarily represent amounts exchanged by the parties and, thus, are not necessarily a measure for the exposure of the Group through its use of derivatives.

The notional amounts of such foreign exchange derivative financial instruments are as follows, specified by year of expected maturity: