In the U.K., EADS participates in several funded trustee-administered pension plans for both executive as well as non-executive employees, with BAE Systems being the principal employer. These plans qualify as multi-employer defined benefit plans under IAS 19. EADS’ most significant investments in terms of employees participating in these BAE Systems U.K. pension plans are Airbus U.K. and MBDA U.K. For Airbus, this remains the case even after the acquisition of BAE Systems’ 20% stake in Airbus on 13^th October 2006. Participating Airbus U.K. employees have continued to remain members in the BAE Systems U.K. pension plans as a result of the U.K. pension agreement between EADS and BAE Systems dated 11 July 2001, as well as a change in U.K. pension legislation enacted in April 2006 that removes previous restrictions on unassociated employers participating in a single pension plan.

Generally, based on the funding situation of the respective pension plans, the pension plan trustees determine the contribution rates to be paid by the participating employers to adequately fund the plans. The different U.K. pension plans in which EADS investments participate are currently underfunded. BAE Systems has agreed with the trustees to undertake various measures in order to remedy such underfunding. These include: (i) making regular contribution payments for active employees at levels well above those that would prevail in the case of adequately funded plans and (ii) making extra contributions totalling GBP 446 million (€664 million) over the next ten years, i.e., up to 2016.

Due to contractual arrangements between EADS and BAE Systems, the contributions that EADS must make in respect of its participation in the two largest pension plans are capped for a defined period of time (i.e., until July 2011 for Airbus U.K. and until December 2007 for MBDA U.K.). Contributions exceeding the respective capped amounts are paid by BAE Systems. EADS is therefore neither exposed to increased regular contribution payments resulting from the pension plans’ underfunding, nor to a participation in extra contribution payments during the period of the contribution caps. Even after the expiry of the contribution caps, the unique funding arrangements between BAE Systems and EADS create a situation for EADS different from common U.K. multi-employer plans, with special regulations limiting the regular contributions that must be paid by EADS U.K. companies to rates applicable to all participating employers.

Since 1^st January 2005, BAE Systems has prepared its consolidated financial statements under IFRS. Before that date, BAE Systems’ consolidated financial statements were prepared under U.K. GAAP, and as such did not include information required under IAS 19 to apply defined benefit accounting. Consequently, EADS accounted for its participation in BAE Systems U.K. defined benefit schemes as if they were defined contribution schemes in accordance with IAS 19. In 2005, EADS requested detailed information from BAE Systems about the different multi-employer pension plans in order to appropriately and reliably estimate the share of its participation in the plans’ assets, defined benefit obligations and pension costs. For accounting purposes, the information provided by BAE Systems in 2005 was judged insufficient for purposes of identifying EADS’ share in the U.K. pension plans. Consequently, EADS continued in 2005 to expense the contributions made to the pension schemes as if the plans were defined contribution plans. Information related to these plans appeared in the contingent liabilities section of the notes to the financial statements.

Upon further request in 2006, BAE Systems began to provide more detailed information regarding these pension plans. The new information has enabled EADS to estimate its share of the pensions plans’ assets, defined benefit obligations and related underfunding, which takes into account the impacts of the contribution caps’ mechanism described above as well as those of future extra contributions agreed by BAE Systems with plan trustees. Accordingly, EADS has recorded a provision of €897 million as of 31^st December 2006 for its current share of the net pension underfunding in the U.K. A related amount of €(853) million has been recorded in total equity (net of deferred taxes) as at 31^st December 2006, consistent with the application of revised IAS 19 (equity approach) described above.

For further information related to EADS’ participation in multi-employer pension plans in the U.K., see “Notes to Consolidated Financial Statements (IFRS) — Note 21b: Provisions for retirement plans”.