Chapter 2. Statutory Auditors - Archos

A French Société anonyme capitalized at 3,379,084.50 euros
Corporate offices: 12, rue Ampère - ZI Igny - 91430 Igny
Evry Trade Register No. 343 902 821
REFERENCE DOCUMENT
2005
THE FRENCH AUTORITÉ DES MARCHÉS FINANCIERS, PURSUANT TO ARTICLES 211-1 TO
211-42 OF THE GENERAL REGULATIONS OF THE AMF, RECORDED THIS REFERENCE
DOCUMENT ON APRIL ●, 2006 UNDER NUMBER R.06-●. IT MAY BE USED IN SUPPORT OF A
FINANCIAL OPERATION ONLY IF IT IS COMPLETED WITH AN OFFERING CIRCULAR
APPROVED BY THE AUTORITÉ DES MARCHÉS FINANCIERS.
THIS REFERENCE DOCUMENT HAS BEEN PREPARED BY THE ISSUER UNDER THE
RESPONSIBILITY OF THE SIGNATORIES. THIS REGISTRATION, WHICH WAS PERFORMED
AFTER A REVIEW OF THE RELEVANCE AND CONSISTENCY OF THE INFORMATION
PROVIDED ON THE POSITION OF THE COMPANY DOES NOT IMPLY AUTHENTICATION OF
THE ACCOUNTING AND FINANCIAL DATA PRESENTED.
Copies of the Reference Document are available free of charge from ARCHOS 12, rue Ampère - ZI
Igny - 91430 Igny, and from the websites of ARCHOS www.ARCHOS.com and of the AMF www.amffrance.org.

PREAMBLE
The Reference Document of the company ARCHOS SA (the “Reference Document”) contains
information on the objectives, prospects and areas of development of ARCHOS SA. This information
should not be interpreted as a guarantee that the facts and data stated will occur or that the objectives
will be achieved. The forward-looking statements contained in the Reference Document also include
known and unknown risks, uncertainties and other factors which, if they occur, could mean that
ARCHOS SA’s future earnings, performance and achievements differ substantially from the objectives
stated and suggested. Such factors may include changes in the general economy and commercial
situation, as well as the risk factors set out in section 4 of the Reference Document.
In the Reference Document, ARCHOS SA is referred to as “ARCHOS” or the “Company”.
The “Group” or the “ARCHOS Group” relate to ARCHOS SA and its direct and indirect subsidiaries,
as listed in section 7 of the Reference Document.
i

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TABLE OF CONTENTS
CHAPTER 1. Responsible persons p.3
CHAPTER 2. Statutory Auditors p.5
CHAPTER 3. Selected financial Information p.7
CHAPTER 4. Risk Factors p.9
CHAPTER 5. Informations about issuer p.21
CHAPTER 6. Description of the company’s market and business p.26
CHAPTER 7. Organizationl chart p.43
CHAPTER 8. Property, plant and equipment p.45
CHAPTER 9. Review of the financil position and earnings p.47
CHAPTER 10. Cash and capital p.55
CHAPTER 11. Resaerch and development, patents and license p.58
CHAPTER 12. Trend information p.62
CHAPTER 13. Earnings forecasts or estimates p.66
CHAPTER 14. Administrative, management, supervisory and executive bodies p.67
CHAPTER 15. Compensation and benefits p.72
CHAPTER 16. Operations and benefits p.75
CHAPTER 17. Employees p.86
CHAPTER 18. Major shareholders p.91
CHAPTER 19. Related party transactions p.96
CHAPTER 20. Financial information concerning the isuer’s assets, financial position
and profits p.100
CHAPTER 21. Additional information p.182
CHAPTER 22. Significant contacts (To which all members of the group are party) p.188
CHAPTER 23. Information from third parties, Declarations by experts,
and declarations of interest p.206
CHAPTER 24. Documents accessible to the public p.208
CHAPTER 25. Informations on equity interests p.210
APPENDIX Glossary p.212

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Chapter 1. Responsible persons
1.1 Name and position of the person responsible for
the Reference Document
1.2 Declaration of the person responsible for the
Reference Document
1.3 Person responsible for the information
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1 RESPONSIBLE PERSONS
1.1 Name and position of the person responsible for the Reference Document
Mr. Henri Crohas, Chairman and Chief Executive Officer of ARCHOS.
1.2 Declaration of the person responsible for the Reference Document
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CHAPTER 1
“I certify, having taken all reasonable steps to this effect, that the information contained in this
Reference Document, to my knowledge, faithfully reflects reality and does not include any omission
liable to alter its interpretation.
I received an end-of-engagement letter from the statutory auditors of the financial statements, in which
they state that they have audited the information relating to the financial situation and the accounts
provided in this Reference Document and have read the entire Reference Document.
The statutory auditors have issued audit reports on the historical financial information presented in the
Reference Document. These reports, which appear in sections 20.1.1.1 to 20.1.1.6 in respect of fiscal
year 2005, in section 20.1.2 in respect of fiscal year 2004 and in section 20.1.3 in respect of fiscal year
2003 of this Reference Document, contain the supporting documentation”.
Igny, April 28, 2006
Henri Crohas
Chairman and Chief Executive Officer of ARCHOS
1.3 Person responsible for the information
Loïc Poirier
Chief Financial Officer
ARCHOS
12, rue Ampère
ZI Igny
91430 Igny
Tel : +33 (0)1 69 33 16 90
Fax : +33 (0)1 69 33 74 35
E-mail : investors@ARCHOS.com

Chapter 2. Statutory Auditors
2.1 Principal auditors
2.2 Secondary auditors
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2 Statutory auditors
2.1 Principal auditors
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CHAPTER 2
Price Waterhouse Coopers Audit
63 rue de Villiers - 92208 Neuilly sur Seine cedex
Represented by Mr. Vincent Gaide
Reappointed during the Shareholders’ Meeting of July 31, 2003 for a term expiring at the
end of the Shareholders’ Meeting called to approve the financial statements for the year
ended December 31, 2008
Member of the Compagnie Régionale des Commissaires aux Comptes de Paris (Paris
regional auditors association).
Frédéric Bitbol
62 boulevard Diderot - 75012 Paris
Appointed on May 15, 2001 for a term expiring following the Shareholders’ Meeting called
to approve the financial statements for the year ended December 31, 2006
Member of the Compagnie Régionale des Commissaires aux Comptes de Paris
2.2 Secondary auditors
Yves Nicolas
63 rue de Villiers - 92208 Neuilly sur Seine cedex
Reappointed during the Shareholders’ Meeting of July 31, 2003 for a term expiring at the
end of the Shareholders’ Meeting called to approve the financial statements for the year
ended December 31, 2008
Member of the Compagnie Régionale des Commissaires aux Comptes de Versailles
(Versailles regional auditors association).
Charles Zenaty
125, rue de Montreuil - 75011 Paris
Appointed on May 15, 2001 for a term expiring at the end of the Shareholders’ Meeting
called to approve the financial statements for the year ended December 31, 2006
Member of the Compagnie Régionale des Commissaires aux Comptes de
Chambéry (Chambéry regional auditors association).

Chapter 3. Selected financial Information
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3 SELECTED FINANCIAL INFORMATION
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CHAPTER 3
The Company’s key accounting and operational data for the last three fiscal years is stated below. It
has been extracted from the Company’s consolidated financial statements for the fiscal years ended
December 31, 2005, 2004 and 2003. This table should be read in
conjunction with the consolidated financial statements and the respective notes thereto for the
corresponding years (see section 20 of the Reference Document).
thousands of euros
Year ended
12/31/05
IFRS
Year ended
12/31/04
IFRS
Year ended
12/31/04
French GAAP
Year ended
12/31/03
French GAAP
Revenues 103,134 58,325 59,796 54,244
Gross margin 26,884 12,843 13,997 10,695
Operating expenses 23,192 20,161 19,381 18,388
Operating income 3,692 -7,318 -5,384 -7,693
Income tax -1,050 2,698 2,069 2,981
Net income 606 -4,508 -3,203 -4,993

Chapter 4. Risks Factors
4.1 Risks linked to the Company’s business
4.1.1 Product risks
4.1.2 Supplier risks
4.1.3 Risks linked to the default of a subcontractor
4.1.4 Customer risks
4.1.5 Risks related to inventories
4.1.6 Risks related to a surge in business
4.2 Company risks
4.2.1 Risks arising from dependence on executives and key employees
4.2.2 Risks arising from the influence of a small number of shareholders
within the Company
4.3 Risks related to the Company’s business sector
4.3.1 Risks related to competition
4.3.2 Risks related to falling prices for retail electronic products
4.3.3 Risks related to the economic and geopolitical environment that could .
adversely affect the Company’s financial situation and earnings
4.3.4 Seasonal risk
4.4 Market risks
4.4.1 Exchange risks
4.4.2 Interest rate risk
4.4.3 Liquidity risk
4.4.4 Equity risks
4.5 Legal risks
4.5.1 Exceptional events and litigation
4.5.2 Intellectual property risks
4.5.3 Risk associated with changes in regulations
4.6 Insurance and coverage of risks
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4 RISK FACTORS
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CHAPTER 4
Investors are invited to review all the information in the Reference Document, including the risks
described below. As of the date of the Reference Document, the risks presented below are risks,
which if they materialize, could have a material adverse effect on the Company, its business, financial
situation, earnings or prospects. However, investors’ attention is drawn to the fact that the list of risks
presented under this paragraph is not necessarily complete and that there may exist other risks, which
are unknown or the occurrence of which, as of the date of the Reference Document, is not considered
likely to have a material adverse effect on the Company, its business, financial situation, earnings or
prospects. If one of the risks described below were to occur, the Company’s business, financial
situation, earnings or prospects could be materially impacted.
4.1 Risks linked to the Company’s business
The Company’s primary operational risks are the risks that may interrupt or compromise its ongoing
operations for the design, production or distribution of its products, or which may endanger its
employees or its tangible or intangible assets, as follows:
4.1.1 Product risks
4.1.1.1 Risks arising from the Company’s inability to develop products that satisfy customers’
expectations under acceptable financial conditions
The Company’s success largely depends on customer acceptance of the products that it offers. This
can be affected by many factors, including in particular: public tastes; advertising; the availability of
alternative products; the general economic situation and other external factors, which can rapidly
change. It is extremely difficult to predict with accuracy the degree of acceptance of the general public
and future demand for existing or future offers and services, and the size, breakdown and future
growth of the markets in which the Company operates. The Company could be unable to adapt to this
constantly changing demand, which in turn could significantly reduce the demand for its products and
have an immediate and material effect on its financial situation and operating income.
Similarly, if consumers do not perceive its new product offers as sufficiently differentiated from existing
products, or if the prices the Company plans to charge for its products are not acceptable to the
market, the Company would have to either reduce the prices or agree to sell only a fraction of the
quantity it had initially planned to sell. Such inflexibility to market demand or inability to attract
consumers would have an adverse influence on the Company’s sales, margins, earnings. And even if
the Company is able to produce audio-visual players that meet the expectations of the targeted market
segments, but under economic conditions that do not satisfy the profitability criteria it has set, its
margins and, therefore, its earnings could suffer as a result.
4.1.1.2 Risks related to the development of new products
The study, design and development of new products require the time and mobilization of the
Company’s internal or external resources. The Company may not be in a position to launch a product
that it has identified as promising and suitable for a market segment, or in a position to launch such a
product on time, for numerous technical, commercial or other reasons. This could apply to any
outstanding project in progress.
The commercial failure of a developed product or a delay in the launching a Company product would
not only damage its credibility vis-à-vis its partners while hurting sales, but would also affect earnings
and its financial situation due to already incurred development costs. The severity of this factor would
increase the fewer the number of products that the Company has developed.

4.1.1.3 Risks related to malfunctioning products marketed by the Company
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The Company cannot guarantee that its customers will not encounter quality problems with its
products. Malfunctions in its products could result in additional research and development costs,
consume technical and financial resources, and harm the Company’s commercial reputation.
The Company may also be forced to incur significant costs due to the return of products by customers.
Such costs could negatively impact the Company’s cash flow and earnings. The Company could also
be obliged to grant discounts to its customers on future orders, which would hurt its profits. Lastly, the
Company could lose certain customers, which might impact sales significantly.
However, in order to limit the risk of malfunctions, the audio-visual products sold in Europe are subject
to quality control by Canon Bretagne under its assembly contract.
4.1.1.4 Supplier risks
The percentage of purchases made with the Group’s top suppliers in the year ended
December 31, 2005 is presented in the following table:
Suppliers % of purchases
Cumulative
purchases
Supplier 1 (hard drive) 15% 15%
Supplier 2 (hard drive) 13% 28%
Supplier 3 (hard drive) 6% 35%
Supplier 4 (subcontractor) 6% 41%
Supplier 5 (electronics) 5% 46%
Supplier 6 (screen) 4% 50%
Supplier 7 (electronics) 3% 53%
Supplier 8 (screen) 3% 56%
Supplier 9 (screen) 4% 60%
Supplier 10 (screen) 2% 62%
Other 38% 100%
TOTAL 100%
While the Company attempts to monitor the quality of its products and services, this
dependence on outside sources could reduce the Company’s capacity to ensure that defective or
inferior technologies or components coming from outside the Group are not included in its products.
The Company’s dependence on its suppliers could also expose it to the consequences
resulting if these suppliers do not comply with applicable regulations and third party intellectual
property rights related to the products they manufacture for the Company.
The Company may also be exposed to the impact of delays in production or other
operational shortcomings of the suppliers, which could negatively impact the Company’s sales,
earnings and reputation. Furthermore, if suppliers of certain products defaulted, the Company may not
be in a position to replace them rapidly. The short life of the products marketed by the Company
increases this risk.

4.1.2 Risks linked to the default of a subcontractor
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The Company believes that its development depends on its capacity to establish and
maintain high quality relations with a certain number of Asian partners. These relations require the
Company to maintain a strong presence in Asia. Consequently, the Company outsources the
assembly of its products to Chinese subcontractors located in the zone known as Shenzhen, north of
Hong Kong. Production is concentrated on a small number of sites, two as of December 2005, each
one specializing in a certain number of models.
If one of these subcontractors were to terminate its contract with the Company, if any of these
contracts were not renewed or if the quality of the relationships with the Company were to deteriorate,
ARCHOS would have to seek new local partners and develop new relationships with them. ARCHOS
cannot guarantee it would be in a position to develop such partnerships, or the time necessary to do
so. Furthermore, it cannot guarantee that ARCHOS’ new partners would be able to provide the same
service as the previous subcontractors, which could have a negative impact on the Company’s
earnings, financial situation and growth prospects.
Moreover, any default by one of these subcontractors could cause a delay in the Company’s
shipments by between 10 and 15 days, which could in turn negatively impact the sales, earnings and
reputation of the Company.
However in the event of any default by one of these subcontractors, the Company will be able to
transfer the manufacturing of its products to one of the other subcontractors. Moreover, these
production sites are large and have a production capacity easily exceeding ARCHOS’ requirements.
The agreement signed in June 2005 with Canon Bretagne reduces the risks linked to the failure of one
of these subcontractors.
4.1.3 Customer risks
ARCHOS markets its products in each country via specialized or general retailers and a few
wholesalers. Although ARCHOS attempts to minimize its dependence on one or more
customers, since retail sales of electronic and computer products has considerably consolidated in
recent years, its business in each country is divided among a comparatively small number of
customers.
The follow table shows the percentage of sales made with the Group’s top customers in the year
ended December 31, 2005:
Customers
Net sales
€
% of sales Cumulative sales
Customer 1 (UK) 8,803 9% 9%
Customer 2 (France) 7,420 7% 16%
Customer 3 (USA) 5,834 6% 22%
Customer 4 (Germany) 5,317 5% 27%
Customer 5 (China) 4,233 4% 31%
Other customers 71,527 69% 100%
TOTAL 103,134 100%
In a relatively concentrated market, the loss of any of the Company’s key customers could lead to a
decline in sales if it is not able to attract new customers. Furthermore, even if it does so, the new
customers may not need the same level of products as the lost customers or could pay less for these
products.

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Furthermore, it is possible that the Company will not be able to recover the full amount or a proportion
of certain receivables, which would have a negative impact on its earnings and financial situation. In
order to hedge the risk of bad debts among its customers, the Company has taken out a credit
insurance policy (see section 4.6 of the Reference Document).
4.1.4 Risks related to inventories
As of December 31, 2005, products in inventory amounted to approximately €31,333 billion. The
Group’s inventories are divided between (i) ARCHOS and its subsidiaries, (ii) the Group’s
subcontractors, and (iii) the Group’s customers.
The Company runs a risk of not having sufficient inventories in the event actual demand
exceeds forecasts. If the Company’s products are no longer available due to a shortfall in inventory, its
reputation could suffer, which in turn could harm its sales and marketing.
The Company is also subject to a risk of obsolescence on the components and products in its
inventories due to the potential introduction of new technologies and the inability to sell such
components or products. Such a situation could affect the Company’s cash flow and significantly
reduce earnings.
In order to reduce the risk of running out of inventory or product obsolescence, the Company uses a
reliable management information system to process orders and manage inventories. Furthermore, the
Company revises its forecasts of production and shipment volumes twice a month.
Finally, the Company is subject to risks related to the destruction, theft or deterioration of products
sold. The destruction of inventories, due to fire for example, would cause a temporary interruption or
reduction in shipments. The Company has taken out a multi-risk industrial insurance policy covering
the loss of inventories and the related operating loss (see section 4.6 of the Reference Document).
The risk of theft or deterioration in products during the storage period is significant due to the very
nature of the products sold by the Company. However, the Company cannot guarantee that any
destruction, theft or deterioration will not occur and if they were to occur, that they will not have a
material adverse impact on the Company’s sales and operating income. As a precaution the Company
has implemented security measures in all its premises.
4.1.5 Risks related to transport from China
ARCHOS is responsible for transporting product from China to its consumer markets. The
international commerce term applicable is FOB Hong Kong. This means that the Company bears the
risk of product theft. This risk is covered under a transport insurance policy (see paragraph 4.6 of the
Reference Document). The Company uses several different freight companies and types of transport
(sea and air).
On the other hand, ARCHOS ships video products assembled to Canon Bretagne, FOB Hong Kong,
which also transfers responsibility for transport to Canon Bretagne.
4.1.6 Risks related to a surge in business
If there is a surge in business, the Company’s logistical operations could be disturbed, which might
harm the Company’s image.

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Furthermore, the resources available to the Company could prove to be inappropriate in
relation to its planned growth objectives. As the Company grows, it will have to invest in technology,
infrastructure, and in other operational sectors, specifically in research and development, sales and
marketing which are crucial to its future success. If the Company is not able to control its growth, the
quality of its service, customer support and business could suffer. The future success of the Company
therefore depends, among other factors, on its ability to:
4.2 Company risks
react effectively to competition and changes in a rapidly evolving market;
strengthen the image of its brand and the loyalty of its customers;
pursue its policies in terms of training, motivation and loyalty of its employees;
attract and integrate new talent
continue to improve its internal procedures and controls.
4.2.1 Risks arising from dependence on executives and key employees
The future success of the Group depends to a large extent on the total involvement of its top
executives. The Company relies principally on Henri Crohas, founder, Chairman and Chief Executive
Officer and the largest shareholder, for its growth and to establish and implement its strategy.
Should the Company lose the services of one or more of its executives who have extensive
experience in the market in which the Group operates, specifically Henri Crohas, or if one or more of
them decided to reduce or terminate their involvement, the Company could find it difficult to replace
them and its business could be harmed, or its earnings, financial position or capacity to achieve its
objectives could be affected.
Furthermore, the Company’s future success depends on its ability to retain and motivate its key
employees and the Company may not be in a position to achieve this to maintain its competitive edge
and profitability. If this happens, it could have a material adverse effect on the Company’s business,
financial situation, earnings or capacity to achieve its objectives.
4.2.2 Risks arising from the influence of a small number of shareholders within the Company
A small number of shareholders have a significant influence on the Company’s major
decisions and, generally, on all decisions submitted to a vote at a shareholders’ meeting, such as a
merger, combination or sale of all or part of the Company’s assets. These shareholders have the
majority interest needed to control appointments to the Board of Directors and are in a position to
exercise a significant influence on the Company’s strategy.
Moreover, pursuant to the terms of an investment agreement signed on December 22, 2004, the
shareholders’ meeting of March 29, 2005 issued one preferred share to the EchoStar Communications
Corporation (“EchoStar”). This preferred share has certain special rights. Specifically, it allows
EchoStar to recommend to the shareholders' meeting the appointment of one-third of the Company’s
directors. As of the date of this Reference Document, three EchoStar representatives are members of
the Company’s Board of Directors.
The amended by-laws also stipulate that certain major decisions require a unanimous
decision minus one vote (see section 21.2.2 of the Reference Document). Any disagreement between
the EchoStar representatives and the other members of the Board of directors on any of these points
could block the operations of the Board of Directors which, in turn, could delay strategic decisions for
the Company.

4.3 Risks related to the Company’s business sector
4.3.1 Risks related to competition
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The Company expects that competition in terms of supply and price will intensify in the near future.
The Company is in competition with a certain number of publicly traded and private
companies on product lines it has developed. It is possible that current competitors or new competitors
will appear in each product line developed by ARCHOS. The Company’s main competitors are Apple,
Creative Technologies, iRiver, Thomson, Samsung and Sony.
Certain competitors, in comparison with the Company, have operated for a longer time, have much
greater technical resources at their disposal, higher brand recognition, a larger product line, a larger
number of consumers as well as long-term relations with the Company’s existing or potential
customers. All these factors could have a significantly adverse effect on the Company’s business,
earnings and financial situation.
Furthermore, certain manufacturers are much larger and have much greater financial
resources than ARCHOS, and it is not impossible that these manufacturers will take advantage of this
strength and their knowledge of the sector to attempt to gain strong competitive positions in the market
segments they consider to be the most promising.
In all these cases, it is probable that the offers developed by these manufacturers would
create significant competition for the Company and it is possible that ARCHOS would not be in a
position to respond.
Given this environment, the Company cannot guarantee that it will retain or increase its
current market share on certain product lines in the future. Nor can the Company guarantee that it will
be able to capture shares of new markets, which could impact its ability to increase sales.
4.3.2 Risks related to falling prices for retail electronic products
The Company sells audio-visual players, the prices of which tend to drop, largely due to the growing
sales volumes of a given technology and the rapid development of successive
technological innovations. The Company balances these continual price reductions by
constantly renegotiating the terms offered by its suppliers, by working to improve the
structure of its products, and by developing their functionalities. Should the Company be
unable to react on any of the aforementioned factors, its business could lose value, which could have
a material adverse impact on its financial situation, earnings or ability to achieve its objectives.
4.3.3 Risks related to the economic and geopolitical environment that could adversely
affect the Company’s financial situation and earnings
The Company produces and buys a large quantity of products on emerging markets and is faced with
the risks inherent to these markets, including rising salaries, changes in customs duties, uncertainty of
the economic, social and geopolitical environment, regulations that are sometimes contradictory and
changing, as well as the expropriation of assets. These risks could interrupt the Company’s production
in these countries and impact its capacity to manufacture products and bring them to market.
4.3.4 Seasonal risk
In the consumer electronic and computer products sector, nearly 50% of volumes are generated
during a short period running from September to the end of the year. This requires good planning,
generates cash peaks, and makes it difficult to forecast earnings in the final three months of the year.

4.4 Market risks
4.4.1 Exchange risks
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The Company’s net positions in the principal foreign currencies and an overall total for other
currencies as of December 31, 2005 are as follows:
€000 US Dollar Pound sterling Other
Assets 15,420 8,928 139
Liabilities and equity 31,184 2,613 14
Net position* before management -15,764 6,315 125
Off-balance sheet position 0 0 0
Net position after management -15,764 6,315 125
* Net position = balance payable or receivable in the currency in question
In thousands in the currency
USD GBP
Sales 64,474 12,429
Purchases 122,901 1,203
The Company has not taken out any specific hedges in respect of its exchange risks.
A sharp fall in the US dollar in relation to the euro would impact the equivalent value of sales in euros
in respect of sales invoiced in US dollars and indirectly the proportion of sales
invoiced in euros since prices tend to move in relation to changes in the exchange rate of the two
currencies. A sharp rise in the US dollar in relation to the euro would increase the
purchase price of raw materials for the Company which, in the short term, would not be able to pass
on such a cost increase in its sales prices. This in turn would have a negative impact on the
Company’s earnings and financial situation.
The sales recorded in the Asia and America zone are denominated exclusively in US dollars. The rest
of the sales denominated in USD are recorded in the rest of the world, excluding Europe, America and
Asia.
Almost all components are produced in Asia. Then, each supplier has organized its distribution and
logistics on the basis of its own needs. The Company may make purchases from the European
subsidiary, but receive deliveries directly from the Asian platforms. Thus, relevant information on the
geographic breakdown of purchases is difficult to provide.
The net foreign exchange impact, all currencies combined, resulted in a loss of 1,132,000 euros in
income over financial year 2005 and in a change in the translation adjustment of 330,000 euros for
equity income.

4.4.2 Interest rate risk
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Since the Company has no medium to long-term debt or any long-term investments, it is not exposed
to interest rate risks.
The impact of a change in short-term rates of +/-1% would be negligible given the Company's debt. As
of December 31, 2005, the overdraft lines utilized totaled 2,938,000 euros, which is +30,000 euros
over one year.
4.4.3 Liquidity risk
The Company's short term debts are principally in the form of bank overdrafts, partially in US dollars.
These overdrafts are agreed for a period of one year renewable, with a pool composed of several
banks. In the event of non-renewal of these short-term lines of credit, the Company could be
compelled to slow its growth in order to limit its need for working capital while it seeks another solution.
In order to diversify its financing, the Company has also established a 10 year bond loan with
EchoStar, repayable at maturity or convertible by EchoStar at any time, and at the
Company's request depending on certain thresholds (see section 21.1.5 of the Reference Document).
4.4.4 Equity risks
Since it has not invested its liquidities in equities or similar securities, the Company is not exposed to
any equity risks.
4.5 Legal risks
4.5.1 Exceptional events and litigation
The Company is, or may be, involved in a certain number of legal proceedings in the normal course of
its activities. In particular, the Company cannot guarantee that some customers will not encounter
quality problems with its products. In the event of malfunctions in products sold by the Company, the
Company could be liable either under contract or for negligence. Damages and interest are or may be
demanded in certain proceedings. The Company believes that the nature or amounts concerned in
litigation or disputes known or currently in progress at this date do not justify reserves and should not
significantly affect its consolidated financial situation in the event of an unfavorable outcome.
A presentation of the proceedings in progress is given in section 20.4 of the Reference Document.
There are no other government, judicial or arbitration proceedings, including all proceedings of which
the Company is aware, which are pending or with which it is threatened, which could have, or has had
in the last 12 months, significant effects on the financial situation or earnings of the Company and/or
the Group.

4.5.2 Intellectual property risks
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4.5.2.1 Risk associated with the inability to adequately protect intellectual property rights and the
know-how on which they are based
Despite the Company's efforts to protect its intellectual property rights, technologies and know-how,
third parties may try to copy or fraudulently make use of said rights, technologies or know-how. The
Company might find itself unable to protect its rights and prevent their illicit appropriation. Any legal
action seeking to establish its intellectual property rights or enforce the confidentiality of its know-how
could result in material costs for the Company. In addition, any outcome unfavorable to the Company
could have a negative effect on its income, business or financial situation. As the Company believes
that its intellectual property rights contribute to the creation of an entry barrier, such events would
therefore tend to weaken its competitive position.
In particular, the Company may have to face counterfeit products or accessories. This could result in a
fall in sales or even a weakening of the value of the brand in the market concerned, which would have
negative repercussions on the Company's income.
4.5.2.2 Risks associated with the use of technologies partially owned by third parties and
dependence on intellectual property partially belonging to third parties
The Company uses technologies partially owned by to third parties in its products and is
dependent on intellectual property partially owned by third parties; its activities could be
affected negatively if the Company was no longer able to use them in whole or in part. The products
supplied to the Company by its suppliers and sub-contractors may use technologies such as software
licensed from third parties. Although the Company makes every effort to obtain contractual guarantees
from its suppliers concerning intellectual property rights, the Company cannot guarantee that its
products do not or will not violate intellectual property rights held by others. The Company could be
the target of actions brought by third parties for violation of their intellectual property rights. If it should
be established in the future that the Company had infringed third party intellectual property rights, use
by the Company could be forbidden. The Company might have to pay royalties or fines and in certain
cases be forced to try to develop its own alternative creations, which might prove impossible. Such
actions could have a material negative impact on the Company's activities, income and financial
situation.
Judgment against the Company could also result in significant costs. Furthermore, even if the
Company were able to obtain a license either for the technology or the content concerned by the
action, or for a similar but not identical content or technology, the royalties claimed by the owners of
the rights could be high. Finally, such intellectual property rights might not be available at all. As a
result, the Company could be forced to revise the design of its products and to develop an alternative
intellectual property which would not constitute a violation of rights, necessitating substantial costs and
efforts. If the Company were unable to obtain licenses or could not develop alternative technologies to
avoid infringing the rights of third parties, it could be compelled to limit its offer of current and future
products. Any one of the above events could have a negative impact on the activity, operating income
and financial situation of the Company.
Excluding any counterfeits, it might simply prove impossible for the Company to get access to certain
intellectual property rights necessary for the development of its products under commercially
acceptable conditions. Such circumstances could also result in unfavourable consequences for the
Company's sales and earnings.

4.5.3 Risk associated with changes in regulations
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CHAPTER 4
4.5.3.1 Risks related to non-compliance of the Company’s products with conditions of product
certification or regulatory standards
The Company’s products must comply with consumer safety directives (EC), as well as the safety
regulations of all countries where the Company does business. If the Company does not manage to
renew regulatory approvals for its current products or to obtain them for its new products, this could
seriously impact the Company’s business, operating earnings and financial situation.
Furthermore, international and government bodies have put in place laws and regulations which
impact particularly on the electronic consumer products market, and these regulations could
potentially increase further. The introduction of a completely new law or regulation could also
potentially reduce the growth in this market, and thus reduce demand for the Company’s products.
There is also a danger of new taxes or costly new technical specifications or processes, which could
negatively impact operating costs. Any one of these measures could have a significant adverse effect
on the business of the Company or its customers.
4.5.3.2 European directive 2002/96/CE of January 27, 2003
European directive 2002/96/CE of January 27, 2003, concerning electrical and electronic waste (the
“EEW Directive”), was published in the JOCE of February 13, 2003. It was amended by directive
2003/108/CE of December 8, 2003.
The EEW Directive requires:
the selective collection of electrical and electronic waste (the “EEW”) for recycling and
an obligation to collect the old equipment without charge after the sale of a new item
of the same type to any household;
the selective and systematic treatment of certain components (condensers using
PCBs, printed circuit boards, discharge lamps, etc.) and substances
classified as hazardous (.mercury, CFCs etc.).
the re-use, recycling and recovery of collected EEWs, with high recycling and
recovery objectives to be reached no later than December 31, 2006. Priority is given
to the re-use of complete items of equipment. Recycling includes the re-use of parts
and materials, while recovery also takes into account the energy value.
The EEW Directive was transposed into French law by Decree 2005-829 of July 20, 2005 concerning
the composition of electrical and electronic equipment and the elimination of waste deriving from such
equipment, and set the obligations of producers and distributors for the collection and treatment of
such waste.
The EEW Directive also introduces the principle of the producer's responsibility for EEWs and
requires:
for household EEWs, at least the financing of collection from a collection point, the
treatment, recovery and elimination of EEWs, as of August 13, 2005; and
for professional EEWs, the financing of the collection, treatment, recovery nonpolluting
elimination of EEWs resulting from equipment marketed after August 13,
2005, unless other agreements have been reached.

4.5.3.3 European directive 2002/95/CE of January 27, 2003
1
Abu Dhabi, Andorra, Australia, Austria, Belgium, Brazil, Canada, Chile, Columbia, Cyprus, Denmark, Dubai, Spain, Estonia, United States of
America, Finland, France, Gabon, Germany, Gibraltar, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Iceland, Israel, Italy, Japan,
Kuweit, Latvia, Lebanon, Liechtenstein, Lithuania, Luxembourg, Malaisia, Malta, Maroc, Maurice, Mexique, Monaco, New Caledonia, Norway,
New Zealand, Holland, Philippines, Poland, French Polynesia, Portugal, United Kingdom, San Marino, Saudi Arabia, Senegal, Singapore,
Slovenia, Slovakia, South Africa, South Korea, Sweden, Switzerland, Taiwan, Thailand, Turkey, Uruguay, Vatican, Wallis and Futuna, Mayotte,
French Administered Territories
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CHAPTER 4
European directive 2002/95/CE of January 27, 2003 concerning the limitation of hazardous
substances in electrical and electronic equipment (known as the RoHS directive) was
published in the JOCE of February 13, 2003.
It introduces a ban on the use of certain toxic substances in electrical and electronic equipment,
including lead, mercury, cadmium, chromium etc., as of July 1, 2006. A maximum level of 0.01%
cadmium and 0.1% for the other substances will be tolerated for a homogenous material.
The Company has already anticipated these risks so as to be in compliance with these regulations as
they come into force.
In addition to the texts referred to above, rapid and/or major changes in French or European
legislation could have a significantly unfavorable impact on the activity, financial situation or income of
the Company or its ability to achieve its objectives.
4.6 Insurance and coverage of risks
The Company has established a policy to cover the principal insurable risks connected to its activity,
subject to the deductibles or usual exclusions imposed by the market.
The Company has taken out insurance in the following areas:
Risks covered
Amount of
coverage
(in euros)
Geographical
coverage
All risks transport 228,674 World
Exclusion from
coverage
Third party risk World Lead/pollutants
- all damages 1,500,000
- criminal protection 30,000
Professional multi-risk
coverage
Fire/weather 2,700,000
Goods in custody 1,600,000
Loss of business 3,700,000
Civil liability of company
officers
Credit 1,650,000
Igny*
5,000,000 World
* The subsidiaries of the Company have taken out independent multi-risk professional insurance.
1

Chapter 5. Informations about the issuer
5.1 History and evolution of the Company
5.1.1 Company name, structure and registered office
5.1.2 Date of incorporation and term of the Company (Article 5 of the
by-laws)
5.1.3 Place and registration number of the Company
5.1.4 Fiscal year
5.1.5 History of the Company
5.2 Investments
5.2.1 Principal investments made during the last three fiscal years
5.2.1 Principal investments made in 2006 or in progress, other than
those mentioned above
5.2.3 Principal investments covered by firm undertakings from
management structures
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5 INFORMATION ABOUT THE ISSUER
5.1 History and evolution of the Company
5.1.1 Company name, structure and registered office
The name of the Company is ARCHOS.
The Company is a French société anonyme (joint stock company).
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CHAPTER 5
The registered office of the Company is at 12, rue Ampère, ZI Igny – 91430 Igny and its
telephone number is +33 (0)1 69.33.16.90.
5.1.2 Date of incorporation and term of the Company (Article 5 of the by-laws)
The Company was formed as a limited liability company on February 9, 1998 and was
transformed into a société anonyme on April 22, 1991.
The term of the Company is fixed at 99 years from the date of registration in the Trade
Register, January 10, 1991, except in the event it is dissolved or extended.
5.1.3 Place and registration number of the Company
The Company is registered in the Evry Trade Register under number 343 902 821.
The APE code of the Company is 722C and its SIRET number is 343 902 821.
5.1.4 Fiscal year
The fiscal year of 12 months begins on January 1 and ends on December 31 each year.
5.1.5 History of the Company
Key dates:
1988: Creation of the Company
1988 - 1997: Construction of a solid knowledge base. Initially operating in the OEM market,
ARCHOS developed through successive technology innovations
1988-1992: 3000 image players installed in public places
1992: First PCMCIA memory card
1993: Video in-lay cards for local TV services
1994: Commodore games console emulator with CD-ROM reader
1996: Creation of first external CD-ROM reader without main power (international patent)
1997: Key year marked by the acceleration of company development; beginning of the
"Think Smaller" adventure with the marketing of the first external CD-ROM reader
without external power

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CHAPTER 5
1997-2001: ARCHOS applies for numerous patents for miniaturized peripherals and
develops a line of multimedia products for the general public
1998: First external miniature CD-ROM; 1999: First CD-RW burner from miniaturization of
Philips technology
2000: Jukebox 6000: first MP3 Jukebox, 100 hours of music in the palm of the hand
2001: Jukebox Recorder: first consumer MP3 recorder
2002: Jukebox Multimedia: first MP4 video jukebox MP4 (MPEG4 & DivX), MP3
reader/recorder and "photo wallet". First MP4 video player. Introduction of personal
multimedia: "all my music, all my photos, all my videos, with me wherever I go"
Initial public offering of ARCHOS in February to finance commercial development, to
develop a brand name recognized by for its innovation, and to build up its
equity capital
2003: Launch of the AV 300 in June 2003
2004: Launch of the AV 400 in June 2004
2005: Launch of the AV 700, the AV 500, Gmini 402 Cam, and the Gmini XS 100
Partnership with EchoStar and CANAL+
2006: Launch of the AV 700 TV and the AR 104
History:
Partnership with CANALPLAY and AlloCiné
ARCHOS was founded in 1988 by Henri Crohas. In the beginning the Company developed and sold
multimedia terminals connected to a Vidéotex server via the Minitel network. In 1994, the Company
moved into miniature peripherals for laptop computers, such as PCMCIA cards and CD-ROM readers.
It also began to develop its export sales (up to 80% of the Company's activity).
From 1994 to 1999, 90% of ARCHOS sales were made under third party brands as Original
Equipment Manufacturer (OEM) equipment, sales under ARCHOS brands remaining marginal.
After 1999, the Company refocused its sales strategy and developed sales under its own brand to
retail outlets specializing in consumer electronics (Best Buy, CompUSA and Circuit City in the USA,
Dixons in Great Britain, Fnac and Surcouf in France, MediaMarkt in
Germany, El Corte Inglés in Spain, etc.), and to wholesalers (Ingram Micro), catalogue sales outlets
and the Internet (including Amazon, Buy.com and direct sales through its own Web site
www.ARCHOS.com.
Since 1998, the Company has concentrated all its R&D efforts on the enhancement of its multimedia
products: MP3 music, digital photos, MPEG-4 video and compatibility with the Microsoft Windows
Media software.
Since June 2000, the Jukebox 6000 pocket music reader has used MP3 technology.
Substituting flash memory technology for hard disk storage, it provides a capacity of 6 Gig, with
storage of up to 6,000 minutes of music.

2002 – 2003
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CHAPTER 5
In 2002, ARCHOS took a new step with the launch of the JBM 20 or Jukebox Multimédia,
capable of storing, recording and reading video in MPEG4 format, together with digital
photos and MP3 music. This was the introduction of PVP (Portable Video Player) technology.
Since the beginning of 2003, ARCHOS has continued to develop its line of mobile audio/video
equipment with the AV 300 series, the first model to offer a large high definition color screen, like a
portable video recorder with DVD quality. ARCHOS also withdrew the same year from the disk burner
(CD-RW, DVD-RW) market in which it had not achieved critical mass.
2004
In 2004, ARCHOS began a product roll-out program aimed at optimizing the quality/
performance/price ratio:
2005
complete replacement of the audio line and launch of the Gmini 400, the first
audio reader with color screen capable of reading videos, storing photos, and serving
as a games console;
new development of the flagship Pocket AV line with the AV 400, now established as
the segment leader;
a special effort in styling, quality of materials used and compact product design;
excellent quality /performance/price ratio.
2005 reinforced this positioning with increasingly innovative products, such as the Gmini XS 100, the
AV 700, the Gmini XS 202, the AV 500 and the Gmini 500.
In a market that is open to new functionalities in players, which are no longer systematically
associated with the use of a computer, the content broadcast by television is becoming a strategic
factor. Thus, the new products, in particular the AV 700 and AV 500,true "portable digital camcorders",
based on experience acquired over the past few years with the AV 300, have become the benchmarks
in this segment.
In 2005, ARCHOS became the privileged partner of EchoStar and CANAL+ with the offer of its
portable digital camcorders, and the following innovative features:
2006
easy use of the electronic programming guide which allows the user to consult
future programs and select favorite programs;
data encryption on mobile products that prevent content copying;
use of a unique remote control between the digital decoder and the ARCHOS mobile product.
In March 2006, the Company launched new and innovative products: the AV 700 TV, the first personal
stereo unit receiving DTT and capable of making digital quality recordings, and the AR 104, an MP3
unit with a color screen.

5.2 Investments
5.2.1 Principal capital expenditures made during the last three fiscal years
The principal capital expenditures made by the Group are not significant and consist of:
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CHAPTER 5
fittings and furnishings for the premises occupied by the various companies in the Group,
purchases of computers and other office equipment and furniture.
5.2.2 Principal capital expenditures made in 2006 or in progress at the date of this Reference
Document
The Group has made no capital expenditure at the date of this document other than those mentioned
under paragraph 5.2.1 above.
5.2.3 Principal investments covered by firm undertakings from management structures
Not applicable

Chapter 6. Description of the Company’s market and
busines
6. Strategy
6.2 The ARCHOS’s markets and their principal players
6.2.1 A market with significant growth potential
6.2.2 A customer base eager for data and mobile
6.2.3 A relatively concentrated competitive market
6.3 The businesses of ARCHOS and the strength of its
positioning
6.3.1 The range of products and accessories
6.3.2 Research and development–focused on high-growth markets
6.3.3 An international marketing network
6.3.4 Strategic partnerships
6.3.5 Control of supply and production
6.3.6 Logistical organization and sales service
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26

6 DESCRIPTION OF THE COMPANY’S MARKET AND BUSINESS
6.1 Strategy
The objective of ARCHOS is profitable growth through ongoing innovation.
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CHAPTER 6
The Group's strategy is based on various marketing and technological developments with the following
priorities: to continue to offer highly innovative products that meet consumer
demands, to continue to improve the level of expertise of its teams to increase the added value, and to
gain market share in all its segments.
ARCHOS is working to clearly differentiate its products from those of the competition based on a
technological edge recognized by the market for functionalities that are enhanced and extended on an
ongoing basis. Thus, ARCHOS designs products considered to be
benchmarks in their segment by the most demanding music and video lovers, placing
"mobile" technology within reach of every consumer. The Company is focusing its efforts on
expanding its existing products lines and on boosting its presence in high-growth markets, particularly
the mobile video markets, in all regions where it operates.
To achieve this goal, ARCHOS is determined to strengthen its program of strategic
partnerships with first-tier operators in the television, telecommunications and content
segments to benefit from inclusion in their catalogues and the power of their retail channels.
Finally, to become a leader in the competitive market in which it is developing, ARCHOS
intends to continue to pay particular attention to controlling operating costs by optimizing purchasing
costs and the life cycle of its products.
6.2 ARCHOS’ markets and their principal players
To facilitate your reading and understanding of this section, a glossary listing all the technical terms
and abbreviations is provided at the end of the Reference Document.
6.2.1 A market with significant growth potential
The market in which ARCHOS is positioned is the market for portable audio-video players.
This market represents a new very high-growth niche within the consumer electronics
market, with growth estimated by various research institutes at 9% in 2005 and 10% in 2006.
The mobile audio-video market has developed over the past three years because, until then,
consumers could not find any products that could:
record television programs or videos from a PC, decoder or television;
record music and photos;
and to obtain a device that offered:
very large storage capacity;
with a large enough quality screen;
high autonomy (greater than 5 hours);
that could be adapted to mobile use.

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CHAPTER 6
ARCHOS believes that the various platforms available could not meet those needs because of the
intrinsic characteristics of the products:
(i) Portable telephone: a consumer can play music, he can watch very short films, but he
can't watch a feature-length movie while mobile because of the low resolution and the
limited screen size and storage capacity.
(ii) Personal Assistance (PDA): a consumer has the possibility of playing music and looking
at photos, but he can't connect to a television and does not have the possibility of storing
data that requires a high-capacity disk.
(iii) Home DVD player with hard disk recorder: this device allows a consumer to record
feature-length films, but he cannot obtain the content for mobile use.
(iv) Portable DVD Player: a consumer can watch long movies, but cannot record them and
has to carry all his DVDs with him.
(v) Laptop computer: this device lets a consumer play music, look at photos, but it won't fit
into the user's pocket and still has a business connotation. In addition, the short battery
use and the start-up time are not adapted to use for mobile entertainment.
Today, the growth drivers in the mobile audio-video market are:
6.2.1.1 The European market
mobility, which is becoming increasingly important as consumers want to be able to
view television series, favorite programs and DTT television anywhere;
Internet access, with the rapid emergency of broadband and expanded offers from
content suppliers, which is transforming the audio-video player into a multimedia
platform with a truly mobile device that offers real viewing comfort, thanks to a very
high resolution screen;
the dematerialization of content, as digital becomes a reality and consumers
increasingly want to store "selected cuts" that require substantial storage capacity;
and
the emergence of related uses, such as camcorder, camera, portable DTT, even GPS
navigation functions, which are transforming the audio-video player into a "multi-use"
platform.
According to the Company's estimates, the market for audio-video players adopting current
compression standards is expected to double in volume between 2005 and 2006 in Europe. In
particular, the high-end segment of this market is expected to increase tenfold in volume over the
same period.
Out of the half million units sold by ARCHOS in 2005, half were MP4 products with a price tag greater
than €300 (unit value), giving the Company a very significant presence in this high added value
segment.
According to the Company's estimates, the MP3 and MP4 market will grow more than 60% in value. It
expects this growth to be particularly strong in the MP4 segment with a price above €300 (unit value).

Expected trend in European
market for MP3/MP4 players
(thousands of units sold)
MP4 HD (>€300)
MP3 HD (€200-300)
MP3 flash
nano (€150-200)
nano
MP3 flash
entry price point
(300€) (>€300)
MP3 HD (€200-300)
MP3 flash
nano (€150-200)
MP3 flash
entry price point (€250)
MP3 flash
(€150-
250)
CHAPTER 6
MP4 HD
(>€250)
MP3 flash
(€150-250)
MP3 flash
entry (

6.2.1.2 The American market
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CHAPTER 6
ARCHOS estimates that the American market should represent between 25 and 30 million units in
2006 (audio and audio-video), or about twice the European market, and the share of audio-video
players could be 20 to 25% of the total. ARCHOS believes that its market share in the audio-video
player segment was approximately 10% in 2005.
Parks Associates estimates that household penetration (Internet equipped) in the United States for
audio-video players should grow from approximately 1% in 2005 to 17% in 2010.
% of US households equipped with Internet access
20%
15%
10%
5%
0%
Digital audio-video players with hard drive:
Household penetration in the USA
0%
1%
2%
4%
6%
11%
17%
2004 2005 2006e 2007e 2008e 2009e 2010e
Source: Portable multimedia analysis and forecasts,
2005 Parks associates
Recent studies (iSuppli in particular) conducted in the United States also reveal substantial growth
potential in the segment of players able to receive and read content from television operators
(broadcast, cable operators, IPTV).
This trend is intensified by the desire of content suppliers to retain customer subscriptions by offering
them innovative resources to record and recover content at any time and any place.
What mobile content stimulates consumer interest?
Clips
Sitcoms
Trailers (films)
TV series
Sports/Sports summary
0% 5% 10% 15% 20% 25% 30% 35% 40%
10%
11%
11%
13%
15%
17%
18%
24%
Adolescents Total sample
*percentages reflect total interest in mobile access to the content described
among the population of the sample of American households connected to the Internet
- Source: Parks Associates
27%
38%

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CHAPTER 6
In the United States, it should also be noted that adolescents are increasingly moving toward mobile
video. American consumers appear to be particularly interested in short, "easily consumable" content.
Studies conducted in 2005 by Parks Associates shows that young users demand video clips (38% of
teen-agers in homes equipped with the Internet in the United States), sitcoms (27%), film trailers
(24%) and films (18%). According to these studies, interest in content for mobile use will reach its full
potential only when consumers have direct access, when and where they want, to clips of favorite
movies and major sports events, etc.
At the same time, television operators–including cable suppliers–are working to develop their offer
and, for this purpose, are ready to marshal their efforts to market this content on portable video
platforms.
6.2.1.2 The Chinese market
According to ARCHOS estimates, the Chinese market is expected to expand sharply since it sold
some 50,000 audio-video players in 2005, and this number could reach about 200,000 in 2006. Based
on this information, the Company would hold about a 50% market share in China.
6.2.2 A customer base eager for data and mobile
Projections for expenditures to purchase content "on demand" on the Internet anticipate strong growth
in the coming years, within a context of growth in the penetration rate of domestic networks and
broadband along with innovation in digital entertainment platforms. In the United States, the total of
these expenditures could reach US$2.4 billion in 2006, then grow 260% in five years to reach $9
billion in 2010, according to Parks Associates.
Surveys estimate that households in the United States watch nearly 5 hours of television per day on
the average, compared with slightly more than 4 hours in Europe. Average monthly expenditures to
acquire audio content are US$5 to 10 in the United States and can exceed $80 for a satellite package.
The increase in the number of subscribers to the various packages is very significant, and operators
have reported an annual increase of more than 10% on the average over the last two years.

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CHAPTER 6
Among portable digital device owners (mobile telephone, digital camera, audio-video player, PDA,
etc.), households equipped with audio players are much more likely to spend on line than the others. It
is probable that the households that are or will be equipped with players with video functions will
represent a significant revenue potential for content suppliers (music and video in particular).
% of households
50%
40%
30%
20%
10%
0%
Online entertainment expenditures by US households
equipped with portable devices
40%
30%
31%
27%
22% 23%
25%
23% 24% 25%
22% 22%
21%
17%
11% 11% 12%
10%
Online games Online music Online video
Port. phone Digital audio player
Digital camera PDA
Portable game console
All US households equipped with Internet
Source : Consumer & Emerging Multimedia Platforms, 2004 Parks Associates study
of 4,000 American households equipped with Internet.
A survey conducted by ARCHOS with its customers also shows that buyers of multimedia mobile
products are more inclined than the average to spend online.
6.2.3 A relatively concentrated competitive market
The audio-video player market appeared about four years ago. After a few years of moderate growth,
this market rapidly expanded from 2003-2005, and is expected to continue to grow substantially until
2010. The two product families, players with a hard drive and those with flash memory, should both
profit from this growth. A Gartner study in 2005 found, however, that hard drive players should grow
more rapidly than players with flash memory.
The success of the audio player market intensified with the 2001 introduction of the iPod, a product
from Apple, and with the rapid growth of online music services. Today, Apple holds a market share of
slightly more than half of the audio player market. Gartner estimates that in 2004, 13.9 million hard
disk audio players were made, compared with 26.3 million flash memory units worldwide. iSupply.com
believes that, in time, the proportion of hard disk players sold should equal that of flash memory units.
The principal players in the audio player market are ARCHOS, Creative Technologies, Apple, iRiver,
Thomson, Samsung, Sony, etc.
While all these devices are intended to play music clips stored in their memory, they often differ in
software content, which offers flexible, but sometimes limited, use. Some major manufacturers of
audio players have, in fact, sharply limited recording functions to restrict the user's choice of online
music suppliers. In contrast, other products, like those from ARCHOS, are based on a completely
open system and allow the user to load music into the device memory in various formats and,
therefore, from a larger number of sources. The digital player market has gradually expanded to video.
ARCHOS was a forerunner in this area when in 2002 it launched its first product that allowed the user
to view a film (Jukebox Multimedia) recorded from any source, like television, a channel package
decoder, or a computer. This potentially fast-growing market requires new technical resources (a hard
disk is required to store the large data volumes needed for video; a large screen for visual comfort;
adequate software to code and decode images, etc.).

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CHAPTER 6
Even though other manufacturers have also penetrated the audio-video player market, ARCHOS
remains today the only company to offer a broad range of video players with very rich functionalities,
such as television recording with programmer or WiFi functions. Thus, there is a limited number of
competitors in the market, which include Samsung, Creative Technologies, Apple, as well as Asian
players that are focusing on the entry-price point. Sony's PSP can also be considered an indirect
competitor to the extent that this mobile game console can read videos.
6.3 The businesses of ARCHOS and the strength of its positioning
6.3.1 The range of products and accessories
ARCHOS is primarily positioned at the high end of the audio-video player market. This trend was
intensified in 2005 with the introduction of players offering a unique selection of functionalities, like the
PMA (Pocket Media Assistant) with its WiFi functions. All the ARCHOS products have been the result
of substantial efforts to develop innovative technologies that make the ARCHOS players benchmarks
in their domain for the most demanding video and music lovers.
ARCHOS has thus been able to integrate new functionalities that expand the market and allow the
consumer to acquire a product in which technology serves several uses:
T Television é l é vision
D decoder é codeur
TNT
WiFi
IP
3.5G 3.5 G
Online purchase
of content
Recording
Transfer
Time-shifting video
(recorder base)
Home PC
network
Mobile
television
Audio Audio/Video / Vid é o
nomade Mobile
Hard drive
(storage)
The ARCHOS offer is now organized into four lines of multimedia products:
GPS
Camcorder
Camera
Internet
+ e-mail
Pocket Media Assistant, recorders (TV, PC and Internet): with the combined
functionalities of the players, the PMAs offer direct Internet connectivity via WiFi or the
Ethernet, like a PC, along with access to office functions. The sale price of the
products in this line is around €700.
Recording audio-video players (TV et PC): their video recording feature makes
them true hard-drive pocket video recorders, with television the main source of
content, but these devices also connect perfectly to a PC and to the Internet. The sale
price for the products in this line ranges from €400 to €700.
Recording audio-video players (PC): these products can store and view music,
photos and videos from a PC and the Internet; they do not have a television recording
feature, but can record elements from a PC. The sale price for the products in this line
ranges from €250 to €400.
Audio players (PC): these products are dedicated to music. They can be equipped
with a color screen and to view photos, but these devices do not read video. Their
content comes primarily from a PC and the Internet. The sale price for the products in
this line ranges from €150 to €250.

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CHAPTER 6
The external hard drive is still present in the offer, but is increasingly positioned as an
accessory.
Description of the products:
Pocket Media Assistant, recorders (TV, PC and Internet)
PMA 430: Launched in January 2005, the PMA 430 presents the new technological platform from
ARCHOS. It is the first pocket player that operates under the Linux operating system and is equipped
with a 30 Gig hard drive, offering both very rich multimedia capabilities (TV recording, audio player
(MP3 & WMA), video player, digital photo album, external storage), wireless and fixed-line connection
functionalities (WiFi, infrared port, optional Ethernet adapter) allowing access to the Internet or email,
as well as electronic organizer functions and a touch screen. The PMA 430 is positioned as a Pocket
Multimedia Assistant and expands the audio-video line with a positioning as a higher-end and semibusiness
product. The PMA 430 is the most complete pocket digital multimedia device in the market
and meets the demands of the most demanding mobile user.
Recording audio-video players (TV and PC)
PMA 430
AV 700: Rolled out in June 2005, the AV 700 is a film player. This portable video recorder is equipped
with a large 7-inch screen (16/9). It also is equipped with a host USB port which allows direct transfer
of photos from a digital camera. This product is compatible with audio files (WMA) and protected
(Microsoft PlayersForSure) video (WMV) files. The AV 700 comes in several versions with 40 to 100
Gig of storage.
AV 700

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CHAPTER 6
AV 500: In September 2005, ARCHOS marketed the AV 500, its flagship product for the year. This
pocket video recorder lets the user record, read, store, organize and view a broad range of videos and
photos (Microsoft Play For Sure), and listen to music in digital format. Available in two versions from
30 to 100 Gigabytes, the AV 500 has a 4-inch color LCD screen in the 16/9 format ideal for photo and
video applications.
Recording audio-video players (PC)
AV 500
These players, primarily designed for music and photos, also give the user the possibility of reading
videos (MPEG-4 and WMV) and playing games. The computer and the Internet are the primary
sources of content. They are compatible with protected audio (WMA) and video contents (WMV)
(Microsoft Play For Sure). These audio-video players offer a more compact and less expensive
alternative to the AV series.
Gmini 402 is now equipped with a host USB port, replacing the Compact Flash drive and allowing
direct transfer of photos from a digital camera. The quality of the video read has been improved (reads
MPEG-4 files in DVD quality and reads WMV files) and its compatibility with protected (Microsoft
PlaysForSure) audio files (WMA) and video files and (WMV) allows the consumer to purchase and
download films and songs from online service sites. With 20 Gig of capacity, the Gmini 402 can store
80 hours of video, 200,000 photos or 10,000 songs.
Gmini 402

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CHAPTER 6
Gmini 402 Camcorder is the first MP3 and video player with a camcorder function. Dedicated to the
mobile user, this new multimedia player is equipped with a camera that can film videos and take digital
photos.
Gmini 402 Camcorder
Gmini 500 was designed to become the wireless extension of the PC. It allows users to watch their
films and slide shows on a 4-inch screen with excellent quality and is the ideal addition to the line of
multimedia players.
Audio players (PC)
Gmini 500
When MP3 music was launched, ARCHOS was one of the first players in the market. The 2005
models were the following:
Gmini XS 202s, the successor to the Gmini XS 202, was launched in August 2005 and is still one of
the smallest 20 Gigabyte MP3 players on the market, offering the possibility of storing up to 10,000
songs. It is now compatible with protected (Microsoft PlaysForSure) audio files (WMA), allowing the
user to buy and download songs from online service sites. The Gmini XS 202s has a 2-inch LCD
screen and a metal case.
Gmini XS 202s

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CHAPTER 6
Gmini XS 100 is the latest in the MP3 player line from ARCHOS, launched in May 2005. This miniplayer
with a capacity of 3 or 4 Gigabytes is compatible with protected (Microsoft PlaysForSure) audio
files (WMA), allowing the user to buy and download all the music clips available on most of the legal
downloading sites. The Gmini XS 100 is the smallest in size of the ARCHOS MP3 line, but it offers
storage capacity for up to 2,000 songs. Designed for the urban youth market, the Gmini XS 100 has a
1.5-inch LCD screen.
External hard drives
Gmini XS 100
External hard drives has been the historic business of ARCHOS, which designs very compact external
hard drives, with a line for desktop PCs or portables for the mobile user. The line offers the following
models:
ARCDisk 4 Gig: Launched in February 2005, the ARCDisk 4 Gig is a true external hard drive in the
size of a USB key with an integrated retractable USB 2.0 connector.
ARCDisk 4 Gig

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CHAPTER 6
ARCDisk 20 to 40 Gig is an ultra-compact external hard drive (only 75 grams for the 20 Gig) offering
capacities ranging from 20 to 40 Gigabytes.
6.3.2 Research and development–focused on high-growth markets
ARCDisk 20 Gig
ARCHOS has a research and development team located in France and Germany. This is an essential
element in the added value of the Company, which is focusing its efforts on the development of
products and new functionalities (DTT reception, GPS, WiFi, etc.).
This team is responsible for the complete design of a product, from the design phase through the
development of the mechanical parts, the software and coding technologies, the creation of the
photo/audio/video interface, wireless communications, image processing, and data management
graphic interfaces.
ARCHOS is an agnostic when it comes to compression formats and audio/video protection; its
technology supports the principal standards in the market. Its proprietary AVOS operating systems,
which is included in all the Pocket audio-video lines, is the first onboard operating system, with the
exception of those from Microsoft, to support all systems for data coding, copyright management and
synchronization with the PC (the result of close collaboration with the Microsoft development teams).

6.3.3 An international marketing network
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CHAPTER 6
The ARCHOS products are sold in several thousands points of sale in more than
40 countries. It top 15 customers represented slightly less than 50% of the Group's business in 2005.
Its customers belong to three categories:
Major retail companies
The leading specialized retailers, store chains or superstores generate more than 75% of the sales.
This network includes Darty, Fnac, Boulanger, Auchan, Carrefour in France; Dixons, Argos, Tesco in
England; MediaMarkt and Saturn, Electronic Partner, Expert in Germany; Mediaworld, Euronics,
PCcity in Italy; MediaMarkt, Fnac, Interdiscount in Switzerland, and Comp USA, Fry’s, and The
Sharper Image in the United States.
The @tailers
This new Internet sales category is growing rapidly and now represents more than 10% of ARCHOS'
sales revenues.
It includes companies with very significant growth in market share, estimated at three times the growth
of the traditional companies. This category includes the "pure Internet" brands such as Amazon,
Cdiscount, RueDuCommerce, Pixmania, Promarktonline, but also traditional companies that also
market on the Internet, including Fnac.com, Wallmart.com, and Target.com.
Specialized wholesalers
When it enters a new territory, ARCHOS generally entrusts the distribution of its products to major
international distributors such as Ingram, Techdata, D&H, but also to local wholesalers that are initially
very active in the marketing of its products.
6.3.4 Strategic partnerships
Content suppliers have always expressed a desire to offer storage solutions for their programs to their
customers, but also a platform capable of downloading targeted information from the Internet. This
trend has become a reality with the arrival of hard drive camcorders and DVD records in order to
improve the quality and volume of storage. However, the customer in this situation was forced to view
his content on his fixed installation.
ARCHOS players stand out from the competition because of their synchronized video recording,
among other features. They can be used to record and watch programs on a [mobile] player, and to
transfer videos from a PC to television and vice versa. Because of this capability, ARCHOS is a
privileged partner for content suppliers that are looking for innovative equipment to allow their
customers to store and display a growing volume of data.
Aware of this competitive advantage, ARCHOS wanted to develop partnerships that combine the
technological advance of the audio-video players (wireless) for recording and coding televised
programs (broadcast television, digital channel packages, IPTV, etc.) and its storage capacities with
the strategic vectors of content suppliers (television operators, for example).
EchoStar is one of the leaders in satellite television in the United States under the commercial name
Dish Network. It has over 12 million subscribers as of January 1, 2006 and employs a labor force of
approximately 20,000. A particularly innovative player in the sector, Dish Network continually offers
new services and technologies to its subscribers.

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CHAPTER 6
The convergence between the Company's audio-video players and the hard drive decoder solutions
offered by Dish Network was clearly an exceptional opportunity for both parties. In December 2004,
the Company and EchoStar signed a commercial agreement, under the terms of which, the Company
agrees to develop and sell to EchoStar audio-video players that are compatibles with the satellite
decoders used by Dish Network to allow its subscribers to record the programs broadcast.
This agreement is a major step in the development of the audio-video segment. It has made ARCHOS
a pioneer in the marketing of mobile products in partnership with one of the largest television
operators in the world and to develop new interface and encryption technologies between the mobile
product and the satellite decoder.
In the same way, the Company and Groupe CANAL+, a leader in pay television in France, signed an
exclusive memorandum of understanding in 2005 for the production, promotion and distribution, in a
limited series, of a Film Player, the AV 700 CANAL+ and CanalSat, which allows CANAL+ and
CanalSat subscribers to record their programs directly from the program guide.
This agreement has since been extended to allow ARCHOS players to read films downloaded on
CANALPLAY, the video downloading service from Groupe CANAL+. Thanks to this initiative, the first
of its kind in Europe, it is now possible to legally download the latest movies onto a computer from the
CANALPLAY website, and then to transfer them to an ARCHOS player to watch them whenever and
wherever the consumer wants, on the player or on a television, with unrivalled video quality. The
content license is automatically transferred to the player, offering the same level of protection as on
the PC. The new offerings in the CANALPLAY video catalogue will be made compatible with the
ARCHOS video players (the AV 500, AV 700, Gmini 402 and 402 Camcorder models). Joint
promotional offers will be proposed in the near future both on the CANALPLAY and ARCHOS sites
and in stores to allow consumers to discover this capability.
These partnerships, which are unprecedented in Europe, demonstrate the capacity of ARCHOS to
offer innovative solutions in the pay television segments.
ARCHOS has also recently signed a similar partnership agreement in the United States in the VOD
(Video on Demand) market with CinemaNow. This agreement lets CinemaNow customers download
and watch films over the entire ARCHOS audio-video line.
Moreover, ARCHOS has recently signed an agreement with AlloCiné, the French leader in Internet
film information, to allow ARCHOS owners to benefit from the program of AlloCiné Podcast movie
trailers. This program, which is updated every Wednesday, lets them download for free all trailers for
new releases for the week and the previews for future theater movies.
6.3.5 Control of supply and production
6.3.5.1 Control of supply
ARCHOS has made the choice to obtain the most technical and high-value components directly. This
is because of the development process, which requires working as early in the pipeline as possible
with the manufacturer, and the need at times to use specific components. Direct purchasing also
ensures better cost control for high-value components. The most expensive components include:
the hard drive, which can represent nearly one-third of the cost price of a product;
the color screens for the multimedia products; and
the critical integrated circuits, central or connectivity processor.
The ARCHOS organization, with its very international team of buyers, is designed to reduce supply
risks to a minimum and to ensure regular supply.

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CHAPTER 6
The breakdown of purchases by supplier is based on the line of components purchased as described
below:
The hard drive suppliers represent the largest volume, with nearly one-third of the
purchases made in 2005; ARCHOS has now divided up its supply needs among three
main suppliers. Given the concentration of this sector in a small number of
manufacturers, it is difficult to diversify purchases more.
Screens represent the second purchasing item, with over 15% of the total. They are
divided among a relatively small number of suppliers–three to four on the average.
Integrated circuit suppliers are the third item and are well diversified among the leading
international distributors of electronic components.
The rest of the suppliers are divided among a large variety of categories and a balanced
number of suppliers.
Over the last three years, ARCHOS has obtained significant price reductions, including the impact of
foreign exchange fluctuations in Asia. In 2005, ARCHOS focused on the developing new supply
sources and on implementing initiatives to reduce the total cost of the materials purchased.
ARCHOS believes that this organization and its privileged relationships with suppliers
and strategic partners allow it to handle supply tensions and remain competitive in its market.
6.3.5.2 Control of production
ARCHOS has great flexibility in the production of its players, which is entirely subcontracted to
assemblers in China and France (assembly and final quality control). ARCHOS completely controls
the component supply cycle, based on specifications required of the assemblers. The essential
components are delivered directly to the subcontractor, which provides only the low-value components
and a fabrication and assembly service based on methods defined by the ARCHOS production teams.
ARCHOS has strengthened its production capacity to meet market demand in the coming years. This
decision was made to improve the business model by diversifying subcontracting resources in order to
secure production and enhance competitiveness. ARCHOS decided to select two new assembly
plants in China to meet the demand. In addition, it made a choice to entrust management of the final
assembly, import logistics and repair activities for the audio-video players intended for the European
market to a Canon entity in France, Canon Bretagne, in order to optimize product quality, proximity to
distributors and customer satisfaction.
ARCHOS is permanently present at the production site where a team of nearly 15 people very closely
monitors operations and quality. This structure ensures both a rapid increase in production rates and
excellent control of the technology, as the subcontractor never completely controls the manufacture of
a product. With this method, ARCHOS retains strategic control of its production.
6.3.6 Logistical organization and sales service
The quality of the after-sale service is a major factor in ARCHOS'S success. It is just as important to
satisfy the end customer with a quality product as to satisfy the intermediary with rapid and reliable
merchandise returns, exchanges and repairs. ARCHOS established a quality charter early in 2005
which applies to all Group subcontractors in order to control receipt of merchandise, production
specifications, and assembly and it also initiated end-of-chain inspection procedures (quality wall).
To manage returns, ARCHOS selected Canon Bretagne as the subcontractor for customer returns in
Europe. The returns are analyzed at ARCHOS and, after diagnostics, are sent for repair to Canon
Bretagne. The general rule is not to exceed one week for repairs. For the United States and China,
there is an initial filtering and diagnostic of problems in the two subsidiaries and the products that
cannot be repaired with simple operations are sent to the subcontractor.

Chapter 7. Organizational chart
7.1 List of subsidiaries
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7 ORGANIZATIONAL CHART
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CHAPTER 7
ARCHOS is the parent company of the Group, with registered offices in Igny on the outskirts of Paris.
ARCHOS provides the design and development of products, central marketing,
purchasing and production, finance, as well as distribution and local marketing for France and
southern Europe. ARCHOS is also present in China via a sales office.
ARCHOS wholly owns four subsidiaries in the United States, the United Kingdom, Germany and Hong
Kong.
7.1 List of subsidiaries
The ARCHOS subsidiaries are as follows:
ARCHOS
- Registered offices in France
- Sales offices in China
100% 100% 100% 100%
ARCHOS
Inc
ARCHOS
UK
ARCHOS
Deutschland
ARCHOS
Asia
United Kingdom: ARCHOS UK is located in Southampton. Since January 1, 2006,
ARCHOS UK has been responsible for marketing, logistics and customer sales
service in the United Kingdom and Scandinavia pursuant to an agent agreement under
which it invoices commissions to ARCHOS on a monthly basis.
Germany: ARCHOS Deutschland is located in the suburbs of Düsseldorf. Since January
1, 2006, ARCHOS Deutschland has been responsible for marketing, logistics and
customer sales service in Germany, the Benelux countries, and Eastern Europe
pursuant to an agent agreement under which it invoices commissions to ARCHOS on a
monthly basis. It also has a research and development team.
United States: ARCHOS Inc. is located in Irvine, California.. ARCHOS Inc. provides the
distribution, logistics and customer sales service to the North American territory
pursuant to a distribution agreement under which ARCHOS invoices the products.
Hong Kong: This is a logistics platform, the services of which are reinvoiced to
ARCHOS.
Financial transactions from the above are described in detail in section 19 of the Reference
Document.

Chapter 8. Property, plant and equipment
8.1 Tangible assets
8.2 Tangible assets and the environment
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8 PROPERTY, PLANT AND EQUIPMENT
8.1 Tangible assets
ARCHOS has no significant tangible assets and is not planning any acquisitions.
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CHAPTER 8
The premises of the Company, located at 12, rue Ampere, Z.I. Igny, 91430 Igny, are rented on a
commercial lease of 3.6 or 9 years, with effect from February 1, 1999, from SCI des Vignerons, of
which Mr. Henri Crohas, a shareholder and director of the Company and Mrs. Crohas (also a director
of SCI) are shareholders and directors of the Company.
The annual rent of €99,000 as of December 31, 2005 is linked to the construction cost index. The
Company considers the contract to be on an arms length basis.
The Company rents warehouses on commercial leases of type 3.6 or 9 years with effect from
November 1, 2003, from a private individual, acting in his own name, for €45,000.
8.2 Tangible assets and the environment
Concerning Pollution
To the best knowledge of the Company, no waste dangerous or hazardous to health or the
environment has been put down, buried or used on the Company’s land, nor has any activity taken
place which would pollute the air, water above and below ground, the ground and soil beneath the
surface of the ground, in contravention of the law issued on July 19, 1976.
State of the building with regard to the regulations concerning asbestos
A study by a firm of architects made in 1998 did not detect asbestos in the flocking, insulation or false
ceilings.

Chapter 9. Review of the financial position and earnings
9.1 Financial position–summary balance sheet
9.2 Income statement
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9 REVIEW OF THE FINANCIAL POSITION AND EARNINGS
9.1 Financial position–summary balance sheet
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CHAPTER 9
€000
ASSETS Notes December 31, 2005 December 31, 2004
IFRS IFRS
Property, plant, equipment a)
3,916 3,312
Deferred taxes b)
8,315 8,849
Inventories c)
31,333 14,018
Trade and other receivables d)
29,822 10,647
Cash and cash equivalents
e) 9,078 1,920
TOTAL ASSETS 82,464 38,746
LIABILITIES Notes December 31, 2005 December 31, 2004
IFRS IFRS
Shareholders' equity f) 18,347 13,889
EchoStar loan g) 3,760 0
Provisions for other liab. and employee benefits h) 1,786 948
Short-term borrowings i) 2,938 2,975
Trade and other payables j) 55,633 20,934
TOTAL LIABILITIES AND EQUITY 82,464 38,746
a) Non-current assets
€000
Description Dec 31,2005 Dec. 31, 2004
IFRS IFRS
Development costs 2,644 2,148
Other intangible assets 202 352
Tangible assets 920 709
Other l/t invest’s held to maturity 150 103
Total non-current assets 3,916 3,312
Non-current assets rose from €3,312,000 to €3,916,000 over the period. This €604.000
increase is primarily due to the 23% rise in the non-current portion of development expenses from
€2,148,000 to €2,644,000.
The rest of the non-current assets rose by €108.000. This portion of assets is relatively limited and
stable over time because of the production model used by ARCHOS, with exclusive use of
subcontracting.
Development costs are capitalized if the capitalization criteria laid down in IAS 38 are all satisfied

) Deferred taxes
Deferred taxes declined by €534,000, largely due to:
c) Inventories
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CHAPTER 9
a decline in timing differences of €243,000, including IFRS restatements;
a decline in tax losses carried forward of €662,000, primarily because of writing off
deferred taxes on the US tax losses;
a €372,000 increase in the research tax credit.
In thousands of euros
Description Dec 31, 2005 Dec 31, 2004 1
IFRS IFRS
Raw materials and components 15,091 4,170
Work in progress 2,030 1,816
Finishing products 14,212 8,032
Total Inventories tocks 31,333 14,018
The inventory increase of €17,315,000 between December 31, 2004 and December 31, 2005 mainly
arose due to the following:
For raw materials and work outstanding in 2005:
For finished products:
higher inventories in order to smooth out supply and production owing to disturbances
related to the Chinese New Year at the beginning of the following year;
increased use of shipping, which takes longer but is more economical for the
transport of materials by Canon Bretagne;
anticipation of growth in business at the beginning of 2006.
the increase in business at the end of December 2005 to meet the strong seasonal
nature of the Company's business, where the fourth quarter accounts for 40% to 45% of
sales;
inventories at the Company's subsidiaries, intended to prevent shortages.
d) Trade and other receivables
The change in the item Trade and other receivables from €10,647,000 to €29,822,000 was driven by
the very strong growth over the last two months of the year, with sales almost
double sales in the previous year.

e) Cash and cash equivalents
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CHAPTER 9
After the injection of €7 million in April 2005,from EchoStar, the cash flow was positive by €7m
compared to the previous year due to two additional factors:
f) Shareholders' equity
the assembly agreement with Canon Bretagne which included a clause requiring Canon
Bretagne to carry inventory (paying cash up front for sub assemblies from Hong Kong
with the subsequent repurchase of these assemblies by the Company on credit terms)
The extent of free cash flow generated by operations
Shareholders' equity rose by €4,458,000 due to the conversion into shares of 25% of the bonds held
by EchoStar, based on the method for accounting for bonds partially as capital
under IFRS standards, and due to net income for the year.
g) EchoStar loan
The €7,000,000 bond issue was finalized in April 2005. Following the conversion of 25% of the bonds
and the accounting recognition under IFRS, the amount still outstanding for the EchoStar loan totaled
€3,760,000 at December 31, 2005.
h) Provisions for other liabilities and employee benefits
Provisions for other liabilities and employee benefits rose from €948,000 to €1,786,000 as of
December 31, 2005. The change is the result of the increase of €857,000 in the provision for product
warranties and a reduction of €19,000 in provisions for employee benefits.
i) Short-term borrowings
Short-term borrowings at December 31, 2005 totaled €2,938,000, down €37,000 from
December 31, 2004.
j) Trade and other payables
The increase in Trade and other payables from €20,934,000 to €55,633,000 reflects:
expansion of the number of suppliers and the renegotiation of more favorable
payment terms;
the contract with Canon Bretagne, which provides for cash purchase by Canon
Bretagne and then the resale of sub-assemblies to the Company with a payment
period. The balance on the Canon Bretagne account was €10,217,000 as of
December 31, 2005.

9.2 Income statement
€000
Notes
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CHAPTER 9
From January 1 to
December 31, 2005
From January 1
December 31, 2004
IFRS IFRS
Sales a) 103,134 58,325
GROSS MARGIN b) 26,884 12,843
Operating expenses c) 23,192 20,034
OPERATING INCOME d) 3,692 -7,318
NET INCOME e) 606 -4,508
a) Sales
In 2005, the Group posted sales of €103,134,000, surging 77% from €58,325,000 for the same period
in 2004, greater than projections.
All geographic regions contributed to this excellent performance.
€000
Description
From January 1
to December 31, 2005
From January 1
to December 31, 2004
IFRS IFRS
America 22,150 15,257
Europe and other regions 69,999 39,542
Asia 10,985 3,526
Total sales 103,134 58,325
In 2005, ARCHOS generated 68% of its sales in Europe, 21% in America and 11% in Asia. The two
regions with the greatest growth were Europe and Asia, while the American business reorganized its
operations.
Europe &
other
regions
68%
Asia
11%
IFRS 2005 Revenues
America
21%
Europe and
other
regions
68%
Asia
6%
IFRS 2004 Revenues
America
26%

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CHAPTER 9
In Europe and other regions, the countries that contributed the major portion of sales in 2005 were:
France, which soared 51% over 2004 boosted largely by the success of ARCHOS
products in the major companies, but also due to new accounts, including Gitem,
Connexion and Pixmania.
UK surged 133% over 2004: business doubled because of the development of the
partnership with Dixons, but also because of new accounts.
Germany jumped 106% over 2004: growth was driven by the development with the
Media Markt and Saturn brand stores and the dynamic performance of the sales force in
winning market share with Amazon or Actebis.
Switzerland, the countries in southern Europe such as Italy and Spain, and the
Scandinavian countries (Finland, Norway, Sweden) and the other regions
(primarily the Middle East and Russia) grew 61% over 2004.
The Asia Pacific region grew sales by more than 212% from fiscal 2004. China accounted for over
two-thirds of sales in the Asia-Pacific region in 2005. The rest of the sales come from Hong Kong,
Singapore, Malaysia, and Thailand.
The United States posted growth of 45% over 2004, including sales to EchoStar of €5,834,000.
b) Gross margin
The gross margin jumped by €14,041,000, rising from €12,843,000, or 22% of sales, to €26,884,000,
or 26% of sales in 2005.
This change was generated by:
the Group's policy to focus on products with high added value;
improvement in the product returns between 2004 and 2005;
savings achieved following the competitive analysis of component purchases and
expanded control of sales margins.
The contract with Echostar has generated sales of €5,834,000: an OEM type contract including a
royalty for research and development for ARCHOS of around 5% and showing a margin over full costs
of around 5%.,
c) Operating expenses
Operating expenses totaled €23,192,000, accounting for 22% of sales, compared with €20,034,000 or
34% of sales for year ended December 31, 2004.
€000
From January 1 to From January 1 to
December 31, 2005 December 31, 2004
IFRS IFRS
Research & development costs 3,089 3,343
Selling costs 10,194 8,439
General and administrative costs 9,909 8,252
Total operating expenses 23,192 20,034

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The Company continued its research and development efforts, resulting in the commercial launch of
14 products in 2005, such as Gmini XS 100, AV 700, AV 500, and Gmini 402 Camcorder. Expenses,
excluding amortization, depreciation and capital expenditure, rose 32% to €3,584,000 from €2,709,000
in 2004.
This increase was more than offset by:
capitalization of development costs in the amount of €2,757,000 compared to
€1,722,000 in 2004, which reduced the expenses accounted for during the year;
amortization and depreciation in the amount of €2,262,000 compared to €2,356,000 in
2004.
As a result, research and development costs fell by €254,000.
Selling and marketing expenses totaled €10,194,000, up €1,755,000 from 2004. In line with the
change in sales, sales commissions rose and the sales teams were expanded.
Marketing-related expenses also increased because of the efforts to launch products and promotion
campaigns in the distribution channels.
General and administrative expenses also rose by €1,657,000 to €9,909,000 in 2005. The increase
was generated by:
d) Operating income
an increase in the number of employees to deal with growth;
costs incurred for quality in order to improve product returns;
costs to rent and maintain buildings, particularly for the Company's UK and German
subsidiaries.
As a result of the rise in sales and cost controls, consolidated operating income came in at
€3,692,000, compared with a loss of €7,318,000 for the same period in 2004.
e) Net income
€000
From January 1 to From January 1 to
December 31, 2005 December 31, 2004
IFRS IFRS
Financial income (loss) -2,036 112
Income/loss before taxes 1,656 -7,206
Tax charge -1,050 2,698
Net income (loss) 606 -4,508

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53
CHAPTER 9
Consolidated financial income dropped to a loss of €2,036,000 from income of €112,000 in the same
period in 2004, primarily reflecting:
interest of €292,000 paid to EchoStar for the bond issued in 2005;
other financial costs for €371,000, particularly factoring costs;
exchange differences of €1,485,000, related to the fluctuation in the euro/US dollar over
the year in the absence of hedging.
The tax charge dropped from income of €2,698,000 to an expense of €1,050,000. The change is due
to the following items:
- current tax charge of €174,000
- deferred tax assets, which rose by €3,763,000, relating to deferred taxes on losses, timing
differences and IFRS adjustments. Capitalization of deferred tax assets on losses was
maintained at year-end 2005, except for the American subsidiary where the Group decided
not to recognize deferred tax until the subsidiary returns to profit.
- the ARCHOS parent company recorded a tax loss of 1,168,000 euros at December 31, 2005.
This is why the deferred tax base on the deficits is higher.
- and conversely, the research tax credit of €410,000, compared with €251,000 in 2004.
After taking account of the financial result and taxes, the Group posted net income of €606,000,
compared with a loss of €4,508,000 in 2004.

Chapter 10. Cash and capital
10.1 Simplified data on the issuer's capital
10.2 Cash flows
10.3 Loan conditions and financing structure
10.4 Restrictions on the use of the capital
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10 CASH AND CAPITAL
10.1 Simplified data on the issuer's capital
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55
CHAPTER 10
The table below shows the change in the Group's shareholders' equity over the last three years:
In €thousands
Apart from the net losses for the year and the movement of the currency differences reserve,
shareholders equity did not change during 2004 and stood at €13,889,000 at the year end. In 2005,
shareholders equity was impacted by the following changes, in addition to net income for the year and
the movement in the currency differences reserve:
Conversion into shares of 25% of the EchoStar convertible bonds ,leading to an
increase in capital of €276,000, by the issue of 553,039 new ordinary shares
Posting to shareholders’ equity of part of the outstanding balance of the EchoStar
convertible bonds in accordance with IAS 32/39
Reclassification of €1,086,000 from the account Premiums on capital
Sale of treasury stock and posting of capital gains made on such sales directly to
shareholders’ equity

10.2 Cash flows
€000
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Year ended
December 31, 2005
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56
Year ended
December 31,
2004
2,373 1,589
-3,372 -2,219
8,565 367
Currency adjustments -686 370
Change in cash 6,880 108
Cash at beginning of year -740 -848
Cash at year-end 6,140 -740
CHAPTER 10
The cash flows related to financing activities come in large part from the EchoStar investment in the
amount of 7 million completed in April 2005.
The effects of Canon Bretagne can be found at the level of cash flows from operating activities.
Canon's position in the Trade payables accounts was 10,217,000 euros at December 31, 2005, for a
position in Trade receivables of 2,930,000 euros and an inventory position of 3,171,000 euros.
10.3 Loan conditions and financing structure
€000
Outstanding Dec 31 2005 Dec 31 2004
IFRS IFRS
Non-current liabilities (ex-current portion)
Bank euro borrowings 0 0
Bond 3,760 0
Total non-current liabilities 3,760 0
Current liabilities
Current portion of non-current liab. 0 61
Bank loans and other s/t bank debt 2,938 2,660
Total current liabilities 2,938 2,721
Total gross liab. 6,698 2,721
Marketable securities -1,110 0
Cash and cash equivalents -7,967 -1 920
Net debt with accrued interest -2,379 801
ARCHOS contracted three medium-term loans, only one of which was still active in 2005, BDPME
(previously CEPME). This loan was closed out at December 31, 2005 and the
repayment over the year amounted to €61,000.

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57
CHAPTER 10
On April 7, 2005, the issue of the bond subscribed by EchoStar was finalized, resulting in the receipt
of €7,000,000, partially recognized as debt and partially as shareholders' equity based on IAS 32/39.
In October 2005, under the forced conversion process offered to the Company, EchoStar converted
25% of the convertible bonds, resulting in the issue of 553,039 new shares.
In April 2006, under the forced conversion process offered to the Company, EchoStar converted 25%
of the convertible bonds, resulting in the issue of 553,039 shares. A third 25% segment of convertible
bonds was also converted at EchoStar's initiative, resulting in the issue of 553,040 shares. After this
conversion, the residual amount for bond non-current debt was 1,253,000 euros.
The Group primarily finances itself through short-term cash lines and documentary credit lines from a
pool of several banks.
The inventory carrying clause included in the subcontracting agreement with Canon Bretagne (cash
purchase of merchandise sub-assemblies in Hong Kong until resale of the finished products under
credit terms) also had a positive impact on cash and cash equivalents.
10.4 Restrictions on the use of the capital
None.

Chapter 11. Research and developmen, patents and
license
11.1 Research and development
11.2 Patents and licenses
11.2.1 Patents
11.2.2 Licenses
11.2.3 Trademarks and brands
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11 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSE
11.1 Research and development
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59
CHAPTER 11
The Group operates in a business sector characterized by constant technological innovation and the
importance of the "time to market". This is why the Group devotes an average of 3% to 5% of its sales
and more than 20% of its work force (approximately forty engineers) to research and development.
The development cycle of a product corresponds to the period covering design, hardware and
software development, prototypes, pre-series, and mass production to make the first customer
delivery. Control of this cycle is critical for the competitiveness of a high-tech company.
The development cycle can last from a few months for a simple product to two years for the
development of a completely new hardware platform and software application.
The ARCHOS research and development department is a multi-disciplinary and completely integrated
structure, capable of managing all the development work. The various steps in a project are
coordinated by a project head (component design, onboard software and user interface, mechanical
design, mould design, electronic design, electronic card routing and production engineering). Only the
acquisition of certain technical elements is outsourced.
Research and development expenses are capitalized each year by project and amortized using the
straight line method over the estimated commercial life of the product (18 months since 2004).
Salaried employees are not rewarded in respect of their contribution to innovation.
ARCHOS intends to maintain its commitment and investment in diversified research and
development projects in order to support and expand its product lines, consolidate its
competitive advantages and open new markets.
The Group's research and development is focused on products that can be marketed and on reducing
the time to market.
Total Research and
Development costs
11.2 Patents and licenses
11.2.1 Patents
€000 2005 2004 Change
(%)
3,584 2,709 32%
When an invention has passed the design phase, it is registered in France, then in the
European community and the United States depending on the relevance of the innovation and the
degree of protection needed. ARCHOS essentially gears its patent strategy toward
protection of the processes affecting uses more than on specific technologies.
To date, the Company holds three patents in France for:
a data storage device that can be connected to a micro-computer;
a device and process to load an external data support drive connected to a computer
and an external drive that includes this device; and
a device to detect a hard drive failure.

In addition, the Company has filed patent applications for the following:
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CHAPTER 11
a portable digital recording device and the process used in such a device;
an external hard drive system and process and an independent, portable external hard
drive unit used in such a system;
a digital system to record video signals;
a multimedia drive host station;
a process and system to record a medium from a decoder to a portable multimedia
recorder/player;
a process and device to search for an element in a list via accelerated scrolling on a
display device, etc.
The Company intends to limit the potential financial consequences resulting from a lack of protection,
including risks of copying, infringement and loss of market share.
11.2.2 Licenses
The ARCHOS products use a number of technologies that require the regular payment of fees in the
form of royalties which include, but are not limited, to:
Microsoft
ARCHOS has signed an agreement with Microsoft to allow it to install and reproduce its
multimedia technology: WMA and WMV for audio and video, WM-DRM for data encryption, MTP for
synchronization with a PC, and Windows Media Center for television on PC. Under the terms of this
agreement, Microsoft agrees to verify the compatibility of the ARCHOS products with the "Windows
Media" technology.
Moreover, ARCHOS and Microsoft have planned to correspond on the compatibility of their
respective products and services according to the terms of the PlayForSure program. This program
implies that the parties cooperate on the related marketing and communications operations.
Now, the entire audio-video line is compatible with Microsoft and benefits from the
PlayForSure label.
MPEG LA
MPEG LA has granted ARCHOS a personal and non-exclusive global sub-license that allows it to use
the MPEG 2, MPEG 4 and AVC technologies and to produce prototypes that incorporate one or more
elements that use or allow the use of the MPEG 2, MPEG 4 and AVC technologies.
Dolby
Dolby has granted ARCHOS a personal, indivisible and non-exclusive license that allows it to use the
Dolby technology (brand, expertise, copyrights and patents protected by copyrights) and to
manufacture prototypes incorporating one or more elements that use or allow the use of the Dolby
technology.
Under this license, ARCHOS pays royalties to Dolby annually.
Royalties are calculated on the basis of ratios, in most cases on the quarterly proceeds declared by
the Company.

11.2.3 Trademarks and brands
ARCHOS has systematically protected its commercial identity and trade marks internationally.
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CHAPTER 11
Originally an OEM (a manufacturer that sells hardware to manufacturers and assemblers), ARCHOS
now markets its products to consumers under its own brand name; its identity has become an
advantage in winning market share and in communications.
ARCHOS uses its industrial property advisors very early in the decision-making chain in order to
validate the direction of its branding policy. The Company carefully manages its portfolio of brands,
drawings and models, and every year verifies whether each right should be maintained.
Each release of new products includes trade name protection.
To date, the Company's principal registered trademark is "ARCHOS".

Chapter 12. Trend information
12.1 Trends affecting the business from the end of the
last year to the date of this Reference Document
12.1.1 Sales
12.1.2 Production
12.1.3 Internal organization
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62

12 TREND INFORMATION
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63
CHAPTER 12
12.1 Trends affecting the business from the end of the last year to the date of this Reference
Document
12.1.1 Sales
The Company has published sales figures for the first quarter of 2006.
Sales from January 1, 2006 to March 31, 2006 under IFRS
€m
(IFRS)
Sales 2006
Quarter 1
Sales 2005
Quarter 1
Sales Variance %
Europe 19.9 12.2 +63%
USA 4.9 3.2 +53%
Asia 4.2 1.4 +192%
Total 29.0 16.8 +73%
ARCHOS posted sales of €29m in the first quarter of 2006, up 73% over the same period of the
previous year.
Europe grew by 63%, driven by the development of its distribution network and an improved
geographic coverage which now extends to Scandinavia and Eastern Europe.
The Asia Region continues to benefit from strong growth (+192%) and now represents 14% of Group
sales. In China, ARCHOS now has sales in 23 of the 30 provinces and its products are now sold
through the majority of major outlets such as Shundian, WallMart, Sam’s club and Friendship Shop.
North America, up 53%, is now positioned to take off strongly. The Company considers this region as
a priority and is currently discussing the strengthening of its product range with the major American
outlets. Sales made with EchoStar make up 15% of the first quarter’s sales in the United States.
Overall, the first quarter rate of growth of 73% was driven by the entire product range, with the AV500
being particularly successful. The product range was also boosted in April by the launch of the
ARCHOS AV700 TNT and the ARCHOS 104.
On March 15, 2006, ARCHOS announced the launch of DVBT (known as TNT, France's DTT
platform) on the AV700. The AV700 TV is the first digital media player that can receive
digital DTT.
12.1.2 Production
The second Chinese subcontractor is gearing up his production capacity in order to absorb much
higher-than-market volume.
ARCHOS has also recently signed a commitment letter with a third subcontractor which should allow
the Company to allocate its production among three Chinese subcontractors.

12.1.3 Internal organization
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CHAPTER 12
Adonix has supplied an IT system to improve daily operations. The system can closely
manage the Group's flow of supplies, product nomenclatures, production, and financial flows.
Originally, this system was used only by ARCHOS SA. However, in order to continue efforts to
optimize logistical flows and to provide visibility to all participants in the value chain, a
decision was made to:
install the information system in the UK and German subsidiaries in January 2006;
transform the UK and German subsidiaries into agents to issue the parent
company directly and to ensure total visibility of inventory.
12.2 Known trends or risks relating to demand and/or events that could reasonably have a
material impact on the Company’s outlook.
None

Chapter 13. Earnings forecasts or estimates
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65

13 EARNINGS FORECASTS OR ESTIMATES
Since the company operates in a very high-growth market, the company has preferred to announce
forecasts. These forecasts do not take into account existing partnerships or possible partnerships in
future years.
The Company has announced projected 2006 revenues of 160 million euros, an increase of about
60% over 2005.
This projection is based on market data available to date, primarily presented in Chapter 6. It is
projected that the market would double in volume between 2005 and 2006 and rise 60% in value.
Anticipating that it will maintain its market share, the Company is therefore projecting about 60%
growth in 2006.
For fiscal year 2007, the company believes it is in a position to gain market share in the America zone
and record growth of 35% to 40% in a global market still estimated to be high-growth and trending
toward revenues of 220 million euros.
The company also believes that, by maintaining a margin of 25% for 2006 and 2007, it would benefit
from a leverage effect on its operating expenses, which are estimated to rise half as quickly as
revenues for 2006 and at the same rate as revenues for 2007, because of the company's need to
invest in research and development and marketing to sustain future growth.
This leads to operating income of 5% and 8% over 2006 and 2007 in an economic model without
plants.
We confirm that the only projections announced by the company affect only operating income and that
any other term (operating profitability, EBIT, income from operations, etc.) has been used only with
this meaning. This is why we refer in the reference document to operating income.
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Chapter 14. Administrative, management,
supervisory and executive bodies
14.1 Corporate officers and corporate governance bodies
14.2 Members of the Board of Directors
14.3 Directors' experience
14.4 Conflicts of interest among administrative, management,
supervisory and executive bodies
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14 ADMINISTRATIVE, MANAGEMENT, SUPERVISORY AND EXECUTIVE BODIES
14.1 Corporate officers and corporate governance bodies
ARCHOS is a French société anonyme with a Board of Directors whose chairman is also the Chief
Executive Officer. The Company has no other chief executive officer.
The Board of Directors met eight times in fiscal 2005. Attendance at meetings was 64%.
14.1.1 Members of the Board of Directors
The table below indicates the members of the Company's Board of Directors on the date of the
Reference Document.
Name and
address
Henri Crohas
12 rue Ampère,
ZI Igny
91430 Igny
Isabelle Marlier-
Crohas*
12 rue Ampère,
ZI Igny
91430 Igny
Giuseppe Agnello
Total
Tour Coupole
92400 Courbevoie
Jean Rizet
Groupe Arc
25, boulevard
Malesherbes
75008 Paris
Jean-Marc Wormser
12 rue Ampère,
ZI Igny
91430 Igny
Date
appointed
April 22, 1991
Shareholders'
Meeting
April 22, 1991
Shareholders'
Meeting
April 22, 1991
Shareholders'
Meeting
July 31, 2003
Shareholders'
Meeting
July 31, 2003
Shareholders'
Meeting
Date term
expires
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2008
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2008
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2008
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2008
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2008
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68
Office and
position in the
Company
Director
Chairman and
Chief Executive
Officer
Director
Director of
Human
Resources
Director
Director
Director
Principal offices and
positions outside the
Company
ARCHOS, Inc.: Chairman
ARCHOS UK: Chairman
and Chief Executive
Officer
ARCHOS Deutschland:
Geschaftsführer
Manager of SCI des
Vignerons
Organization Manager for
the Total group
Executive Vice President,
Groupe Arc
Manager, Agence
Quadridge Conseil
None

Michelle Ann Tadros
EchoStar
9601 S. Meridian
Boulevard, Englewood
Colorado 80112 (USA).
Markus Wayne
Jackson
EchoStar
9601 S. Meridian
Boulevard, Englewood
Colorado 80112 (USA).
Steven Bruce Schaver
EchoStar
9601 S. Meridian
Boulevard, Englewood
Colorado 80112 (USA).
Thomas Abramovici**
12 rue Ampère,
ZI Igny
91430 Igny
March 29, 2005
Shareholders'
Meeting
March 29, 2005
Shareholders'
Meeting
March 29, 2005
Shareholders'
Meeting
Appointed at
the Board of
Directors
meeting of
October 6,
2005***
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2010
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2010
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2010
Shareholders'
Meeting called
to approve the
financial
statements for
the year ended
December 31,
2011
Rapport Annuel – Document de Référence
69
Director
Business development
analyst, EchoStar
Technologies Corporation
Director Chairman, EchoStar
Technologies Corporation.
Director Chairman, EchoStar
International
Director Analyst at Barclays Bank
* Married to Mr. Henri Crohas.
** Nephew of Mr. Henri Crohas.
The Company's management is not aware of any other family ties among the members of the Board of Directors.
*** The appointment of Thomas Abramovici will be submitted to the shareholders for
approval at the April 19, 2006 meeting. The directors appointed are proposed by the Chairman and Chief
Executive Officer or any other director. The appointment or nomination of a new director is made in accordance
with the voting regulations of the Board of Directors, as prescribed by law and the by-laws of the Company.
The directors have held no offices other than those listed in the table above over the past five years.
Under the corporate by-laws, each director must hold at least one share of stock.
14.1.2 Directors' experience
Henri Crohas (55 )
Mr. Crohas is a graduate in Arts et Métiers (ENSAM), and has an Executive MBA from the HEC and a
Master's degree from Bath University in the UK. He started his career in the oil industry before forming
ARCHOS in 1988. Since then, Mr. Crohas has served as Chairman of the Board of ARCHOS.
Isabelle Marlier-Crohas (45)
Mrs. Marlier-Crohas, who is married to Mr. Henri Crohas, is a graduate of Arts Décoratifs de Paris
(ENSAD). She currently is the Human Resources Manager at ARCHOS

Giuseppe Agnello (56)
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CHAPTER 14
Mr. Agnello is a graduate of the Ecole des Ingénieurs de Marseille and holds a doctorate in
engineering. He was in responsible for several oil projects in Norway, Iran and in Africa for the Elf
group's Export Division. He now works in Total SA's Exploration Division where he is responsible for
organization standards and procedures.
Jean Rizet (55)
Mr. Rizet is a graduate of the Institut des Etudes Politiques de Paris (IEP). He served as Vice
President at Pierre Conseil before becoming Executive Vice President of Ile-de-France in Groupe Arc,
his current position.
Jean-Marc Wormser (60)
Mr. Wormser is a graduate of the Institut des Etudes Politiques de Paris (IEP). He served as Human
Resources Director at Thomson and then at OCIL until 2002.
Michelle Ann Tadros (34)
Mrs. Tadros holds an MBA and a Masters in International Relations from the University of Chicago.
She began her career has an Associate at the JP Morgan Chase NY investment bank, which she held
until 2001. In 2002, she served as a Venture Capital Analyst at Holden Capital LLC in Denver. She
then became an Equity Research Associate at CIBC World Market in 2003. She now works as a
Business Development Analyst at EchoStar Technologies Corporation.
Markus Wayne Jackson (45)
Mr. Jackson is a graduate of Texas Tech University. He began his career in 1993 at
EchoStar as a Vice President of Engineering and is responsible for product development.
He is now Chairman of EchoStar Technologies Corporation and six development units.
Steven Bruce Schaver (52)
Mr. Schaver joined EchoStar in 1984. He has held several management positions in the
international trade, finance and operations departments. Since 2000, he has served as Chairman of
EchoStar International.
Thomas Abramovici (26)
Mr. Abramovici is a graduate of ESC Paris. He is now an analyst at Barclays Bank.
Over the past five years, none of these persons:
has been convicted of fraud;
has been associated with a bankruptcy, receivership or liquidation while serving as an
officer or director;
has been banned from a management position;
has been the subject of official public incrimination or sanctions by the statutory or
regulatory authorities.
Directors who have resigned or who have not been re-appointed in the last three years :
Albert HAKIM was not re-appointed as a Director by the annual general meeting of July 31, 2003.
Alice CROHAS resigned on October 6, 2005.

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CHAPTER 14
14.2 Conflicts of interest among administrative, management, supervisory and
executive bodies
On the date this Reference Document was filed, ARCHOS Chairman Henri Crohas directly held
47.23% of the equity capital and 47.23% of the voting rights.
The directors have no shareholding in their own right in any of the subsidiaries of the Company.
Mr. Crohas, Chairman and Chief Executive Officer, and the leading shareholder in the Company and
Mrs. Crohas, also a shareholder in the Company, are also shareholders in the company SCI des
Vignerons, which owns the Company’s Head Office.
One preferred share was issued to EchoStar during the March 29, 2005 shareholders' meeting. This
new share constitutes a new P class of stock, due to the special rights attached to it.
The class P share enjoys special rights. It allows EchoStar to nominate one-third of the Company's
directors at the shareholders' meeting, to have access to the Company's premises and accounting
documents, and to conduct one audit a year.
EchoStar is thus represented on the Board of Directors by three of its executives:
Steven Bruce Schaver
Markus Wayne Jackson
Michelle Ann Tadros
EchoStar is also a client of ARCHOS under a commercial contract, the terms of which are
detailed in section 22 of this Reference Document.
The Company's management is not aware of other situations that could result in a conflict of interests
among the administrative and management bodies.

Chapter 15. Compensations and benefits
15.1 Amount of compensation paid to the top executives and
corporate officers
- €292 TO HENRI CROHAS
15.2 Retirement and other benefits
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15 COMPENSATION AND BENEFITS
15.1 Amount of compensation paid to the top executives and corporate officers
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73
CHAPTER 15
The table below details the compensation and benefits in kind (in euros) paid to the ARCHOS
directors for the fiscal years ended December 31, 2005, 2004 and 2003:
Name
Chairman
Henri
Crohas
Other members
Isabelle
Marlier-
Crohas
Giuseppe
Agnello
Gross
compensation
Fixed
101,3
42
Variable
In-kind
benefit
s
Directors
' fees
paid by
the
Group's
entities
Total gross compensation
paid by the Company
In 2005 In 2004 In 2003
0 0 4,269 105,611 84,175 111,517
0 0 0 0 0 4,573 4,573
0 0 0 4,269 4,269 8,842 4,573
Jean Rizet 0 0 0 4,269 4,269 6,174 1,905
Jean-Marc
Wormser
Michelle
Ann Tadros
Markus
Wayne
Jackson
Steven
Bruce
Schaver
Thomas
Abramovici
0 0 0 4,269 4,269 6,174 1,905
0 0 0 0 0 0 0
0 0 0 0 0 0 0
0 0 0 0 0 0 0
0 0 0 0 0 0 0
The Company pays all out-of-pocket expenses, notably for reasonable travel and lodging
expenses, incurred by the directors to perform their duties (attending Board meetings,
completion of missions assigned by the Board). In this regard, the following was paid in 2005:
€8,202 to Michelle Tadros
€292 to Henri Crohas

ARCHOS paid no bonus to its directors.
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CHAPTER 15
ARCHOS has made no commitment to its directors relating to severance compensation or
benefits.
15.2 Retirement and other benefits
Neither the Company nor its subsidiaries fund or recognize provisions for the payment of pensions,
retirement packages or other benefits to directors.
On May 21, 2004, the Company took out an insurance liability policy for the officers with AIG Europe.
The purpose of the insurance policy is to reimburse the Company's officers, or pay on their behalf,
any monetary consequences from losses resulting from any claim filed against them for individual or
joint civil liability for any real or alleged professional misconduct committed by the officers in the
performance of their duties.
Furthermore, as a result of Plan no. 1 mentioned under 17.3 below, one of the officers of the Company
was granted 1,336 stock options. At the date of the Reference Document, the beneficiary of these
options is no longer an officer nor a salaried employee of the Company (see paragraph 17.2 of the
Reference Document).

Chapter 16. Operations of the administrative and
management bodies
16.1 The Company's management
16.2 Service contracts binding the corporate officers
16.3 Works Council
16.4 Corporate governance
16.5 Statutory Auditors' report on internal control
PricewaterhouseCoopers Audit
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16 OPERATIONS OF THE ADMINISTRATIVE AND MANAGEMENT BODIES
16.1 The Company's management
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CHAPTER 16
The Company is managed by a Board of Directors composed of nine members. Individuals serving on
the Board must be under 85 years of age. The preferred shareholder is
represented by three directors on the Board of Directors.
The Ordinary Shareholders' Meeting appoints the directors for six-year terms.
The Board meets as often as the Company's business requires at the headquarters or at any other
location when notified by its Chairman at least five (5) business days in advance by any means, even
verbal.
The Board of Directors votes with the quorum stipulated by law. The Board may validly
deliberate only when at least one of the three directors representing the preferred
shareholder is present or deemed present for establishing a quorum. The Board of Directors may,
however, validly deliberate in the event none of the three aforementioned directors is present or
deemed present for the purpose of establishing a quorum, even though its
members were notified at least five (5) business days in advance.
However, the following decisions may be legally made by the competent bodies only after approval by
the Board of Directors with the unanimous consent of the members present or represented minus one
vote:
a) Any proposal to amend the by-laws of the Company or those of any one of its
subsidiaries;
b) Any transfer, assignment, disposal or creation of a guarantee on any significant asset of the
Company or of one of its subsidiaries or any transfer, assignment or disposal for the payment
of a price lower than the market value of the asset in question;
c) Any acquisition of an interest or granting of any loan (a new loan or an extension of a line of
credit) in excess of €500,000 by the Company or one of its subsidiaries to a third party;
d) Any investment, capital asset or finance lease by the Company or any of its
subsidiaries in excess of €500,000 unless it is included in the annual budget;
e) Any unbudgeted borrowing by the Company or one of its subsidiaries, or any line of credit for
the Company or one of its subsidiaries in excess of €500,000;
f) The above provisions do not preclude the Company's corporate bodies, without the need to
obtain prior approval from the Board of Directors acting on a qualified
majority vote, from:
a. granting, in the normal course of business, trade credits not exceeding €200,000,000;
and
b. drawing from short-term lines of credit up to the limits set in the annual budget of the
Company and its subsidiaries;

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g) Approval of the annual budget of the Company and its subsidiaries. If the annual budget of the
Company and its subsidiaries is not approved at the first Board of
Directors' meeting to which it is submitted, an independent expert will then be named by the
Chief Judge of the Evry Commercial Court acting at the request of the
Company's Chief Executive Officer or by the more diligent party in order to resolve the
disagreement in the best interests of all Company shareholders. The independent expert shall
submit his report on the annual budget as soon as possible, preferably within 60 days of his
appointment. The annual budget so defined shall be final and not subject to appeal.
h) Any decision governed by French law respecting companies in difficulty (Section One or
Section Two of Volume Six of the French Commercial Code), except those
decisions that must be made by the Company's Chairman or Chief Executive Officer by law;
i) Appointment of the Chief Executive Officer of the Company and its subsidiaries
(or any officer to whom similar or equivalent duties could be assigned) except for the office of
Chairman and Chief Executive Officer of the Company which is held by Mr. Henri Crohas until
the date of the Company's Shareholders' Meeting called to
approve the financial statements for the year ending December 31, 2008 and the possible
renewal of this term of office at expiration;
j) Adoption of any significant employee incentive or profit sharing plan, any stock option plan,
and any significant modification made to the aforesaid plans;
k) Any hiring by the Company or one of its subsidiaries of personnel at an annual salary in
excess of €150,000 or any increase that raises the annual compensation of an
employee to over €150,000, except for an increase in the compensation of Mr. Henri Crohas
approved by the Board of Directors in 2005 to bring his compensation in line with market
practices;
l) Appointment of the statutory auditors of the Company and its subsidiaries;
m) Approval of the Company's bi-annual research plan in the field of personal video
recorders connected to satellite or cable television decoders;
n) Approval of any withdrawal from or significant change in the business or product line relating
to personal video players connected to a satellite or cable television (with the exception of any
withdrawal concerning a "loss making" business or product line when the Company has made
commercially reasonable efforts to make a profit in the business or product line in question);
o) Any significant change in the insurance coverage of the Company and its
subsidiaries;
p) The declaration or payment of dividends or any other distribution to shareholders of the
Company or any of its subsidiaries;
q) Any signature or termination by the Company or one of its subsidiaries of contracts involving
the payment of over €2,000,000 or involving assets valued over €2,000,000;
r) Any out-of-court settlement concerning the Company or one of its subsidiaries in
excess of €500,000;

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s) Any significant change in the accounting principles applied in the Company and its
subsidiaries, except for any modification required because of a change in current
legislation.
Any proposal for a decision relating to one of the topics covered in paragraphs (a) to (s) above must
be disclosed to the directors prior to the meeting of the Board of Directors with
reasonable notice of at least 5 business days.
Except in the cases where this method of attendance is excluded by law, directors are
deemed to be present for computing the quorum and majority who participate in the Board of Directors
meeting by videoconferencing methods, the type and application of which are
defined by decree. Directors may participate in Board of Directors meetings by telephone conferencing
with the understanding that they may not then be deemed present for
establishing quorum and majority.
16.2 Existence of one preference share held by EchoStar
One preference share was issued to EchoStar during the March 29, 2005 shareholders'
meeting. Specific rights are attached to this preference share: It allows Echostar to call a shareholders
meeting and to nominate a third of the directors of the Company..
Echostar is therefore represented by three of its directors or employees : :
Steven Bruce Schaver;
Markus Wayne Jackson and
Michelle Ann Tadros.
The Board of Directors may validly deliberate only if at least one of the three directors representing the
preferred shareholder is present or considered present for the purposes of determining the quorum.
Since the appointment of the three directors representing the preferred shareholder to the Board of
Directors, EchoStar has been represented by at least one director at each Board meeting.
EchoStar actively participates on the Board of Directors. Detailed information is regularly exchanged
with EchoStar and with the other directors, particularly on strategic issues for the company.
Moreover, as certain decisions may be legally made by the competent corporate bodies only after
approval by the Board of Directors by a unanimous vote minus one vote of the members present or
represented, the EchoStar vote is, therefore, decisive in any major decision made by the Board of
Directors, particularly for the following decisions:
a) Any proposal to amend the bylaws of the Company or of any subsidiary of the Company;
b) Any transfer, assignment, disposal or pledge on any significant asset of the Company or of any of
its subsidiaries, or any transfer, assignment or disposal for the payment of a price lower than the
market price of the asset in question;
c) Any acquisition of an interest or any loan (whether a new loan or an extension of a line of credit) for
a third party by the Company or any of its subsidiaries for an amount greater than 500,000 euros;
d) Any investment, capital expenditures or finance lease by the Company or any of its subsidiaries for
an amount greater than 500,000 euros, unless this amount is included in the annual budget;

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e) Any borrowing by the Company or any of its subsidiaries (not included in the annual budget) or any
line of credit for the Company or one of its subsidiaries for an amount greater than 500,000 euros;
f) The provisions above do not prohibit the corporate bodies of the Company from performing the
following, without the need for prior approval from the Board of Directors by a qualified majority vote:
a) in the normal course of business, granting customer credits not exceeding
2,000,000 euros; and
b) drawing from short-term lines of credit within the limits set in the annual budget of
the Company or of its subsidiaries;
g) Approval of the annual budget of the Company and its subsidiaries. It is specified that, if the annual
budget of the Company and its subsidiaries is not approved at the first meeting of the Board of
Directors at which it is submitted, an independent expert shall be appointed by the Chief Judge of the
Evry Commercial ruling on a petition submitted by the Chief Executive Officer of the Company or by a
more diligent party in order to resolve the disagreement in the best interests of all the Company's
shareholders. The independent expert shall issue his report on the annual budget as soon as possible
and, preferably, within 60 days after he is appointed. The annual budget so defined shall be final and
not subject to appeal;
h) Any decision covered by the law governing businesses in difficulties (Section I or Section II of Book
VI of the Commercial Code), with the exception of those decisions that must be made by the
Chairman or the Chief Executive Officer of the Company as required by law;
i) Appointment of the Chief Executive Officer of the Company or its subsidiaries (or any agent to whom
similar or equivalent responsibilities may be assigned), with the exception of the office of Chairman
and Chief Executive Officer entrusted to Mr. Henri Crohas until the date of the Annual Shareholders'
Meeting called to approve the financial statements for the year ended December 31, 2008 and any
renewal of his term of office upon expiration;
j) Adoption of any significant incentive or profit-sharing plan for employees, any stock option plan, and
any substantial change made in such plans;
k) Any hiring by the Company or any of its subsidiaries of employees with an annual salary greater
than 150,000 euros or any increase that brings the annual compensation of an employee above
150,000 euros; with the exception of an increase in the compensation paid to Henri Crohas decided by
the Board of Directors in 2005 in order to align this compensation with market practices;
l) Appointment of the Auditors of the Company and its subsidiaries;
m) Approval of the Company's bi-annual research plan in the area of personal video players
connected to satellite or cable television decoders;
n) Approval of any abandonment or any significant change in the business or the line of products
related to personal video players connected to satellite or cable television (with the exception of any
cessation of a "loss-making" business or product line when the Company has made commercially
reasonable efforts to make the relevant business or product line profitable);
o) Any significant change in the insurance coverage of the Company or its subsidiaries;

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p) The declaration or payment by the Company or any of its subsidiaries of dividends or any other
distribution to its shareholders;
q) Any signature or termination by the Company or any of its subsidiaries of contracts that involve the
payment of an amount greater than 2,000,000 euros or concerning assets valued at more than
2,000,000 euros;
r) Any waiver of legal action concerning the Company or any of its subsidiaries for an amount greater
than 500,000 euros;
s) Any significant change in the accounting principles applied within the Company and its subsidiaries,
with the exception of any change required because of a change in the applicable legislation.
To date, EchoStar has not used this veto right.
In addition, the preferred shareholder has special and extended access to information about the
company. For this purpose, the documents and information listed below will be transmitted to the
preferred shareholder under the following conditions:
a) A copy of all documents filed with the French Autorité des Marchés Financiers or any other
administrative authority as soon as possible after they are filed;
b) As soon as possible, the annual budget of the company and its subsidiaries;
c) As soon as possible and, in all cases, before the deadline for filing the company's audited
financial statements with the Autorité des Marchés Financiers, the audited consolidated
financial statements of the company (balance sheet, income statement and notes) for the last
year ended (the "Audited Financial Statements"). The Audited Financial Statements will be
prepared in accordance with generally accepted accounting practices in France along with a
reconciliation with generally accepted accounting practices in the United States ("US GAAP"),
and will also have to include a certificate issued by the Company's auditors. The Audited
Financial Statements must be prepared in accordance with principles that are consistent with
the principles applied in the preparation of the annual statements for prior years, they must be
accurate and give a fair presentation of the consolidated financial position of the company and
the results of the company's operations. The company will exert its best efforts to transmit
these Audited Financial Statements to the preferred shareholder within time periods
compatible with the financial disclosure requirements for the shareholder.
d) As soon as possible and in any event within 10 business days from the end of a given month,
the unaudited consolidated monthly balance sheet and monthly income statement of the
company and its subsidiaries (the "Monthly Financial Statements"). The Monthly Financial
Statements will be prepared in accordance with IFRS and will include a quarterly reconciliation
with US GAAP. The Monthly Financial Statements will be prepared in accordance with the
rules and methods previously applied by the company, and will be accurate and fairly present
the consolidated financial position of the company for the month in question.
e) All other financial statements of the company and other financial or operational data which the
preferred shareholder might reasonably request.
f) Minutes of the meetings of the Board of Directors and the Shareholders' Meetings within ten
days from the date of said meetings.

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The preferred shareholder has an audit right that may be exercised under the following conditions:
The representatives of the preferred shareholder (corporate officers, employees, accounting experts,
agents and advisors) may, with notice sent to the company within reasonable periods, have access
during business hours to the offices, production sites and warehouses of the company and its
subsidiaries and to the books and registers of the company and its subsidiaries, and may speak with
representatives of the company and its subsidiaries (corporate officers, employees, accounting
experts, agents and advisors) who have information about the company and its subsidiaries. The
representatives of the company and its subsidiaries shall also transmit to the representatives of the
preferred shareholder the financial or operational information and data for the company and its
subsidiaries which those representatives might reasonably request from time to time.
Moreover, the preferred shareholder will have the option once a year to have an audit conducted by a
certified accounting expert in order to assess the correct performance of the agreements dealing with
the preferred shareholder’s investment.
To date, EchoStar has not exercised this audit right.
16.3 Service contracts binding the corporate officers
SCI des Vignerons owns the building housing the Company's offices. Mr. Henri Crohas and his wife,
Mrs. Isabelle Crohas, hold stock in SCI des Vignerons. The Company was billed €99,272 in rent for
the premises in 2005. The transaction was concluded under normal
conditions as certified in the special report of the statutory auditors below.
16.4 Works Council
The Works Council is composed of three members, one of whom is elected from
management and two who are elected from the workers.
They are elected for a term of two years. Their term of office ends in April 2007.
16.5 Corporate governance
Chairman's Report on Internal Control
Pursuant to Article L. 225-37, section 6 of the French Commercial Code, I am pleased to report to you
on the preparation and organization of the work of your Board of Directors and the internal control
procedures set up by your Company.
I. Conditions for the preparation and organization of the work of the Board of Directors
1. Presentation of the Board of Directors
The Board of Directors is composed of nine members at present. Each director serves for a six-year
term.

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Appended to this report are the names of the directors in office, the effective dates and
expiration dates of their terms, the duties they perform within the Company, and the positions and
offices they hold in other companies.
The Board of Directors has one salaried director. In addition, it is important that one or
several members of the Works Council attend Board meetings.
2. Conditions for preparing the work of the Board of Directors
The Chairman:
edits the documents prepared by the Company's departments;
organizes and directs the work of the Board of Directors;
ensures that the directors can fulfill their mission and that they have the information and
documents needed to carry out their mission;
ensures that the representatives of employee bodies meet regularly and that they have
the information and documents needed to carry out their mission.
The Board of Directors is not currently assisted by committees . However, the Company is currently
studying the possibility of setting up two committees to comply with the principles of good corporate
governance. These are:
an audit committee to help improve the Company's management and administration;
and
a compensation committee to provide opinions or recommendations within the
compensation policy for employees and senior management.
3. Conditions for organizing the work of the Board of Directors
3.1 Organization of the Board of Directors
The Chairman organizes the work of the Board of Directors, whose operation is not governed by any
internal rules and regulations.
In addition to the mandatory meetings of the Board (approval of the annual and interim
financial statements), the Board also meets as required by business considerations and the conditions
stipulated in the by-laws.
3.2 Board of Directors' Meetings
The Chairman calls the Board of Directors five business days in advance by any means in accordance
with clause 4 of Article 9 of the Company's by-laws.
The Board of Directors met eight times over the past fiscal year.
The attendance rate rose to 64% in 2005. The meetings of the Board were chaired by the Chairman of
the Board.
The Works Council representatives were notified of all meetings of the Board of Directors and one of
them was present at three of the eight meetings held in 2005.

3.3 Minutes of the meeting
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The minutes for each meeting are drawn up by the Secretary to the Board, who is appointed at each
meeting, and then they are approved by the Chairman who submits them for
approval by the Board at the next meeting. The minutes are transcribed in the minutes
register once they are signed by the Chairman and one director.
The Board made a certain number of decisions over the past fiscal year, in particular:
to float a bond issue reserved for EchoStar,
to issue one preferred share,
to appoint four new directors,
to set the strategic orientations for the Company's business,
to reorganize the group's legal structure,
to convert bonds into shares of stock,
to approve the budget.
3.4 Information for the Board of Directors
For Board meetings, the directors receive all of the documents and information they need to carry out
their mission at the Board meetings. Outside Board meetings, the directors
regularly receive all of the important information concerning the Company.
3.5 Directors' fees
Directors' fees are allocated to the directors in accordance with the resolution adopted by the Board of
Directors on April 18, 2005. The total amount of directors’ fees to be allocated among the directors
was €25,611.42 for fiscal year 2005.
The directors representing the preferred share have all waived their right to collect fees.
Hence, under the aforesaid rules, the following directors' fees were paid:
Mr. Henri Crohas: €4,268.57
Mr. Giuseppe Agnello: €4,268.57
Mr. Jean-Marc Wormser: €4,268.57
Mr. Jean-Claude Rizet: €4,268.57
For 2005, the directors' fees allocated to Mrs. Isabelle Crohas and Miss Alice Crohas have not yet
been paid.
4. Restrictions on the powers of the Chairman and Chief Executive Officer
There are no statutory limitations on the powers of the Chairman and Chief Executive.
II. Internal control procedures established by the Company.
The internal control procedures in place within each company in the Group is based on the following
principles:
recognition of the full liability of the officers of the Company's of the Group;
a regular financial reporting system.

The procedures meet the following criteria:
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reactivity, to support the autonomy of each Company in managing its own affairs;
flexibility so that executives of the Group's Companies fully exercise their
responsibilities;
simplicity so that the internal control process remains adapted to the small size of the
companies making up our Group.
The principal participants in the internal control are:
the Board of Directors;
the Group's Chief Financial Officer, Group Comptroller, and the local financial and
administrative agents;
the control of financial data through the Group's ERP system.
The Company prepared monthly accounting and financial reporting, which are with the managers of
the subsidiaries involved.
Analysis and assessment meetings are held with managers of the Group and the managers of the
relevant entities within:
annual budget meetings;
strategic meetings held during the year.
The Company's legal department performs the following:
handles the Company's legal cases and/or disputes and, if needed, related cases for the
subsidiaries) which could generate significant risks.
provides legal counsel to the Company and its subsidiaries.
We are specifying in the reference document below the production quality programs established:
In order to secure its operations, the company has established a quality assurance charter with its
subcontracts.
The purpose of this charter is to formalize the specifications provided by Archos, which contain the
essential elements of the industrial relationship, including the demands for conformity and inspection
of the different parts required in assembly, the assembly procedures and various stages, and the
steps in the quality inspection of work in progress and finished products.

16.6 Statutory Auditors' report on internal control
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Statutory Auditors' report, prepared in accordance with Article L. 225-235 of the French
Commercial Code, on the report from the Chairman of the Board of Directors of ARCHOS
S.A. concerning internal control procedures for the preparation and treatment of accounting
and financial information.
To the shareholders of
ARCHOS
A French société anonyme capitalized at €3,379,085
12, rue Ampère,
91430 Igny
Dear shareholders,
As the statutory auditors for ARCHOS S.A. and in accordance with Article L. 225-235 of the French
Commercial Code, we are reporting on the report prepared by the Chairman of your company in
accordance with Article L. 225-37 of the French Commercial Code for the year ended December 31,
2005.
The Chairman is responsible for reporting on how the Board of Directors prepares and
organizes the work of the Board and the internal control procedures used within the Company. It is our
responsibility to report any observations we have on the information contained in the Chairman's
report concerning the internal control procedures for the preparation and processing of the accounting
and financial information.
We conducted our work according to the professional standards applied in France. These standards
required that we assess the fair presentation of the information disclosed in the Chairman's report
concerning the internal control procedures for the preparation and processing of the accounting and
financial information. Our work consists of:
reviewing the objectives and general organization of the internal control and the
internal control procedures for preparing and processing the accounting and financial
information which are presented in the Chairman's report;
reviewing the work underlying the information given in the report.
Based in this work, we have no comment to make on the information provided on the
company's internal control procedures for the preparation and processing of the accounting and
financial information, which are contained in the report submitted by the Chairman of the Board of
Directors pursuant to the final paragraph of Article L 225-37 of the French
Commercial Code.
Neuilly-sur-Seine, March 17, 2006
Frédéric Bitbol
The Statutory Auditors
Members of the Compagnies Régionales de Paris et de Versailles
PricewaterhouseCoopers Audit
Vincent Gaide

Chapter 17. Employees
17.1 Number of employees at the end of the reporting period
17.2 Stock options and/or other benefits granted to corporate
officers
17.3 Stock options and/or other benefits granted to
employees
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17 EMPLOYEES
17.1 Number of employees at the end of the reporting period
The average number of persons employed by the Company breaks down as follows:
Description 12/31/05 12/31/04 12/31/03
Managers 26 17 13
Supervisors and technicians 83 61 47
Employees 63 62 71
Total 172 140 131
ARCHOS SA 118 90 81
ARCHOS UK 7 4 3
ARCHOS Germany 14 11 8
ARCHOS Inc 33 35 39
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The increase in the work force from 2004 to 2005 is the result of new employees hired at the
Company's various subsidiaries to meet growth demands. ARCHOS, Inc. reduced its labor force after
outsourcing the customer hotline.
17.2 Stock options and/or other benefits granted to corporate officers
Under plan No. 1 issued in 2002, described in section 17.3 below, Albert Hakim, one of the officers,
was awarded 1,336 stock options. On the date of the Reference Document, the beneficiary of these
1,336
options was no longer an officer or employee of the Company. (see paragraph 14.1 of this Document)
. However, the 1336 shares have not been cancelled because the corporate officer has not resigned.
No other officer was granted stock options.
PURCHASE OR SUBSCRIPTION
OPTIONS ISSUED TO EACH COMPANY
OFFICER AND OPTIONS EXERCISED
BY SUCH OFFICERS
Plan no. 1
Options issued in the year to Company
officers
Options exercised in the year by Company
officers
Number of
options issued
17.3 Stock options and/or other benefits granted to employees
0
0
Option Price
Date of
maturity
The Shareholders' Meeting of August 13, 2001, authorized the Board of Directors to grant options to
subscribe to the Company's shares to all or some company employees and/or officers of the Group.
To this end, the Board of Directors created three stock option plans at its meeting on
July 31, 2002.
Plan No. 1: The options are granted to employees with one year of seniority.
Plan No. 2: The options may be exercised only if the objectives set for the beneficiaries are met.

Plan No. 3: The options may be exercised only if the objectives set for the beneficiaries are met.
The conditions common to the three plans are:
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Saving exceptions, the options may be exercised only as of July 31, 2003.
The options will expire under any circumstance 10 years from the date they were
granted.
Saving exceptions, the shares of stock resulting from the exercise of the options will
be non-transferable for three years from the first anniversary date of the grant, or until
July 30, 2006. The shares will be in registered form.
A beneficiary who leaves the Company loses all rights to exercise the options.
By law, the right to exercise the option is non-transferable; if a beneficiary dies, his
heirs may exercise the option within six months of his death, and under plans 2 and 3,
if the objectives were met.
The Board of Directors also set up two more plans at its meeting on July 3, 2003.
Plan No. 4: The options are granted to "key personnel" and may be exercised only if certain objectives
are met.
Plan No. 5: The options are granted to "key personnel" without any objectives attached.
The common conditions of these two plans are:
Saving exceptions, the options may be exercised only as of July 3, 2005.
The options will expire under any circumstance 10 years from the date they were
granted.
Saving exceptions, the shares of stock resulting from the exercise of the options will
be non-transferable for two years from the second anniversary date of the grant, or
until July 2, 2007. The shares will be in registered form.
A beneficiary who leaves the Company loses all rights to exercise the options.
By law, the right to exercise the option is non-transferable; if a beneficiary dies, his
heirs may exercise the option within six months of his death and, under plan No. 4, if
the objectives were met.
The Board of Directors set up a sixth plan at its meeting on September 21, 2004.
Plan No. 6: The options are granted to "key personnel" without any objectives attached.
This terms of this plan are as follows:
Saving exceptions, the options may be exercised only as of September 21, 2006.
The options will expire under any circumstance 10 years from the date they were
granted.
Saving exceptions, the shares of stock resulting from the exercise of the options will
be non-transferable for two years from the second anniversary date of the grant, or
until September 20, 2008. The shares will be in registered form.
A beneficiary who leaves the Company loses all rights to exercise the options.
By law, the right to exercise the option is non-transferable; if a beneficiary dies, his
heirs may exercise the option within six months of his death.

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The options authorized by the Shareholders' Meeting on August 13, 2001 were allocated as follows:
Number of options
granted
Number of options
granted that
expired
Number of options
granted that may
still be exercised
Plan No. 1 14,700 1,347 13,353
Plan No. 2 25,300 25,300 0
Plan No. 3 870 870 0
Plan No. 4 88,000 88,000 0
Plan No. 5 66,000 13.000 53,000
Plan No. 6 10,314 5,157 5,157
Total 205,184 133,674 71,510
A Shareholders' Meeting on November 29, 2004 authorized the Board of Directors to distribute
310,256 stock options for new shares. To date, the Board of Directors has not defined any plan.
Shareholders'
Meeting date:
8/13/01
Board meeting
date
Total number of
new or existing
shares that may be
purchased by:
- the corporate
officers:
- the ten
employees
receiving the
largest number of
options
Starting date
for exercising
options
Plan No. 1 Plan No. 2 Plan No. 3 Plan No. 4 Plan No. 5 Plan No. 6
7/31/02 7/31/02 7/31/02 7/3/03 7/3/03 9/21/04
1,336 0 0 0 0 0
7,093 0 0 0 66,000 10,314
7/31/03 7/31/03 7/31/03 7/3/05 7/3/05 9/21/06
Expiration date 7/30/12 7/30/12 7/30/12 7/2/13 7/2/13 9/20/14
Subscription or
purchase price
Condition for
exercise
Exercise
conditions (when
the plan has
several tranches)
Number of shares
subscribed at
3/15/06
8.50 8.50 8.50 3.40 3.40 1.28
two times
maximum
achievemen
t of global
objectives*
two times
maximum
achievemen
t of global
objectives*
two times
maximum
achievemen
t of global
objectives**
two times
maximum
two times
maximum
two times
maximum
0 0 0 0 0 0

Stock options
cancelled during
the year
Stock options
remaining
1,347 0 0 0 13,000 5,157
13,353 0 0 0 53,000 5,157
* The objectives of Plans 2 and 3 were tied to recording profits in 2002 and to the launch of the new products on
specific dates. Now, the company had a deficit in 2002 and the new products were launched several months
behind scheduled. Thus, the Board of Directors noted the non-achievement of objectives on July 3, 2003.
** The objectives of Plan 4 were tied to recording certain revenues in 2003 and also to the introduction of new
products on specific dates. Now, as the 2003 revenues were not reached and the new products again were
launched with a substantial delay, the Board of Directors noted the non-achievement of objectives on September
21, 2004.
The following table shows the history of stock options granted during the year ended
December 31, 2005:
GRANTING AND EXERCISE OF
STOCK OPTIONS TO
EMPLOYEES OTHER THAN
CORPORATE OFFICERS
Options granted during the year by the
issuer and
by any company included within the
,
option plan to the ten employees
of the issuer, and of any company
included in this plan, who were granted
the largest number of options .
Options held on the issuer and the
aforementioned ,
companies that have
been previous exercised during the
year by the ten employees of the issuer
and of these companies with the
largest number os options.
Total
number
of options
granted /
new or
existing
shares
purchased
Rapport Annuel – Document de Référence
90
Average
weighted
price
Plan 1 Plan 5 Plan 6
0 0 0 0 0
0 0 0 0 0

Chapter 18. Major Shareholders
18.1 Current breakdown of capital and voting rights
18.2 Control of the Company
18.3 Description of the agreement that could result in a
change of controlat a subsequent date.
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91

18 MAJOR SHAREHOLDERS
18.1 Current breakdown of capital and voting rights
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CHAPTER 18
The table below analyzes the Company's capital and voting rights as of the date of the Reference
Document:
Shareholders
Number of
shares
% of
capital
Number of
voting rights
% of voting rights
Corporate officers*
Henri Crohas 3,191,766 40.59% 3,191,766 40.59%
Isabelle Crohas 2,000 0.03% 2,000 0.03%
Giuseppe Agnello 6,056 0.08% 6,056 0.08%
Jean Rizet 2,176 0.03% 2,176 0.03%
Jean-Marc Wormser 96,875 1.23% 96,875 1.23%
Michelle Ann Tadros 1 0.00% 1 0.00%
Markus Wayne 1 0.00% 1 0.00%
Steven Schaver 1 0.00% 1 0.00%
Thomas Abramovici** 0** 0.00% 0 0.00%
Other shareholders
EchoStar 1,659,119 21.10% 1,659,119 21.10%
Remote Reward 389,223 4.95% 389,223 4.95%
SIS SEGAINTERSETTLE AG 197,732 2.51% 197,732 2.51%
RBC DEXIA INVEST.SCES
BK 102,950
1.31%
102,950
1.31%
M.M WARBURG & CO
LUXEMBOURG 55,564
0.71%
55,564
0.71%
GEISSWILLER 53,000 0.67% 53,000 0.67%
FRANCE FUTUR 50,000 0.64% 50,000 0.64%
JP MORGAN CHASE BANK
NA 40,311
0.51%
40,311
0.51%
MARIANNE 40,000 0.51% 40,000 0.51%
BANK OF NEW YORK 35,720 0.45% 35,720 0.45%
HSBC AM SMALL CAP
FRANCE 35,000
0.45%
35,000
0.45%
TEBBOUCHE 32,213 0.41% 32,213 0.41%
BUGNET 31,425 0.40% 31,425 0.40%
DE VIENNE 30,000 0.38% 30,000 0.38%
HSBC MICROCAPS 30,000 0.38% 30,000 0.38%
HSBC SECURITIES
SERVICES 26,100
0.33%
26,100
0.33%
FCP ALEF 22,750 0.29% 22,750 0.29%
KBC SECURITIES NON
RESIDENT 22,140
0.28%
22,140
0.28%
Other shareholders 1,712,125 21.77% 1,712,125 21.77%
Total 7,864,248 100.00% 7,864,248 100.00%
*Each director must own at least one share of stock.
**On the date of this Reference Document, Thomas Abramovici did not yet own one share, but this situation is
being rectified.
Each of share of the Company's stock carries one voting right. To date, the Company has issued no
non-voting share and there is to provision in the by-laws allowing for a double voting right.

18.2 Control of the Company
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CHAPTER 18
At the time of this Reference Document, Henri Crohas held 40.59% of the Company's equity capital
and 40.59% of its voting rights.
On April 7, 2005, Mr. Henri Crohas and Echostar signed a shareholders agreement which is available
on-line at www.amd-france.org and which stipulates the following :
(i) Restrictions on the disposal of ARCHOS shares
Unavailability
Mr. Henri Crohas has agreed that until April 7, 2008 he will not, directly or indirectly, sell, distribute,
give, pledge, mortgage, transfer or wager or in any other way dispose of ARCHOS shares or rights
related to the shares, nor any rights related to the Company, to any person, and he shall not enter into
any contract related to such a disposal without the prior written consent of EchoStar.
Right of first refusal
If, at the end of this period, Mr. Henri Crohas wishes to dispose of all or part of his ARCHOS equity, he
must in the first instance offer such equity to Echostar. This right of first refusal which accrues to
EchoStar will be in place until the tenth anniversary of the agreement dated April 7, 2015.
Subscription rights
Furthermore the agreement contains contractual arrangements which allow EchoStar, should it so
wish, in the event of further share issues by ARCHOS, to maintain its potential equity interest in the
Company at the same level, related to the convertible bonds that it holds. These arrangements shall
not apply in the following cases :
the allocation or exercising of stock options by employees or directors of the
Company in line with past practice of the Company
any issue approved in writing by Echostar
any share issue with preferential subscription rights.
In the event that EchoStar would be enable to participate in a practical timeframe in such an issue, the
parties involved would conclude a second issue , at the request of EchoStar, which would put into
place these contractual arrangements.
Public Offering
If one party to this shareholders’ agreement wishes to engage in a compulsory public offering of the
shares of both parties, the other party shall have the right to be indemnified by the initiating party for
losses that arise from this. If Mr. Crohas is the initiator of such a course of action. Echostar can
terminate the agreement and additionally Echostar shall be entitled to sell all or part of its ARCHOS
stock to the initiator at the price of the public offering and in accordance with the same terms and
conditions applicable to other shareholders. If Echostar is the initiator of such a course of action, Mr.
Crohas shall be entitled to sell all or part of his ARCHOS stock to the initiator at the price of the public
offering and in accordance with the same terms and conditions applicable to other shareholders...

(ii) Arrangements relating to the transfer of stock or exercising voting rights
Repurchase by ARCHOS of stock held by Mr. Crohas
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CHAPTER 18
Mr. Henri Crohas agrees not to enter into any contract by which ARCHOS will purchase his stock or
equity unless ARCHOS extends an offer to EchoStar to purchase an amount of stock or equity
proportional to the amount of stock or equity it is to purchase from Mr. Henri Crohas.
Exercise of Voting Rights
In the absence of a written agreement with EchoStar, Mr. Crohas will exercise voting rights in
accordance with his stock and equity holding and will not bestow any proxy concerning his voting
rights other than that laid down in the shareholders’ agreement..
The agreement will expire on the latest of the following two dates :
the date when EchoStar ceases to hold at least 10% of the stock issued by ARCHOS,
taking into account the stockholding that could arise from any conversion of the
convertible bonds.
April 7, 2015.
The Company has not taken any specific measures to ensure that this control is not abusively
exercised.
18.3 Agreement on the Equity Participation of EchoStar
On April 7, 2005, ARCHOS issued to EchoStar bonds of a total par value of €7,000,000, divided into
2,212,158 convertible bonds at €3.16, each bond maturing in 10 years. This transaction is detailed in
circular 05-182 which was filed with the AMF on March 25, 2005 and is available on the AMF’s
website (www.amf-france.org).
Under the terms of the issue contract, the Company is entitled to oblige bondholders to convert or
redeem prior to term their convertible bonds in three successive installments of 25% each, subject to
the following conditions:
In respect of the first 25% installment of the bonds: if the Company’s average share price
weighted for volumes reaches and remains at or above five (5) euros for ninety (90)
consecutive stock market trading days;
In respect of the second 25% installment of the bonds: if the Company’s average share
price weighted for volumes reaches and remains at or above ten (10) euros for ninety (90)
consecutive stock market trading days;
In respect of the third 25% installment of the bonds: if the Company’s average share price
weighted for volumes reaches and remains at or above fifteen (15) euros for ninety (90)
consecutive stock market trading days;
The Company is prohibited from demanding the conversion or redemption of only one 25% installment
of the bonds.

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CHAPTER 18
In addition, according to the bond issue prospectus, EchoStar is able to request the conversion of the
bonds into shares at any time
The forced conversion of the second 25% instalment of the convertible bonds was requested by the
Company from EchoStar and executed on April 14, 2006 by return receipt from EchoStar.
EchoStar, in a letter dated March 3, 2006, informed the Company of its intent to convert, in addition to
the said forced instalment, an additional 25% of the convertible bonds. To do so, the Company waived
its right concerning the force conversion of the third instalment. Thus, this conversion was executed on
April 14, 2006 by return receipt from EchoStar.
On the date of this document, 3 25% installments of the bonds have been converted. The remaining
amount booked as debt after conversion of 75% of the bonds is 1,253,000 euros.
The 4 th installment can be converted only at EchoStar's initiative. EchoStar may convert the remaining
553,040 bonds at any time until the bond maturity date.
18.4 Description of the agreement that could result in a change of control at a
subsequent date.
EchoStar and Mr. Crohas entered into a shareholders agreement for a ten-year term on April 7, 2005
(see paragraph 18.2 of the Reference Document).
Mr. Crohas and EchoStar are deemed to act in concert with respect to ARCHOS.
Because of the existence of concerted action with Mr. Crohas, EchoStar crossed in concert the
ownership thresholds of 5%, 10%, 20%, one-third and 50% of the capital and voting rights in ARCHOS;.
the one-third ownership threshold generates the obligation to file a preliminary tender offer pursuant to
Article 234-2 of the AMF's general regulations. Pursuant to Article 234-6 1 of these regulations, the
persons acting in concert asked the AMF to note that there were no grounds for filing a preliminary
tender offer for the ARCHOS shares on the occasion of the
transactions related to the reserved issue of convertible bonds (the features and terms of this bond issue
were described in a prospectus approved by the AMF on March 25, 2005) and to the issuance of the
preferred share described in section 21.2.3 of the Reference Document.
Given that the crossing of the threshold of one-third of the capital and voting rights in ARCHOS by
EchoStar would be the result of an action in concert with Mr. Crohas, who will then remain the biggest
shareholder in the Company, not only on the basis of his interest, but also under the ARCHOS by-laws
and the agreements signed with EchoStar, the AMF in its session of January 25, 2005 ruled that there
were no grounds for filing a preliminary tender offer for the Company's shares on the basis of the
regulatory provisions cited.
Furthermore, in the settlement reached on September 30, 2003 of a legal dispute between ARCHOS
and Spencer Trask, a US company, Henri Crohas granted warrants (purchase options) to Spencer
Trask and its partners allowing them to purchase 150,000 shares of stock at a price of €3.59 each and
40,000 shares at €5.59 each for a period of seven years ending September 30, 2010. On March 15,
2006, 104,600 warrants were exercised by Spencer Trask. On the date this Reference Document was
registered, 67,400 warrants at €3.59 and 18,000 warrants at €5.59 were still outstanding.
The Company is not aware of other agreements that could eventually lead to a significant change in
control of the Company.

Chapter 19. Related-party transactions
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19 RELATED-PARTY TRANSACTIONS
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97
CHAPTER 19
The Company entered into the following agreements with related parties during the years ended
December 31, 2003, 2004 and 2005 and until the date of this Reference Document.
Type Amount in 2005 Co-contracting party
ARCHOS, Inc. management fee
ARCHOS UK management fee
ARCHOS Deutschland management
fee
Distribution of ARCHOS products
by ARCHOS, Inc.
Distribution of ARCHOS products
by ARCHOS UK
Distribution of ARCHOS products
by ARCHOS Deutschland
Logistical services billing
performed by ARCHOS Asia Ltd
USD 120,000
€95,577
£78,000
€113,846
ARCHOS, Inc.
ARCHOS UK
€120,000 ARCHOS Deutschland
USD 13,968,175
€11,290,881
£10,678,317
€15,656,110
ARCHOS, Inc.
ARCHOS UK
€9,976,059 ARCHOS Deutschland
RMB528,368
€57,815
ARCHOS Asia Ltd

STATUTORY AUDITORS' SPECIAL REPORT
ON THE RELATED-PARTY AGREEMENTS
Fiscal year ended December 31, 2005
To the shareholders of
ARCHOS
A French société anonyme capitalized at €3,379,085
12, rue Ampère,
91430 Igny
Dear shareholders,
AS THE STATUTORY AUDITORS FOR YOUR COMPANY, WE ARE SUBMITTING
OUR REPORT ON RELATED-PARTY AGREEMENTS.
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CHAPTER 19
It is not within the scope of our duties to verify whether there are other agreements in existence, but to
report to you, based on the information provided to us, the essential characteristics and terms of those
disclosed to us, without issuing an opinion on their utility and merit. Under the terms of Article 92 of the
Decree of March 23, 1967, it is your responsibility to assess the importance of these agreements for
the purpose of approving them.
Agreements authorized during the year
We have received no notice of any agreement signed during the fiscal year that is covered by Article
L. 225-37 of the French Commercial Code.
Agreements approved in previous fiscal years which continued in force during the reporting period
Pursuant to the Decree of March 23, 1967, your management reported that the following agreements
approved in previous years were executed during the past financial year.
1) Guarantee given in favor of ARCHOS Deutschland vis-à-vis the factoring company
Cofacecredit. The Chief Executive Officer concerned was Henri Crohas. This guarantee
expired on December 31, 2005.
2) A civil liability insurance policy covering the following directors or Chief Executive Officers:
Henri Crohas, Isabelle Crohas, Giuseppe Agnello, Jean Rizet et Jean-Marc Wormser, Mark
Jackson, Steve Schaver, Michelle Tadros, and Thomas Abramovici.
Your company took out a civil liability insurance policy on the aforementioned management
personnel for 2005, which amounted to €7,755 for the year.
3) ARCHOS UK management fee – Chief Executive Officer concerned: Henri Crohas
Your company billed its subsidiary ARCHOS UK for £78,000 in management fees over the
year ending December 31, 2005.

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CHAPTER 19
4) ARCHOS Deutschland management fee – Chief Executive Officer involved: Henri
Crohas
Your company billed its subsidiary ARCHOS Deutschland for €120,000 in management fees
over the year ending December 31,2005.
5) Commercial lease with SCI des Vignerons – Persons concerned: Henri Crohas and Isabelle
Crohas.
Your company rented the premises at 12, rue Ampère at Igny from SCI des Vignerons for
€99,272 in rent for the full year in 2005.
6) Extension of the lease without rental increase - Chief Executive Officer or Director involved:
Henri Crohas and Isabelle Crohas.
Your company extended the commercial lease with SCI des Vignerons without a rent
increase.
7) Authorization to make current account advances to ARCHOS, Inc. - Persons concerned:
Henri Crohas.
Your company can make advances to current accounts to its subsidiary ARCHOS Inc., up to a
maximum of USD 300,000.
This agreement had not effect during the year ended December 31, 2005.
8) Management fees billed to ARCHOS Inc. - Persons concerned: Henri Crohas.
Your company billed its subsidiary ARCHOS, Inc. for USD 120,000 in management fees for
the year ended December 31,2005.
We conducted our audit in accordance in accordance with applicable professional standards in
France. Those standards require due diligence to verify the consistency of the information provided
with the primary documentation from which it comes.
Neuilly-sur-Seine, March 17, 2006
Frédéric Bitbol
The Statutory Auditors
Members of the Compagnies Régionales de Paris et de Versailles
PricewaterhouseCoopers Audit
Vincent Gaide

Chapter 20. Financial information concerning the issuer’s
assets, financial position and profits
20.1 Consolidated financial statements as of December 31,
2005, 2004 and 2003
20.1.1 Consolidated financial statements as of December 31, 2005
20.1.2 Consolidated financial statements as of December 31, 2004
20.1.3 Consolidated financial statements as of December 31, 2003
20.2 IFRS
20.3 Dividend
20.4 Judicial and arbitration procedures
20.5 Material changes to the commercial and financial
position
20.6 Fees paid to the statutory auditors for the financial year
ended December 31, 2005
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101
CHAPTER 20
20 FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS, FINANCIAL POSITION
AND PROFITS
20.1 Consolidated financial statements as of December 31, 2005, 2004 and 2003
20.1.1 Consolidated financial statements as of December 31, 2005
20.1.1.1 Consolidated balance sheet for the financial year ended December 31, 2005
IFRS balance sheets as of 31 December 2005 and 31 December 2004
In €thousands
ASSETS Notes 31 December 2005 31 December 2004
IFRS IFRS
Development Expenses (5) 2.644 2.148
Other intangible fixed assets (6) 202 352
Tangible fixed assets (7) 920 709
Other long-term investments (8) 150 103
Deferred tax assets (12) 8.315 8.849
TOTAL NON CURRENT ASSETS 12.231 12.161
Inventories (9) 31.333 14.018
Trade receivables (10) 13.011 4.572
Other current receivables (11) 16 811 6.075
Cash and cash equivalents (14) 9.078 1.920
TOTAL CURRENT ASSETS 70.233 26.585
TOTAL ASSETS 82.464 38.746
LIABILITIES AND SHAREHOLDERS’ EQUITY Notes 31 December 2005 31 December 2004
IFRS IFRS
Contributed capital (13) 3.379 3 103
Consolidated reserves 14 362 15 294
Net income for the financial year 606 -4 508
Shareholders’ equity accruing to the company’s shareholders 18.347 13.889
Minority interests 0 0
TOTAL SHAREHOLDERS’ EQUITY 18.347 13.889
Non-current financial debt (14) 3.760 0
Provisions for employee benefits (15) 112 131
Provisions for other non-current liabilities and debts (16) 1.674 817
Deferred tax liabilities 0 0
TOTAL NON-CURRENT LIABILITIES 5 546 948
Current financial debt (14) 2.938 2.975
Trade payables 40.779 14.872
Other provisions and current liabilities (17) 14.854 6.062
TOTAL CURRENT LIABILITIES 58.571 23.909
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 82.464 38.746

20.1.1.2 Consolidated income statement for the financial year ended December 31, 2005
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CHAPTER 20
IFRS income statements for the period between 1 January and
31 December 2005 And from 1 January to 31 December 2004
In €thousands
Notes
From 1 January to
31 December 2005
From 1 January to
31 December 2004
IFRS IFRS
Revenues 103.134 58.325
Cost of goods sold 76.250 45.482
GROSS MARGIN 26.884 12.843
Research and development expenses 3.089 3.343
Sales expenses 10.194 8.439
Administration and general expenses 9.909 8.252
CURRENT OPERATING INCOME 3.692 -7.191
Other operating revenues and expenses (22) 0 -127
OPERATING INCOME 3.692 -7.318
Net financial income (21) -2.036 112
Tax burden (23) -1.050 2 698
NET INCOME 606 -4.508
* attributable to the company’s shareholders 606 -4.508
* attributable to minority interests
Net income per share in euro 0.10 -0.74
Number of shares used 6,303,183 6,105,195
Diluted net income per share in euro 0.08 -0.73
Number of shares used 7,914,326 6,192,315

CHAPTER 20
Table of changes in shareholders’ equity for the financial year ended December 31, 2005
Changes in shareholders’ equity as of 31 December 2005 and 31 December 2004
In thousand of €
IFRS
Contributed
capital
SHAREHOLDERS’ EQUITY AS OF 01/01/2004 3.103
Reserves
Share Treasury and
premiums Shares consolidated
profits
16.761 -1.028 -667
Results
Minori
directly Total tyt
Recognized Accruing to
as
share
the
shareholders
holder
company’s
’ equity shareholders
s
18.169 0
Total
Share
equity
18.169
Capital transactions 0 0
Transactions involving treasury securities 0 0
Dividends 0 0
Net income of the financial year -4.508 -4.508 -4.508
Intangible and tangible assets:
revaluations and sales 0 0
Financial instruments; changes in
fair value and transfers to equity 0 0
Translation differential, changes and
transfers to equity 228 228 228
Change in scope 0 0
SHAREHOLDERS’ EQUITY AS OF 31/12/2004 3.103 16.761 -1.028 -5.175 228 13.889 0 13.889
Capital transactions
276 3.624 -1.086 2.814 2.814
Transactions involving treasury securities
1.028 340 1.368 1.368
Dividends 0 0
Net income of the financial year
606 606 606
Intangible and tangible assets:
revaluations and sales
0 0
Financial instruments; changes
fair value and transfers to equity
0 0
Translation differentials, changes in
transfers to equity -330 -330 -330
Change in scope 0 0
SHAREHOLDERS’ EQUITY AS OF 31/12/2005 3.379 20.385 0 -5.655 238 18.347 0 18.347
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shareholders

20.1.1.3 Consolidated cash-flow statement for the financial year ended December 31, 2005
IFRS cash-flow statements for the periods from 1 January to 31 December
2005 and1January to 31 December 2004 (indirect method)
In €thousands
Cash-flow statement
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104
From 1 January to 31 From 1 January to
December 2005 31 December 2004
IFRS IFRS
Consolidated net income 606 -4.508
+/- Net amortization, depreciation and provision expenses 4.301 4.228
+/- Unrealized gains and losses linked to fair value adjustments 0 0
+/- Calculated expenses and revenues related to stock options and assimilated benefits -41 104
+/- Other calculated revenues and expenses 0 0
+/- Capital gains and losses related to disposals 0 0
+/- Profits and losses related to dilution 0 0
+/- Share of net income related to equity affiliates 0 0
- Dividends 0 0
Cash-flow from operations after cost of the financial debt and taxes 4.866 -176
+ Cost of the net financial debt
+/- Tax burden (including deferred taxes)
-937
1.050
-163
-2.698
Self-financing capacity before the cost of net financial debt
and tax
4.979 -3 037
- Tax paid -146 -189
+/- Change in WCR linked to operations including the debt related to
employee benefits -2.460 4.816
NET CASH FLOWS FROM OPERATIONS 2.373 1.589
- Outflows linked to acquisitions of tangible and intangible fixed assets
+ Inflows linked to acquisitions of tangible and intangible fixed assets
-3.372 -2.219
0 0
- Outflows linked to acquisitions of long-term financial investments (nonconsolidated
securities)
0 0
+ Inflows linked to acquisitions of long-term financial investments (nonconsolidated
securities)
+/- Impact of changes in the scope
+ Dividends received
0
0
0
0
0
0
+/- Changes in loans and advances granted 0 0
+ Investment subsidies received 0 0
+/- Other flows linked to investment transactions 0 0
NET CASH FLOWS LINKED TO INVESTMENT TRANSACTIONS -3.372 -2.219
+ Amounts received from shareholders in connection with capital increases 0 0
+ Amounts received upon exercise of stock options 0 0
+/- Repurchases and resales of treasury shares 1.369 0
- Dividends paid during the financial year 0 0
+ Inflows linked to new borrowings 6.574 1.000
- Loan repayments (including operating leases) -61 -1.050
- Net financial interest paid (including operating leases) 937 163
+/- Other flows linked to financing activities -254 254
NET CASH FLOWS LINKED TO FINANCING TRANSACTIONS
8.565 367
+/- Impact of foreign exchange rate fluctuations -686 370
CHANGE IN THE NET CASH POSITION 6.880 108
Cash and cash equivalents at the beginning of the financial year -740 -848
Cash and cash equivalents at the end of the financial year 6 140 -740
CHANGE IN THE NET CASH POSITION 6.880 108

20.1.1.4 Notes to the consolidated financial statements
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CHAPTER 20
ARCHOS SA is listed on the Eurolist Paris Market (compartment C). ARCHOS SA is the parent
company of the ARCHOS Group.
The Company’s operations consist in the development, design, production and distribution of mobile
peripheral equipment.
The financial statements presented herein were approved by the Board of Directors during its meeting
of 14 March 2006.
Note 1 – Base of preparation
Until December 31, 2004, the ARCHOS Group prepared and presented its consolidated financial
statements by applying the consolidation principles generally accepted in France, i.e. C.R.C.
Regulation No. 99-02.
Under EU Regulation 1606/2002 of 19 July 2002, the ARCHOS Group consolidated financial
statements for the financial year ended December 31, 2005 were prepared in accordance with the
IFRS standards as adopted by the European Union as of December 31, 2005.
The IFRS-compliant accounting standards used are described in Note 2 below.
These standards were applied consistently by the Group for all periods presented in
accordance with the IFRS standards, including IAS 32 and IAS 39 concerning financial
instruments, which were applied ahead of their effective date as from 1 January 2004.
The choice of options and exemptions concerning in particular IFRS 1 as well as the impact of IFRS
compliance are shown below (see Note 29 and following, IFRS Transition).
The choice of options and exemptions described in IFRS 1 was presented by the Group upon
publication of the interim consolidated financial statements as of 30 June 2005 and are recalled below.
In accordance with the rules contained in IFRS 1 “First adoption IFRS,” the following options were
selected by the ARCHOS Group:
Financial instruments: the Group chose to apply, as from 1 January 2004, IAS 32 and
IAS 39 concerning financial instruments and treasury shares.
Translation differentials: the Group transferred to “consolidated reserves” the
translation differentials related to the translation of the financial statements of foreign
subsidiaries as of 1 January 2004. Such adjustment has no impact on consolidated
shareholders’ equity as of 1 January 2004. Accordingly, only translation differentials
recognised after that date shall be recognised through the income statement in the
event of disposal of the subsidiary to which they relate.
Long-term employee benefits: as the amount of long-term benefits is immaterial,
actuarial gaps were not revised. This item has therefore no impact on net income or
shareholders’ equity.
Share-based payments: IFRS 2 on share-based payments was applied to the stock
option plans granted after 7 November 2002 and whose rights have not yet been
vested as of 1 January 2005.
Fixed assets: the Group did not use the option for the fair value revaluation of its fixed
assets as of the transition date.

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CHAPTER 20
The standards, interpretations and amendments below, published by IASB and applicable after the
financial statements’ closing date, have not been applied ahead of their
effective date:
IAS 39 amendment: fair value option and cash flow hedge accounting in respect of
future intra-group transactions,
IFRIC 6: waste from electrical and electronic equipment,
Terms of the restatement of financial statements in accordance with IAS 29 2 ,
IFRS 1 and IFRS 6 amendments,
IFRIC 4: determination of whether an agreement contains a lease,
IFRS 7: financial instruments, information to be provided,
IAS 30 and IFRS 4 amendment: financial guarantee and credit insurance
agreements,
IAS 1 amendment: information concerning the capital.
As of the publication date, these standards’ impact was still under review.
The consolidated financial statements have been shown in accordance with the historical cost
principle, except for the convertible bond issue, which was recognised by using the
amortised cost method.
The preparation of the consolidated financial statements implies the factoring in of estimates and
assumptions by the Group’s Management. Such estimates and assumptions may affect the
accounting value of certain assets and liabilities, revenues and expenses, as well as the information
provided in the notes. The Group’s Management regularly revises its estimates and assumptions in
order to ascertain their relevance in view of past experience and current economic developments.
According to changes in such assumptions, the information
included in the Group’s future financial statements might be different from current estimates.
Future cash flows used to determine the going concern value (note 2.6 – Impairment test) are based
on the budget. This process, involving the entire Group’s Management, requires the use of key
assumptions and assessments, in particular in order to determine market trends, the cost of raw
materials and price determination policies. Actual future cash-flows may thus be different from the
estimates used in order to determine the going concern value.
Note 2 – Accounting principles
2.1 – Consolidation principles
The ARCHOS group’s scope of consolidation includes the following entities:
2 Please see IAS 39
ARCHOS S.A., the parent company, a société anonyme registered in France,
domiciled at 12 rue Ampère, 91430 IGNY (France). The parent company’s
operations consist in the design, production through subcontractors and
distribution of peripheral mobile equipment.
and its subsidiaries:
ARCHOS Inc. based in Irvine, California, United States
ARCHOS UK Limited, based in the United Kingdom
ARCHOS Deutschland GmbH, based in Germany
ARCHOS Asia Limited, based in Hong Kong, operational from March 2005.

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ARCHOS Inc., ARCHOS UK, ARCHOS Deutschland and ARCHOS Asia, over which the Group
has exclusive control, are fully consolidated. Full consolidation includes all of the relevant companies’
assets, liabilities and income statement items. There are no minority interests,
as all subsidiaries are wholly-owned.
The consolidated companies’ financial statements are closed as of 31 December of
each year.
The accounting principles applied by the subsidiaries have where applicable been amended in order
to be made consistent with the rules applied within the Group.
2.2 – Segment information
To date, taking into account the Group’s risk structure and profitability, the first segment
information level corresponds to business lines, while the second level corresponds to
geographic areas.
The first segment information level contains the following business lines:
- Mobile peripheral equipment
The Group’s second segment information level contains the following geographic areas:
- Europe and other areas
- Americas
- Asia
2.3 – Foreign currency transactions
(a) Reporting currency and functional currencies
The accounting systems are maintained in the functional currency of each affiliate, i.e. the currency of
the principal economic environment in which such affiliate operates and which corresponds in general
to the local currency.
The consolidated financial statements are denominated in euro, which is the consolidating entity’s
functional currency.
(b) Translation
The financial statements of those affiliates whose functional currency is not identical to
the consolidated financial statements’ reporting currency are translated as follows into the reporting
currency. The balance sheets of ARCHOS Inc., ARCHOS UK and ARCHOS Asia are translated into
euro on the basis of the foreign exchange rates prevailing as of the closing date. Income statements
are translated on the basis of the financial year’s average foreign exchange rates. Shareholders’
equity accounts are translated by using the historical foreign exchange rates. The translation
differentials so released are immediately recognised in the balance sheet in shareholders’ equity
accounts.
(c) Transactions
Transactions denominated in foreign currencies are translated into the functional currency on the
basis of the monthly average exchange rate according to the preceding month’s average exchange
rate. At the end of the financial year, receivables and liabilities denominated in foreign currencies are
translated on the basis of the closing foreign exchange rate.
Unrealised foreign exchange rates recognised upon such translation are recognised as
financial revenues or expenses according to the nature of the differential.

2.4 – Intangible assets
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The depreciation of intangible fixed assets is recognised through the income statement,
either in the cost of goods sold or as research and development expenses, or as sales and
administrative expenses.
(a) Goodwill
No first consolidation goodwill was recognised, as subsidiaries ARCHOS Inc, ARCHOS UK,
ARCHOS Deutschland and ARCHOS Asia were initially formed by ARCHOS S.A. and are wholly
owned.
(b) Research and development expenses
Development expenses must be recognised as intangible assets when all of the
requirements below are simultaneously satisfied:
technical feasibility of the intangible asset’s completion, so that the same can be used or sold,
intent to complete the intangible asset and use or sell the same,
ability to use or sell the intangible asset,
generation of future likely economic benefits by the intangible asset,
availability of technical, financial or other resources in order to complete the project,
ability to reliably measure the expenses related to such asset during its development phase.
All development expenses incurred, determined project per project according to the time
actually spent by the engineering unit’s engineers, as well as any related expenses, are
reviewed, and projects are capitalised, up to the amount of the incurred costs, starting from the date
on which all criteria are satisfied.
Projects are amortised starting from the date of initial sales related to the relevant projects. They are
amortised over a period of 18 months, corresponding to their estimated useful life.
(c) Other intangible assets
The gross value of other intangible assets is stated at cost.
Other intangible assets are amortised on the basis of their estimated useful life:
Description Amortisation method Useful life
Patents 5 years
IT programme expenses Straight-line 1 year and 3 years
2.5 – Tangible assets
The gross value of the Group’s tangible assets corresponds to the initial acquisition
cost. This value is decreased in the cumulated amount of depreciation expenses and where applicable
the cumulated amount of impairment provisions. The relevant amount is not revalued.
The ARCHOS Group chose to maintain the principle according to which tangible assets are to be
valued on the basis of the depreciated historical cost.

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Depreciation is calculated according to the straight-line method, based on the estimated
useful life of the various asset classes.
Description Depreciation method Useful life
Technical facilities, equipment and tools Straight-line 2,6,8 and 10 years
Office and IT equipment Straight-line 3 and 8 years
Furniture Straight-line 8 and 10 years
Other tangible assets Straight-line 3 to10 years
The depreciation of tangible assets in the income statement is applied against the cost of goods sold
and administrative and general expenses.
As recommended by IAS 17, rental agreements are recognised according to their nature. Where lease
agreements result in particular in the transfer of materially all risks and benefits to the lessee, the
relevant leasing agreements are capitalised, as if the assets concerned had been acquired through an
instalment sale, up to their fair market value as of the agreement’s execution date. Fixed assets so
recorded are depreciated under the terms described above as regards assets of the same nature.
As opposed to leasing agreements, outright rental agreements are recognised in the income
statement in the form of rental expenses over the term of the rental.
2.6 – Impairment test
Under IAS 36, in the event of any sign of a loss of value, the assets’ book value is analysed as
regards any difference between the recoverable amount and the asset’s book value.
However, on each closing date, current development expenses are subject to an annual
impairment test. The asset’s going concern value is determined on the basis of future
cash-flows, relying on the Group’s budget (see preparation base). As the products’ life cycle is
approximately one year, the cash flows so calculated are not discounted.
When the circumstances that led to the recognition of an asset impairment cease to exist,
the corresponding impairment entry is reversed.
Impairment charges and their reversals are posted to the income statements as other
operating revenues and expenses.
2.7 – Long-term financial investments
Purchases and sales of financial assets are recorded as of the transaction date, i.e. the
date on which the Group agrees to acquire or sell the relevant asset. Financial assets are measured
on the basis of their fair market value, plus any transaction expenses directly attributable to the
acquisition or issuance of the assets (save for the category of financial assets marked to market
through the income statement). Financial assets are deconsolidated when the rights to future cash
flows have expired or have been transferred to a third party and the Group has transferred most of the
risks, benefits and controls.

The Group classes its financial assets other than derivatives as follows:
loans and receivables
financial assets available for sale
financial assets marked to market
investments held to maturity
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These assets are posted as current assets on the balance sheet, except when they mature in more
than 12 months.
2.8 – Treasury shares
Regardless of their intended use, treasury shares are deducted from consolidated
shareholders’ equity. Upon their sale, the consideration received for these shares, net of any
transaction costs and related tax impact, is recognised as shareholders’ equity.
2.9 – Inventories
Inventories are valued at the lowest of cost and net disposal value, according to the FIFO method.
The cost of purchases of raw materials and components includes the purchase price and other costs
directly attributable to the acquisition. Purchases made in USD are recognised on the basis of their
exchange value in euro, according to the USD / EUR foreign exchange rate for the preceding month.
The cost of works-in-progress and manufactured finished goods includes any direct labour expenses,
as well as the other costs directly linked to the units produced, the production overhead and the
integration of development expenses, based on the normal production capacity.
In the event that the cost of a product exceeds its net disposal value, an inventory provision is
recognised. Inventories having a low turnover or a risk of future non-use give rise to the recognition of
a provision for impairment of the inventories, through a review of the various items concerned.
2.10 – Trade receivables
Trade receivables are recognised on the basis of their nominal value.
Receivables transferred to factors are classified as other current receivables.
Doubtful receivables give rise to the recognition of trade receivables impairment provisions, which are
determined customer per customer, taking into account the age and estimated non-collection risk.
The impairment of trade receivables is recognised as administrative and general expenses.
2.11 – Cash and cash equivalents
The amounts recognised as cash and cash equivalents correspond to the debit position of the bank
accounts and to investment securities.
2.12 – Contributed capital
Ordinary shares and preference shares are recognised as shareholders’ equity.
When such shares are sold at a later date, the price collected, after deducting all expenses related to
the sale, is recorded as shareholders’ equity.

2.13 – Financial liabilities
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Borrowings are shown on the balance sheet as short-term liabilities, unless the Group has an
unconditional right to postpone the reimbursement of the relevant amount for a period of no less than
12 months after the closing date.
Financial liabilities other than derivatives are initially marked to market, after deducting
issuance costs, and are subsequently revaluated on the basis of their amortised cost. Any difference
between the initially collected amount (after deducting issuance expenses) and the finally repaid
amount is recognised through the income statement over the term of the loan according to the actual
interest rate method. Such actual interest rate is determined for each transaction.
2.14 – Employee benefits
Any compensation, salaries, social contribution, annual paid holidays and sick leave, as well as any
non-cash premiums and benefits, are recognised during the year in which the Group’s employees
have supplied the relevant services.
Long-term benefits, such as pensions and other post-retirement benefits, give rise to the
recognition of an asset and liability and to the posting of the relevant expenses.
(a) Pensions and other post-retirement benefits
The benefits granted by the Group only concerned defined benefits plans, i.e. schemes through which
the Group agrees to pay the stipulated benefits to current employees and
retired staff members. These plans are subject to an annual actuarial assessment.
Under IAS19, pension commitments were determined by using the retrospective method. The
liabilities posted on the balance sheet are based on the valuation taking into account staff turnover,
rates, likely changes in remuneration levels, as well as the discounting of the liabilities on the basis of
the maturity date of the relevant liabilities.
(b) Share-based payments
Stock option and subscription plans are awarded by the Group to certain employees. Under IFRS 2
(Share-based payments), the fair value of these plans is estimated definitively as of the award date by
using a binomial model with a number of steps equal to 500, taking into account in particular the
number of options potentially exercisable as of the end of the vesting period.
Under the transitional provisions of IFRS 2, the Group chose to apply this standard only as regards
plans that were issued after 7 November 2002 and whose rights are not vested as of 1 January 2005.
Amounts received upon exercise of the options are credited to the Contributed Capital accounts and to
the Share Premiums accounts, net of any directly attributable transaction cost.

2.15 – Provisions
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Provisions are recognised when a current obligation resulting from a past event exists as of the
closing date and it is likely or certain that such obligation should be extinguished by an outflow of
future resources whose amount can be reliably estimated.
Provisions correspond to the best estimate of the expenditure required in order to settle
obligations existing as of the closing date. Provisions are not discounted, as the discounting impact is
not material.
Restructuring provisions are recognised when the Group has announced a formal and
detailed plan.
2.16 – Deferred taxation
The tax burden stated on the income statement includes payable taxes as well as any
deferred taxes.
The income tax expense is based on the affiliates’ net income and is calculated in
accordance with local tax rules.
Deferred taxes are determined according to the “variable deferment” method, according to timing
differences between the assets’ and liabilities’ tax base and their book value in the consolidated
financial statements. Deferred taxes are determined on the basis of the taxation rates applied as of the
closing date.
Deferred tax assets are only recognised insofar as it is likely that the entity concerned will generate a
future taxable income, against which the timing differences and carry-overs may be applied.
Regardless of the maturity date, deferred tax assets and liabilities are set off when they are related to
the same tax entity.
2.17 – Earnings per share
Consolidated net earnings per share are calculated on the basis of the weighted average number of
shares outstanding during the same period, except for any ordinary shares
acquired by the Group as treasury shares.
Fully diluted consolidated net earnings per share are calculated on the basis of the number of shares
outstanding during the period, plus the number of shares that would result from the conversion of all
shares having a potentially dilutive effect (bond issue and stock options)
2.18 – Revenue recognition
The revenues associated with the sale of products related to ordinary activities are recorded as of the
date on which the Group:
transferred to the buyer most of the risks and benefits associated with title to the
property,
is no longer involved in management, as is normally incumbent on the owner, or
in the actual control of the sold property,
anticipates receiving the economic benefits associated with the transaction.
In the case of the ARCHOS Group, agreements made with clients and containing a product return
clause have been taken into account.

2.19 – Cost of goods sold
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The cost of goods sold includes the acquisition of raw materials, cost of production or
subcontracting of manufactured goods, as well as manufacturing overhead, on the basis of the
production facilities’ normal capacity.
Such manufacturing overhead includes in particular the amortisation and depreciation
of tangible and intangible fixed assets, directly linked to the units produced, as well as
inventories impairment.
The cost of goods sold also includes the directly attributable share of overhead, insofar as such
overhead is incurred in order to bring the manufactured goods to their present place and condition.
Sales, research and development and financial expenses are not included in the cost of goods sold.
Note 3 – Management of financial risks
3.1 – Liquidity risk
The Company’s short-term debt primarily consists of bank overdrafts, part of which is
denominated in USD. Such overdrafts are made for a revolving term of approximately one year, with a
pool comprised of several banks. In order to diversify its financing, the Company also arranged with
EchoStar a bond issue over a term of 10 years, redeemable over time or convertible at any time by the
bondholder and, according to certain thresholds, at the Company’s request.
3.2 – Foreign exchange risk
In €thousands
USD GBP OTHERS
Assets 15.420 8.928 139
Liabilities 31.184 2.613 14
Net position before management
Off-balance sheet position
-15.764 6.315 125
Net position after management -15.764 6.315 125
The Company did not arrange for any specific hedging mechanism.
3.3 – Interest rate risk
The Company is not exposed to any interest rate risk, as it has no medium- or long-term debt and
does not hold any financial assets.
Note 4 – Main events occurred during the period from 1 January to 30 June 2005 and events
subsequent to the closing
4.1 – Material events occurred during the period between 1 January and December 31, 2005
Sale of treasury shares
The ARCHOS Group sold in June 2005 all of the 99.934 treasury shares that it was holding since
2003. The impact of such sale (€340.000) was taken to shareholders’ equity.

Opening of the ARCHOS Hong Kong subsidiary
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The ARCHOS Group opened in March 2005 a wholly-owned subsidiary in Hong Kong, which is to
serve primarily as a logistical centre for Asia.
EchoStar partnership
On 7 April 2005, the financial side of the EchoStar partnership was finalised by the Board of Directors
through issuance of bonds convertible into shares in the amount of €7 million and one preference
share.
4.2 – Post-balance sheet events
EchoStar asked the Company for the forced conversion of the second 25% tranche of
convertible bonds. As of the date of the meeting of the Board of Directors approving the
2005 financial statements, the conversion process was still in progress and did not give rise to the
capital increase.
EchoStar has, in a letter dated 3 March 2006, informed the Company of its intent to convert 25% of
the convertible bonds. As the conditions on which such conversion by EchoStar are contingent have
not yet been satisfied, the capital increase was therefore not completed as of the date of the meeting
of the Board of Directors approving the financial statements.
It was decided that the US subsidiary would move from its Irvine (California) site to Denver (Colorado).
The detailed costs of such move are currently being calculated. The move should occur during the
second quarter 2006.
4.3 – Reminders
The various subsidiaries’ key corporate data are as follows:
ARCHOS Inc.
In USD thousands
Description 31-Dec-05 31-Dec-04
Control percentage 100% 100%
Stake 100% 100%
Revenues 20.247 18.560
Operating income 61 -1.142
Net income 61 -1.328
ARCHOS UK Limited
In GBP thousands
Description 31-Dec-05 31-Dec-04
Control percentage 100% 100%
Stake 100% 100%
Revenues 12.302 5.460
Operating income 538 249
Net income 357 168

ARCHOS Deutschland GmbH
In €thousands
Description 31-Dec-05 31-Dec-04
Control percentage 100% 100%
Stake 100% 100%
Revenues 11.743 5.504
Operating income 314 -402
Net income 288 -385
ARCHOS Asia Limited
In HKD thousands
Description 31-Dec-05
Control percentage 100%
Stake 100%
Revenues 528
Operating income 11
Net income -40
Note 5 – Research and Development Expenses
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In €thousands
31-Dec-05 31-Dec-04
IFRS IFRS
Description
Gross
value
Amortis.
Net
value
Gross
value
Amortis.
Net
value
Development expenses 11.256 -8.612 2.644 8.498 -6.350 2.148
Of which fixed assets in progress 844 556
Total 11.256 -8.612 2.644 8.498 -6.350 2.148
In €thousands
Capitalization year
Payroll
expenses
Purch.
studies
Purch. of
prototypes Rental
expenses
Total
gross
value Amortis.
Total
net
value
Expenses capitalized in 1998 230 230 -230 0
Expenses capitalized in 2000 413 274 85 23 795 -795 0
Expenses capitalized in 2001 780 666 354 19 1.819 -1.819 0
Expenses capitalized in 2002 1.017 1.234 230 18 2.499 -2.499 0
Expenses capitalized in 2003 1.097 214 107 17 1.435 -1.428 7
Expenses capitalized in 2004 1.012 337 349 24 1.722 -1.267 454
Expenses capitalized in 2005 1.426 614 696 20 2.757 -573 2.184
Total 5.975 3.338 1.821 122 11.256 -8.612 2.644
The amount of expenditures incurred by ARCHOS in respect of research and development
expenses over financial year 2005 is equal to €3,584,000, of which €2,757,000 were
recognised as development expenses.

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In 2005, fourteen products were marketed, giving rise to an amortisation expense equal to
€764.000. The total 2005 expense amounted to €2,262,000.
Note 6 – Intangible fixed assets
In €thousands
31-Dec-05 31-Dec-04
IFRS IFRS
Description
Gross
value
Amortis.
Net
value
Gross
value
Amortis.
Net
value
Patents 155 -97 58 135 -75 60
Software 559 -415 144 415 -284 131
Other intangible fixed
assets in progress (1)
0 161 161
Total 714 -512 202 711 -359 352
(1) Other intangible fixed assets in progress correspond to expenses incurred in connection with the search conducted
by the company and in progress by the end of financial year 2004 in order to identify a financial partner.
The other intangible assets as of December 31, 2004 as well as expenses incurred in 2005 for the
issuance of the EchoStar bond programme were netted with the gross amount of the loan.
The change in the gross value corresponds to acquisitions made during the financial year. No sale
was made during the financial year.
Note 7 – Tangible fixed assets
In €thousands
Payments recorded in the income statement in respect of outright rental agreements amounted to
€606.000 as of December 31, 2005.
The change in the gross value corresponds to acquisitions made during the financial year. No sale
was made during the financial year.
Note 8 – Other fixed assets
31-Dec-05 31-Dec-04
IFRS IFRS
Description Gross value Amortis. Net value Gross value Amortis. Net value
Technical facilities 894 -880 14 894 -833 61
Other tangible fixed assets 1.914 -1.008 906 1.350 -702 648
Total 2.808 -1.888 920 2.244 -1.535 709
The other fixed assets are comprised of security deposits and financial guarantees primarily related to
property rentals.

Note 9 – Inventories
In €thousands
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Materials impairment provisions in the amount of €4,200,000 correspond to components and items
having low turnover or a risk of future non-utilisation.
Note 10 – Trade receivables
Description 31-Dec-05 31-Dec-04
The Group manages 2 factoring agreements, i.e. one in France and one in the UK. As the Group
retained materially all of the risks and benefits associated with title to the receivables, the receivables
transferred under these agreements were not removed from the balance sheet. These assets are
recognised as Other Current Receivables in connection with the current accounts maintained with
each individual factor. (see Note 11).
Trade receivables mature within less than one year.
IFRS IFRS
Raw materials and components 17.447 6.221
Work in progress 3.264 2.947
Finished goods 14.822 8.547
Total Gross Inventories 35.533 17.715
Raw materials and components -2.356 -2.051
Work in progress -1.234 -1.131
Finished goods -610 -516
Total Inventories Impairment Provisions -4.200 -3.698
Total 31.333 14.018
In €thousands
Description 31-Dec-05 31-Dec-04
IFRS IFRS
Gross amount 13.389 4.830
Impairment provisions -377 -258
Net amount 13.011 4.572
Note:
A factoring agreement is in force as regards ARCHOS SA and ARCHOS UK.
In 2005, the Group recorded as administrative and general expenses a net bad debt charge in the
amount of €242.000.

Note 11 – Other current receivables
In €thousands
Description 31-Dec-05 31-Dec-04
The Other Receivables mature within less than one year.
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The amounts stated under “Factoring Accounts” are net of any trade receivables impairment
provisions related to accounts transferred under the relevant factoring agreements.
As of December 31, 2005 and December 31, 2004, the amount of the provisions related to Factoring
Accounts was immaterial.
Note 12 – Deferred Taxation
IFRS IFRS
Recoverable VAT 1.205 0
Other tax receivables 28 51
Due by suppliers 210 319
Accrued expenses 191 281
Factoring accounts 14.915 5.137
Other debtors 262 288
Net amount 16.811 6.075
In €thousands
31-Dec-05 31-Dec-04
IFRS IFRS Normes fra
Description
Timing differences
Base
2.998
Deferred tax
1.221
Base
1.463
Deferred tax
644
Capitalized Research Tax Credit 1.445 1.073
Annual all-in tax 57
IFRS restatements 2.364 964 5.200 1.784
Base carry-over France 13.872 4.619 12.607 4.324
Base carry-over UK and Germany 27 9 402 138
Base carry-over INC 0 0 2.075 885
Total 19.261 8.315 21.747 8.849
As of December 31, 2005, deferred tax assets amounted to €8,315,000 compared with
€8,849,000 as of December 31, 2004, broken down as follows:
€4,628,000 in tax loss carryovers,
€1,445,000 in reimbursable research tax credits,
€1,221,000 in timing differences,
€964,000 recognised as a result of IFRS restatements,
€57,000 corresponding to the annual all-in tax.
The capitalisation of deferred taxes was maintained by the end of 2005, except for the US subsidiary,
for which the Group decided not to calculate any deferred tax and to apply losses after its subsidiary
reaches the break-even point.

Note 13 – Contributed capital
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The capital stock is comprised of 6,758,168 ordinary shares and one preference share, which was
issued on April 7, 2005 to EchoStar Communications Corporation, with a priority right of access to
information and representation on the Board of Directors, such shares
having voting rights identical to those of an ordinary share.
As of December 31, 2004, the company held 99.934 shares having a total residual value of
€1,028,000 and an average share price of €10.29. Such shares were applied as a
deduction of consolidated shareholders’ equity under the “reserves” item. These shares were sold in
June 2005, the impact of the sale being recognised through Shareholders’ Equity.
Note 14 – Debt
In €thousands
Amounts outstanding 31-Dec-05 31-Dec-04
ARCHOS SA repaid in 2005 all of its non-current bank loans.
On 7 April 2005, the bond loan issue was finalised and resulted in proceeds of €7,000,000, recognised
in part as debt and in part as shareholders’ equity, in accordance with IAS 32. Such loan is
remunerated at a rate of 5%.
The Group is primarily funded through treasury lines and documentary credit lines, arranged for an
aggregate amount in euro and usable in euro or in USD.
Investment securities correspond to short-term euro-denominated bank deposits.
Positions denominated in foreign currencies are as follows:
In €thousands
Amounts outstanding 31-Dec-05
IFRS
EUR 90
USD 2.848
Total current financial debt 2.938
EUR 7.607
USD 986
Others
Total cash position
484
9.078
IFRS IFRS
Non-current debt (not including current portion)
Euro-denominated bank loans 0 0
Bond loan 3.760 0
Total non-current debt 3.760 0
Current debt
Current portion of non-current debt 0 61
Bank loans and other current bank debt 2.938 2.660
Total current debt 2.938 2.721
Total gross debt 6.698 2.721
Investment securities -1.110 0
Cash and cash equivalents -7.967 -1.920
Net debt with accrued interest -2.379 801

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Taking into account the debt structure, the Group did not set up any interest rate
management policy.
Also, the Group does not use any foreign exchange rate risk management instrument.
Note 15 – Provisions for employee benefits
In €thousands
Description
31 December
2004
Expenses
2005
Reversals 2005
31 December
2005
Used Unused
Provisions for retirement indemnities 27 22 49
Provisions for stock options 104 -41 63
Total 131 22 0 -41 112
The Group’s commitments in respect of pensions and related benefits correspond to defined benefit
plans:
retirement indemnities in France.
Employees of the Group’s subsidiaries do not to date qualify for any additional pension or expense
reimbursement benefit.
Discount rates were determined by reference to the returns generated by bonds issued by first-ranking
enterprises over periods equivalent to the periods of the commitments as of the valuation date. As of
December 31, 2005, the discount rate used was equal to 3.75%.
In accordance with transitional provisions, the Group chose not to apply IFRS2 retroactively.
Accordingly, the Group values options awarded after 7 November 2002 and not vested as of 1
January 2005.
Among the stock option plans remaining in force, this decision only covers plans No. 5 and 6, as plan
No. 1 was awarded before 7 November 2002.
Plan No. 5 Plan No. 6
Date of award by the Board 03/07/03 21/09/04
First exercise date 03/07/05 21/09/06
End restriction period for exercised options 02/07/07 20/09/08
Expiration date 02/07/13 20/09/14
Initial number of awarded options 66 000 10 314
Subscription price €3.40 €1.28
In order to mark to market the awarded options, it is necessary to determine the following
assumptions:
underlying share’s anticipated volatility,
anticipated dividends,
risk-free interest rate during the option’s term,
anticipated exit rates implying or triggering an early exercise of the options
(death, resignation, dismissal, retirement).

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In accordance with IFRS 2, the valuation was made as of the options’ award date, on which the
employer and the beneficiary employee mutually understand the terms and conditions of the
agreement. As the beneficiary employees are informed, within one month from the Board’s meeting, it
was decided to choose an award date corresponding to the last working day of the month following the
date of the Board meeting.
Plan
Award
date
Expected
volatility
Risk-free
rate
Anticipated
dividend
The valuation model used is a binomial model with a number of steps equal to 500, taking into account
an assumption of early exercise before resignation on the basis of a 5% annual exit rate.
In €
It is necessary to note that no option was exercised during financial year 2005.
Share
price
Exercise
price
5 01/08/03 86.60% 3.50% 0 €3.61 €3.40
6 21/10/04 79.30% 3.75% 0 €2.42 € €1.28
Plan Nbr. options
Fair
value
Total compensation expense
as of the award date
5 66.000 2.94 194.040
6 10.314 2.05 21.144
Total 76.314 215.184
In €
Plan
Total compensation expense
as of the award date
Shareholders’
equity
01/01/2004 - 41.399
2004 -103.530 103.530
2005 -62.287 62.287
2006 -7.967 7.967
Total 215.184
However, as of December 31, 2005, the recognised expense takes into account the actual
resignations of employees who are concerned by the above plans leading to an adjustment of the
compensation expense calculated as of the award date. The amount recognised in 2005 is a proceed
of €41.000.
In €
Plan
Total compensation expense Shareholders’
as of 31 December 2005 equity
01/01/2004 - 41.399
2004 -103.530 103.530
2005 41.321 -41.321
2006 -3.984 3.984
Total 107.592

Note 16 – Provisions for other liabilities and non-current liabilities
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Other provisions and non-current debt comprise the provision for warranty (€1,655,000) and the
provision constituted in France in respect of the all-in annual tax (€19.000).
The warranty provision covers the warranty expenses that the company is likely to bear
over the months following the closing date, over the contractual warranty period offered to customers.
The provision was determined through reliance on the actual cost of the unit dedicated to warranty
issues.
Note 17 – Other provisions and current liabilities
In €thousands
Description 31-Dec-05 31-Dec-04
The other accrued expenses primarily include financing granted by factoring companies.
Note 18 – Segment information
All of the Company’s revenues correspond to mobile peripheral equipment.
Consolidated revenues are broken down as follows:
IFRS IFRS
Provision for credit notes to be issued 4.944 2.231
Other accrued expenses 6.002 416
Social security liabilities 1.009 1.151
VAT 1.854 1.840
Other tax liabilities 823 326
Corporate income tax due 222 98
Total 14.854 6.062
In €thousands
From 1 January From 1 January
Description
to 31 December 2005 to 31 December 2004
IFRS IFRS
Americas 22.150 15.257
Europe and other areas 69.999 39.542
Asia 10.985 3.526
Total revenues 103.134 58.325
In €thousands
Description Europe and other areas Americas Asia Total Group
Net sales 69.999 22.150 10.985 103.134
Segment assets 33.416 9.630 1.298 44.344

Note 19 – Expenses classified according to their nature
In €thousands
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Other expenses consist primarily in expenses incurred for marketing purposes (€5,450,000), expenses
related to external and interim staff and staff working in China (€1,599,000), fees (€1,477,000). The
difference corresponds to the Group’s other operating expenses.
Note 20 – Staffing levels
From 1 January
to 31 December 2005
From 1 January
to 31 December 2004
Description
IFRS IFRS
Raw materials consumed and
other supplies
74.567 36.540
Change in inventories of finished goods
And work in progress
-6.514 2.918
Payroll expenses (see Note 20) 9.194 7.518
Product transportation 5.793 4.232
Depreciation and provision
expenses
5.381 3.591
Other expenses 11.021 10.717
Total expenses per nature 99.442 65.516
The average workforce employed by the Group was equal to 172 as of December 31, 2005 (146 as of
December 31, 2004).
In €thousands
Description 31-Dec-05 31-Dec-04
IFRS IFRS
Expenses and compensation 6.902 5.579
Payroll expenses 2.311 1.828
Cost of defined benefits schemes 22 7
Stock option plans (see Note 15) -41 104
Total 9.194 7.518
Payroll expenses are posted to the relevant items of the income statement classified per function.

Note 21 – Net financial income
In €thousands
From 1 January to 31 From 1 January to 31
Description
December 2005 December 2004
IFRS IFRS
Foreign exchange gains 1457
1.446
Other financial income 33
6
Financial income 1.490 1.452
Foreign exchange loss 2.589
1.093
Interest expenses 937
169
Other financial expenses 0
78
Financial expenses 3.526
1.340
Total
-2.036
112
Note 22 – Other operating revenues and expenses
In €thousands
Description
From 1 January to 31 From 1 January to
December 2005 31 December 2004
IFRS IFRS
Non-recurrent revenues 0 0
Non-recurrent expenses 0 -127
Total 0 -127
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The amount of €127.000 corresponds to the restructuring expenses of the US subsidiary and includes
mainly dismissal expenses.
Note 23 – Tax burden
The breakdown of the tax burden between current tax and deferred tax is as follows:
In €thousands
Description
From 1 January to
31 December 2005
IFRS
From 1 January to
31 December 2004
IFRS
Current tax 253 79
Deferred tax -1.303 2.619
Total -1.050 2.698

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The reconciliation between the tax burden and the theoretical tax (on the basis of the ARCHOS SA
actual taxation rate in 2005) can be analysed as follows, in absolute value, and in % of the taxation
rate:
Tax burden Taxation rate
Description in €thousands in %
Net income before tax 1 656
Tax at the standard rate 551 33.3%
Research tax credit -410 24.8%
Impact foreign tax rate lag (USA-UK-Germany) -82 5.0%
Permanent differences 3 -0.2%
Tax rate differential in France 181 -10.9%
Impact of the de-capitalization of deferred tax
-1.047 63.2%
on US losses
Deferred tax on translation differential -246 14.9%
Total -1.050 130.0%
Note 24 – Earnings per share
The extraordinary general meeting of 13 August 2001 authorised the award of 205,184 stock
subscription options.
Through the introduction of six successive stock option plans, the Board of Directors made full use of
such authorisation. These plans set, for the exercise of the awarded options,
target-related conditions that were to be satisfied. Certain options have lapsed following
the non-attainment of certain of the objectives set. Thus, the number of awarded options
remaining exercisable is equal to 71.510, taking into account resignations occurred as of
December 31, 2005.
Furthermore, the extraordinary general meeting of 29 November 2004 authorised the issuance of
310.256 new options, which have not yet been awarded by the Board of Directors.
As of 7 April 2005, the Group issued to EchoStar 2,212,158 bonds convertible into shares. Following
the conversion of 25% of its bonds convertible into shares, giving rise to the issuance of 553,039 new
shares in October 2005, the number of bonds convertible as of the closing date was equal to
1,659,119.

Note 25 – Financial commitments
Iin €thousands
25.1 – Pledge
Commitments given
Counter-guarantee bonds (Government contracts)
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As part of the renewal of its short-term loans during the first half 2004, the Group entered
a pari passu first pledge in favour of the banks in respect of the IT products distribution
business.
During the second half of 2004, in connection with the execution of an agreement for
the spreading of the Company’s liabilities vis-à-vis URSSAF and the French Treasury,
the company entered a second pledge in respect of the IT products distribution business.
The debts covered by these pledges were fully repaid as of the close of financial year 2005. The
registration lead times did not make it possible to obtain the release of these pledges prior to the
closing date.
25.2 – Movable property leasing agreements
Amount
of which
officers
of which
subsidiaries
Of which
others
Assigned and non-matured receivables
Dailly receivable (research tax credit) 786 786
Pledges, mortgages and security interests in rem
Pledge to BNP of finished goods inventories
First pledge of the business to the banking pool
1.600
1.708
1.600
1.708
Second pledge to URSSAF of the business
200
200
Second pledge of the business to the French Treasury
681
681
Endorsements, bonds and guarantees given
Documentary credits 593 593
Other commitments given
Leasing arrangements 3 3
TOTAL 5.571 0 0 5.571
ARCHOS SA executed four leasing agreements covering various electronic, IT and office equipment
representing a purchase value not including VAT of €41 million. The term of the agreements does not
exceed a maximum of 48 months. Monthly payments are in the amount of €720 not including VAT per
month. Because they are immaterial in nature, these agreements were not restated according to the
methods indicated in Note 2.5.

Note 26 – Transactions with affiliates
The list of the Group’s main subsidiaries and affiliates is provided in Note 2.1.
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The transactions between the parent and its affiliates and among subsidiaries are eliminated as part of
the consolidation process.
Transactions and balances between affiliates are detailed below:
In €thousands
Description 2005
Income statement
Proceeds of the sale of goods and services -22.718
Balance sheet
Receivables 22.938
Note 27 – Compensation and pension commitments awarded to members of the
governing bodies
The total amount of the compensation, pension commitments, advances and loans granted to
members of the governing bodies in respect of their role in the controlled enterprises is broken down
as follows:
In €thousands
Description ARCHOS SA ARCHOS Inc (*) Total
Compensation and assimilated items 106 0 106
Pension commitments 0 0 0
Advances 0 0 0
Total 106 0 106
(*) USD amounts converted into euro on the basis of the average rate for the financial year
Note 28 – Country risk
Nil

TRANSITION to IFRS
Note 29: Accounting principles and standards used
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The accounting principles applied by the ARCHOS Group for the transition to the IFRS set of
standards and the accounting principles serving for the preparation of the IFRS-compliant 2004
consolidated financial statements are in accordance with all standards published by the IASB
(International Accounting Standards Board) as of 30 June 2005, which came into force in France
starting from 1 January 2005 in accordance with EU Regulation No. 1606/2002 of 19 July 2002.
The international accounting standards were applied retroactively in the opening balance sheet as of
the transition date (1 January 2004), save for certain optional or mandatory
exceptions provided for in IFRS1 (“First application of IFRS standards”) which are
commented below individually per standard.
According to the provisions contained in IFRS1 (“First application of IFRS standards”), the following
options were selected by the ARCHOS Group:
Financial instruments: the Group chose to apply as of 1 January 2004 IAS 32 and
IAS 39 concerning financial instruments and treasury shares.
Translation differentials: the Group transferred to “consolidated reserves” the
translation differentials related to the translation of foreign subsidiaries’ financial
statements as of 1 January 2004. Such adjustment has no impact on consolidated
shareholders’ equity as of 1 January 2004. Thus, only translation differentials
recognised after that date shall be restated in the income statement in the event of
transfer of the subsidiary to which they are related.
Long-term employee benefits: actuarial gaps were not revised, as the amount of
long-term benefits is not very material. There is therefore no impact on net income or
shareholders’ equity.
Share-based payments: IFRS2 on share-based payments was applied to stock option
plans awarded after 7 November 2002 and not vested as of 1 January 2005.
Tangible assets: the Group did not make any use of the option allowing for
the revaluation of its fixed assets on the basis of fair value as of the transition date.
29.1 – IAS 27 Scope of consolidation
The application of the standards concerning the scope of consolidation (IAS 27, 28 and 31) did not
change the ARCHOS Group’s consolidation methods. As all subsidiaries and interests are wholly
owned, they remain fully consolidated.
29.2 – IAS 38 Intangible assets
Only those intangible assets corresponding to the definition provided in IAS 38 were
maintained on the balance sheet.

Treatment of research and development expenses
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Under French accounting principles currently applied by the ARCHOS Group, research and
development expenses are already recognised as fixed assets.
The ARCHOS Group conducted a full review of research and development expenses by
applying the criteria defined by IAS 38 for the recognition as fixed assets. As these criteria and the
date of compliance with IAS 38 criteria are more strict, the restatement led to the expensing of certain
projects that were treated as fixed assets under French GAAP.
No divergence was identified as regards the amortisation principles.
Treatment of other intangible assets.
Patents and software were not restated.
29.3 – IAS 16 Tangible assets
In accordance with the option allowed by IFRS 1, the ARCHOS Group chose not to re-value in its
opening balance sheet tangible fixed assets on the basis of their fair market value. Fixed assets
remained recorded on the balance sheet on the basis of their historical cost less
cumulated depreciation.
The Group applies the component-based approach.
The depreciation applied in accordance with French GAAP is not different from that based on the
utilisation period.
29.4 – IAS 17 Rental agreements
A review of the agreements was conducted but did not lead to any restatements. All of the agreements
correspond to outright rentals, save for certain immaterial leasing agreements.
29.5 – IAS 36 Asset impairment
As of 1 January 2004, the ARCHOS Group applied asset impairment tests to intangible assets in
progress. No additional impairment was recognised.
Taking into account the nature of the tangible assets, the ARCHOS Group did not identify
any sign of impairment. Therefore, no impairment test was carried out in respect of tangible assets.
29.6 – IAS 2 Inventories
The rules applied for the valuation and recognition of inventories have been modified.
The application of the standard has an impact following the integration of research and
development expenses into the inventories’ valuation.
Inventories are valued at the lower of cost or net resale value.

29.7 – IAS 21 Translation
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The ARCHOS Group made use of the option offered by IFRS 1 consisting in the adding back to
consolidated reserves of translation reserves prior to 1 January 2004.
Under IAS 21, transactions denominated in foreign currencies are recognised on the basis
of the average monthly foreign exchange rate for the preceding month. This principle was already
applied at an earlier date.
29.8 – IAS 19 Employee benefits
The ARCHOS Group had recognised a pension provision. As the relevant amount was not
material, actuarial assumptions were not revised for the purposes of the transition to the IFRS
standards.
There are no other employee benefits falling under IAS 19 and requiring a restatement.
29.9 – IAS 32 and 39 Financial instruments
Treasury shares
Under IAS 32, the treasury shares held are applied against shareholders’ equity.
The ARCHOS Group does not hold any financial instruments likely to have an impact on
the transition.
29.10 – IFRS 2 Share-based compensation
The Company does not have any stock-option plan. Operating expenses related to option plans were
calculated on the basis of a binomial model having 500 steps.
The following parameters were applied:
the underlying security’s anticipated volatility was estimated on the basis of the share
price’s historical volatility over the period preceding the option award date.
anticipated dividends, knowing that the Company has not paid any dividends to date.
the risk-free interest rate over the life of the option: this rate is based on the rate of the
OATS, seen as of the award date, with a maturity equal to the anticipated maturity of
the valued option, i.e. 8.6 years taking into account the assumption used as
regards the early exercise of the option.
the anticipated exit rates implying or triggering an early exercise of the options (death,
resignation, dismissal, etc.). Early exercise rights during the vesting period have been
disregarded. On the contrary, it is assumed that, between the starting point of the
exercise period and the option expiration date, the termination of employment as a
result of a resignation would result in the immediate exercise of the options. The
annual exit rates were calculated on the basis on the experience acquired by
the Company.
For more details, please refer to Note 13.
29.11 – IAS 12 Deferred taxation
The ARCHOS Group maintained the presentation of Deferred tax assets in accordance with IAS 12.

29.12 – Revenue recognition
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The revenues associated with the sale of products are recognised on the date on which the Group
transferred to the buyer substantially all of the risks and benefits associated with title to the goods and
is no longer involved in management of the transferred assets, as normally incumbent on the owner,
or in the actual control over the transferred assets.
The ARCHOS Group thus restated its revenues for all customers whose contract includes a product
return clause.

Note 30: IFRS Impact on the opening balance sheet
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The following comments cover the opening balance sheet as of 1 January 2004. The balance sheet as
of December 31, 2004 is presented for information purposes only. Any changes
in the balance sheets between 1 January and 31 December result from the changes
commented upon in the consolidated financial statements under French GAAP and the
application of the IFRS standards to the net income for the period presented in this note.
In €thousands
ASSETS 1 January 2004 31 December 2004
Notes
French
GAAP
IFRS
Impact IFRS
IFRS
R&D expenses (b) 3.716 -933 2.783 2.148
Other intangible assets 193 193 352
Tangible assets 797 797 709
Other fixed assets 101 101 103
Deferred tax assets (f) 4.885 1.155 6.040 8.849
TOTAL NON-CURRENT ASSETS 9.692 222 9.914 12.161
Inventories (c) 18.784 2.031 20.815 14.018
Trade receivables (d) 9.116 -3.859 5.257 4.572
Other current receivables 3.842 3.842 6.075
Cash and cash equivalents 1.603 1.603 1.920
TOTAL CURRENT ASSETS 33.345 -1.828 31.517 26.585
TOTAL ASSETS 43.037 -1.606 41.431 38.746
LIABILITIES AND SHAREHOLDERS’ EQUITY 1 January 2004 31 December 2004
Notes
French
GAAP
IFRS
Impact
IFRS IFRS
Capital stock 3.103 3.103 3.103
Consolidated reserves 22.271 22.271 15.294
Net income for the financial year -4.992 -2.213 -7.205 -4.508
Attributable shareholders’ equity 20.382 -2.213 18.169 13.889
Minority interests 0 0 0
TOTAL SHAREHOLDERS’ EQUITY (a) 20.382 -2.213 18.169 13.889
Non-current financial liabilities 24 24 0
Provisions for employee benefits 21 21 132
Other provisions and non-current liabilities (e) 226 607 833 817
Deferred liabilities 0 0 0
TOTAL NON-CURRENT LIABILITIES 271 607 878 948
Current financial liabilities 2.536 2.536 2.975
Trade payables 15.091 15.091 14.872
Other provisions and current liabilities 4.756 4.756 6.062
TOTAL CURRENT LIABILITIES 22.384 0 22.384 23.909
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 43 037 -1.606 41.431 38.746

(a) Change in shareholders’ equity
In €thousands
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In accordance with the option offered by IFRS1 and used by the Group, accumulated
translation differentials as of 1 January 2004, i.e. a positive amount of €309,000, was added back to
consolidated reserves. This has no impact on attributable shareholders’ equity.
(b) R&D expenses
As explained in the note on applicable accounting standards, the review of the various
development projects led to the expensing of project PMA400, which was previously treated as a fixed
asset, and which fails to comply with all criteria defining fixed assets under IAS 38.
The amount restated as expenses is equal to €933.000 and was treated as fixed assets in progress as
of 1 January 2004 under French GAAP.
(c) Inventories
Notes Shareholders’
equity
01/01/04
IAS 2 changed the net valuation of inventories.
Share
capital Consolidated
reserves
Development expenses were integrated into the valuation of the inventories, on the basis of a unit cost
calculation per project. The number of units is based on a production estimated as of the date on
which the project is treated as a fixed asset.
The impact on inventories of the development expenses’ amortisation as of 1 January 2004 was found
immaterial and was not restated. This method is now applied to the valuation of inventories.
The inventories’ impairment provision was restated on the basis of discount rates per
category of products. These rates were determined on the basis of reliable turnover rates and losses
actually observed.
This restatement led to a €842.000 increase in the impairment provision.
Consolidated
profits
Attributabl
Minority Sharehold
e Profits interests equity
31/12/04
French GAAP 20.382 0 228 -3.203 17.407 0 17.407
R&D expenses (b) (i) -933 -677 -1.610 -1.610
0 0
Corporate liabilities valuation (j) -103 -103 -103
0 0
Other liabilities (e) (h) -607 -19 -626 -626
0 0
Revenue recognition (d) (g) -3.859 -1.471 -5.330 -5.330
Inventories (c) (h) 2.031 335 2.366 2.366
0 0
Deferred taxation (f) 1.155 629 1.784 1.784
IFRS 18.169 0 228 -4.508 13.889 0 13.889
Finally, following the restatement of revenues (see below the specific terms of the
restatement, Note 26 (g)), the adding back to inventories of proceeds corresponding to the increase of
revenues amounts to €2,873,000.

(d) Trade receivables
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Following the analysis of the transfer of risks and benefits (see below the specific terms of the
restatement under Note 26 (g)), the revenues adjustment leading to the cancellation of sales over the
period led to the cancellation of trade receivables in the amount of €3,859,000.
(e) Other provisions and non-current liabilities
The warranty provision was subject to an adjustment based on a return analysis method and the
actual costs of dedicated service, in the amount of €607.000.
(f) Deferred tax assets
The various IFRS restatements give rise to an increase in the deferred tax assets in the amount of
€1,155,000.
Note 31: IFRS Impact on 2004 income statement
In €thousands
2004 French
GAAP
2004
IFRS Notes
adjustments
2004
IFRS
Revenues 59.796 -1.471 (g) 58.325
Cost of goods sold 45.799 -317 (h) 45.482
GROSS MARGIN 13.997 -1.154 12.843
R&D expenses 2.666 677 (i) 3.343
Sales expenses 8.439 8.439
Administrative and general expenses 8.149 104 (j) 8.252
Other operating revenues and expenses 0 0
CURRENT OPERATING INCOME -5.257 -1.934 -7.191
Other operating revenues and expenses -127 -127
OPERATING INCOME -5.384 -1.934 -7.318
NET FINANCIAL EXPENSE 112 112
Tax burden
Share of net income of equity affiliates
2.069 629 2.698
0 0
NET INCOME -3.203 -1.306 -4.508
* attributable -3.203 -4.508
* minority interests
Net earnings per share (in €) -0.52 -0.74
Number of shares used 6,105,195
6,105,195
Diluted net earnings per share (in €) -0.52 -0.73
Number of shares used 6,105,195
6,192,315

(g) Revenues
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Under the IFRS standards, revenues are recognised when substantially all of the risks are transferred
to the buyer. Therefore, all agreements executed with customers and providing for a product return
clause have been reviewed, with, in certain cases, a modification of
the revenue recognition date. Sales made to these customers are not recognised until the product
return clause lapses. As of 1 January 2004, the opening balance sheet’s net income was reduced in
the amount of the said sales, i.e. €3,859,000.
For financial year 2004, the restated sales of financial year 2003 were recognised and, as
of December 31, 2004, the same rule was applied, leading to a reduction in sales recognised under
French GAAP in the amount of €5,331,000. The impact on 2004 net income
corresponds to a net decrease of €1,472,000.
(h) Cost of goods sold
Along with the restatement of recognised revenues, the cost of goods sold was revised downwards in
the amount of €889.000.
The cost of goods sold was thus adjusted with an increase of €572.000, following the
restatements related to inventories (see Note 25 (c)) and the warranty provisions (see Note 25 (e)).
(i) R&D expenses
As explained in Note 25 (b), the costs incurred in respect of the PMA 400 project were
restated as expenses. The amount restated for financial year 2004 by way of transfers from fixed
assets to expenses was equal to €677.000.
(j) Administrative and general expenses
The stock option expenses over the period amounted to €104.000.

Note 32: IFRS impact on the cash-flow statement
In €thousands French GAAP 2004 IFRS
From 1 January to
From 1 January to 31
IFRS impact
31 December 2004 December 2004
Consolidated net income
+/- Net amortization, depreciation and provision expenses
-3.203
3.933
-1.306
295
-4.508
4.228
+/- Unrealized gains and losses linked to fair value adjustments
0 0
+/- Calculated expenses and revenues related to stock-options and assimilated
benefits
0 104 104
+/- Other calculated revenues and expenses
+/- Capital gains and losses related to disposals
+/- Profits and losses related to dilution
0
0
0
0
0
0
+/- Share of net income related to equity
affiliates
0 0
- Dividends 0 0
Cash-flow from operations after cost of the financial debt
and taxes
730 -907 -176
+ Cost of the net financial debt
+/- Tax burden (including deferred taxes)
-163
-2 069 -629
-163
-2.698
Self-financing capacity before the cost of net financial debt
and tax
-1.502 -1.536 -3.037
- Tax paid -189 -189
+/- Change in WCR linked to operations including the debt
related to employee benefits
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3.955 859 4.816
NET CASH FLOWS FROM OPERATIONS 2.264 -677 1.589
- Outflows linked to acquisitions of tangible and intangible
fixed assets
-2.893 677 -2.219
+ Inflows linked to acquisitions of tangible and intangible
fixed assets
0 0
- Outflows linked to acquisitions of long-term financial investments
(non- consolidated securities)
0 0
+ Inflows linked to acquisitions of long-term financial investments
(non- consolidated securities)
0 0
+/- Impact of changes in the scope
+ Dividends received
+/- Changes in loans and advances granted
0
0
0
0
0
0
+ Investment subsidies received
+/- Other flows linked to investment transactions
0
0
0
0
NET CASH FLOWS LINKED TO INVESTMENT
TRANSACTIONS
-2.893 677 -2.219
+ Amounts received from shareholders in connection with capital
increases
0 0
+ Amounts received upon exercise of stock options
0 0
+/- Repurchases and resales of treasury shares
- Dividends paid during the financial year
+ Inflows linked to new borrowings
0
0
1.000
0
0
1.000
- Loan repayments (including operating
leases)
-841 -841
- Net financial interest paid (including operating
leases)
163 163
+/- Other flows linked to financing activities 254 254
NET CASH FLOWS LINKED TO FINANCING TRANSACTIONS
576 0 576
+/- Impact of foreign exchange rate fluctuations 370 0 370
CHANGE IN THE NET CASH POSITION
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
CHANGE IN THE NET CASH POSITION
317 0 317
1.603 1.603
1.920 1.920
317 0 317

Note 33: Segment information
In €thousands
Description
1 January
to 31 December 2004
US 15.257
Europe and other areas 39.542
Asia 3.526
Total revenues 58.325
All revenues are achieved in relation to mobile peripheral equipment.
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20.1.1.5 Report submitted by the Statutory Auditors on the consolidated financial statements as of
December 31, 2005
Dear Shareholders,
Pursuant to the engagement entrusted to us by your general meeting, we audited the ARCHOS S.A
consolidated financial statements for the financial year ended December 31, 2005, as attached to this
report.
The consolidated financial statements were drawn up by the Board of Directors. On the basis of our
audit, we are responsible for issuing an opinion on the said financial statement. These financial
statements were prepared for the first time in accordance with the IFRS set of
standards as adopted by the European Union. These standards include for comparison
purposes the data related to financial year 2004 restated according to the same rules.
1.1. Opinion on the consolidated financial statements
We conducted our audit in accordance with the auditing standards generally applicable
in France. These standards require that we plan and perform the audit in order to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well as evaluating the
financial statements’ presentation. We believe that this audit provides a reasonable basis for this
opinion.
We certify that the consolidated financial statements referred to above give, under the IFRS
standards, as adopted in the European Union, a true and fair picture of the assets, financial position
and results of the set of persons and entities included in the scope of consolidation.

1.2. Justification of our assessments
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In accordance with the provisions of Article L.823-9 of the French Commercial Code
concerning the justification of our assessments, we inform you of the following:
Activation of development costs
In our assessment of the accounting principles applied by your company, we reviewed the
procedures for recognizing development costs as assets and the procedures used to amortize those
costs and for the verification of their recoverable value, and we verified that Note 2.4.b) provides
appropriate information.
Inventories and work in progress
Note 2.9 describes the accounting methods used for the valuation and depreciation of inventories
and work in progress. In our assessment of the accounting principles applied by your company, we
verified the appropriateness of the accounting methods specified above and the information
provided in the notes to the consolidated financial statements, and we verified they are correctly
applied.
Recognition of revenues
As indicated in Note 2.18, revenues are recognized when the transfer of most of the risks to the
buyer is made. All the customer contracts containing a merchandise return clause have been taken
into account. On the basis of the elements available on this date, we conducted an assessment of
the approaches used by the company and verified on a test basis the application of these methods.
Deferred taxes
Note 2.16 specifies that deferred tax assets are recognized only when recovery is probable. Our
work consisted of verifying the correct application of this method and assessing the reasonable
nature of the provisional data and the assumptions justifying the probable recovery of these deferred
tax assets.
The assessments made were included in our audit of the consolidated financial statements,
considered in their entirety, and therefore contributed to our opinion expressed in the first part of this
report.
1.3. Specific checks and information
Furthermore, we also verified the information contained in the report on the management
of the group. We have no observation to make concerning such information’s fairness and consistency
with the consolidated financial statements.
Made in Paris and Neuilly-sur-Seine, on 17 March 2006
Frédéric Bitbol
The Statutory Auditors
Members of the Paris Regional Professional Association
PricewaterhouseCoopers Audit
Vincent Gaide

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20.1.1.6 Supplemental information to the notes to the consolidated financial statements for the year
ended December 31, 2005
Please find below supplemental information to the financial statements and notes to the financial
statements closed approved by the Shareholders' Meeting of the Company on April 19, 2006,
presented in sections 20.1.1.1 to 20.1.1.6.
Earnings per share
Diluted net earnings per share in the financial statements is calculated without restatement of the net
income earned.
We are proposing, attached hereto, a calculation of net earnings per share on the basis of adjusted
attributable earnings of:
- interest booked during the period for potentially diluting common shares, which is the 292
thousand euros recognized in 2005 for the bond.
legend
Notes
From January 1-December 31, 2005
IFRS
From January 1-December 31, 2004
IFRS
Diluted net earnings per share in euros
Please find below the details of the calculation of the number of shares after the exercise of all diluting
instruments:
Nombre dilué moyen pondéré d'actions en circulation
Période jours
Moyenne
pondérée
nette
Options
émises
Obligations
émises
Moyenne
mensuelle
pondérée
options
Moyenne
pondérée
période
options
Moyene
pondérée
période
nette diluée
janv-05 31 518 523 90 037 90 037 7 647 526 170
févr-05 28 468 344 90 037 90 037 6 907 475 251
mars-05 31 518 523 90 037 90 037 7 647 526 170
avr-05 Emission emprunt obligataire 30 501 797 90 037 2 212 158 2 302 195 189 222 691 018
mai-05 31 518 523 90 037 2 212 158 2 302 195 195 529 714 052
juin-05 30 510 011 90 037 2 212 158 2 302 195 189 222 699 232
juil-05 31 527 011 90 037 2 212 158 2 302 195 195 529 722 540
août-05 31 527 011 90 037 2 212 158 2 302 195 195 529 722 540
sept-05 Sortie personnel 30 510 011 71 510 2 212 158 2 283 668 187 699 697 709
oct-05 Conversion 25% obligations 31 573 981 71 510 1 659 119 1 730 629 146 985 720 966
nov-05 30 555 466 71 510 1 659 119 1 730 629 142 243 697 709
déc-05 31 573 981 71 510 1 659 119 1 730 629 146 985 720 966
Total 365 6 303 183 71 510 1 659 119 1 611 143 7 914 326

Statement of cash flows from financing activities – Details of Working capital requirements
Note 2.2
The geographic sectors used to segment the activity correspond to the marketing locations.
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Note 2.6
Pursuant to IFRS, the annual impairment test was conducted on current intangible assets
(development costs only).
Activated development costs were also tested.
The other assets presented no indication of a loss of value on the closing date and were, therefore,
not submitted to an impairment test.
Note 2.15
We draw your attention to section 20.4, which describes the company's current litigation.
Note 2.18
Revenues are booked net of any discount, rebate or return pursuant to IFRS. The only payment
facilities that we offer to our customers are a discount for early payment. We take this into account in
determining revenues.
Note 3
Credit risk
The Group's customers can be divided into two categories:
major international accounts which benefit from a substantial financial position, for
which the credit risk is low;
smaller national distributors and customers with fewer financial resources, for which a
credit risk exists; for these clients, the Group insures the receivables held with a credit
insurer.
Note 5
No loss of value was recognized in 2005 or in 2004.
Note 6
No loss of value was recognized in 2005 or in 2004.
Note 7
No loss of value was recognized in 2005 or in 2004.
Simple leases primarily represent the leases on the various locations occupied by the Group. Please
refer to section 8.1 to find a more complete discussion of this information.

Note 8
Note the following items:
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* These assets are categorised as “Assets held until they mature”
**These assets are categorised as “Financial assets valued at fair value via the income statement”
Note 9
The amount of the inventories expenses during the year was 599,000 euros.
Note 12
The amount of the non-activated deferred taxes for the American subsidiary was 4,890,000 euros.
There is no expiration date for utilization.
Note 13
The par value of the share is 0.50 €.
The elements of the capital transfers in 2005 are discussed in section 21.1.8.
Note 14
The conditions for the convertible bond issue were as follows:
On April 7, 2005, ARCHOS issued a bond in favor of EchoStar with a nominal amount of 7,000,000
euros divided into 2,212,158 convertible bonds for 3.16 euros each, which could be converted at
maturity in 10 years. The interest rate was 5%.
The issuance contract provided that the Company could require the conversion or early redemption of
three successive tranches of the bond of 25% each only in the following cases:
for the first 25% tranche of the bonds, when the price of the Company's share
reached or remained at or above an average price weighted for volumes of five (5)
euros for ninety (90) consecutive trading days;
for the second 25% tranche, when the price of the Company's share reached and
remained at or above an average price weighted for volumes of ten (10) euros for
ninety (90) consecutive trading days;
for the third tranche of 25% of the bonds, when the price of the Company's share
reached and remained at or above an average price weighted for volume of fifteen
(15) euros for ninety (90) consecutive trading days.
Only the conversion or redemption of one 25% tranche of the bonds cannot be required by the
Company.
In addition, pursuant to the bond issue offering circular, EchoStar is able to request the conversion of
the bonds into shares at any time.

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On the date of this document, 3 25% tranches of the bonds have been converted. The remaining
amount booked as debt after conversion of 75% of the bonds is 1,253,000 euros.
The 4 th tranche can be converted only at EchoStar's initiative. EchoStar may convert the remaining
553,040 bonds at any time until maturity.
The procedures for evaluating the "Shareholders' equity" portion of the bond are based on the
calculation of a cost amortized over the total duration of the borrowing.
This accounting method is described in Note 2.13 Financial liabilities.
Note 16
All our products are guaranteed for a legal period (which depends on the country) for the end user. In
Europe, the warranty is 2 years from the date of purchase in the countries that have transposed
European regulations. In the United States, the warranty is one year.
The provision for IFA at December 31, 2004 was 19,000 euros and the provision for warranties was
798,000 euros.
The provision for IFA did not change from one year to the next. We consider that the provision for
warranties is completely used and refunded each year.
Note 18
We did not include inter-sector sales in the information provided in Note 18, because inter-sector sales
represent only intra-group sales and are therefore eliminated.
Investments by geographic region were as follows:
Description
Europe et autres zones Amérique Asie Total groupe
Investissements 474 71 19 564
Details of the effects of the Canon contract
We draw your attention to the treatment of the Canon contract. A legal description of the contract has
been presented in section 22.1.
This contract includes an inventory carrying clause, which is treated as follows in the accounts:
On the balance sheet
1) In the trade accounts for the amount of 2,930,000 euros, which corresponds to the
components invoiced in the last ten days, pending receipt of payment from Canon.
2) In the inventories, by reintegration of the products still carried by Canon, which have not yet
been reinvoiced from Canon Bretagne to ARCHOS, for the amount of 3,171,000 euros.
3) In the supplier accounts, for the amount of 10,217,000 euros, which represents the various
reinvoicings from Canon Bretagne to ARCHOS (components, labor, carrying costs, shipping).
On the income statement
This contract is recognized at two levels:
1) Labor and transport costs are recognized at the level of the cost price of sales.
2) Carrying costs are recognized at the level of financial expenses.

20.1.2 Consolidated financial statements as of December 31, 2004
20.1.2.1 Consolidated balance sheet for the financial year ended December 31, 2004
Balance sheets as of 31 December 2004, 31 December 2003
and 31 December 2002
In €thousands
ASSETS 31 December 2004 31 December 2003 31 December 2002
Research and Development Expenses 10.108 7.710 5.343
Other intangible fixed assets
711 452 219
Amortisation -6.709 -4.253 -2.066
Total intangible assets 4.110 3.909 3.496
Technical facilities and industrial equipment 894 889 1.116
Other tangible assets 1.350 1.119 480
Depreciation -1.535 -1.211 -867
Total tangible assets 709 797 729
Long-term interests 0 0 0
Security deposits and guarantees 103 101 68
Total long-term financial investments 103 101 68
TOTAL FIXED ASSETS 4.922 4.807 4.293
Inventories, net of provisions 11.650 18.784 17.931
Trade receivables 9.904 9.116 8.396
Other net receivables 6.075 3.842 13.733
Deferred tax assets 7.065 4.885 2.221
Cash and cash equivalents 1.920 1.603 6.043
TOTAL CURRENT ASSETS 36.614 38.230 48.324
TOTAL ASSETS 41 536 43 037 52 617
LIABILITIES AND SHAREHOLDERS’ EQUITY
31 December 2004 31 December 2003 31 December 2002
Capital stock 3.103 3.103 3.103
Share premium 16.761 16.761 16.761
Reserves / Retained earnings 209 5.201 6.487
Translation reserve 537 309 -78
Net income for the financial year -3.203 -4.992 -1.269
TOTAL SHAREHOLDERS’ EQUITY
17.407 20.382 25.004
RISK PROVISIONS 239 1.545 275
Borrowings and loans from credit
institutions
2.721 2.560 3.389
Miscellaneous borrowings and loans
Trade payables
Tax and social security liabilities
Other liabilities
TOTAL LIABILITIES
254
14.872
3.415
2.628
23.890
15.091
1.751
1.707
21.110
55
20.872
1.456
1.566
27.338
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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41.536 43.037 52.617

20.1.2.2 Consolidated income statement for the financial year ended December 31, 2004
Income statement for the periods from 1 January to 31 December 2004, from 1 January
to 31 December 2003 and from 1 January to 31 December 2002
In €thousands
From 1 January to
31 December 2004
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From 1 January to
31 December 2003
From 1 January to
31 December 2002
Revenues 59.796 54.244 61.604
Other revenues -983 2.237 6.044
TOTAL OPERATING REVENUES 58.813 56.481 67.648
Purchases of raw materials and production subcontracting 34.130 38.771 53.654
Change in inventories 2.227 -1.351 -7.539
Purchase of subcontracting services, studies and prototypes 759 673 1.349
Other purchases and external expenses 14.045 13.572 14.013
Taxes other than corporate income tax 1 800 818 548
Wages, salaries and social security contributions 7.414 6.986 4.831
Amortization and depreciation expenses 2.800 2.551 1.450
Provision expenses 461 1.874 969
Other expenses 318 80 19
TOTAL OPERATING EXPENSES 63.954 63.974 69.294
OPERATING INCOME -5.141 -7.493 -1.646
Financial revenues 1.452 2.869 2.282
Financial expenses 1.340 3.150 2.599
NET FINANCIAL INCOME 112 -281 -317
Extraordinary revenues 131 83 842
Extraordinary expenses 374 281 1 577
EXTRAORDINARY INCOME -243 -198 -735
Corporate income tax 2.069 2.981 1.429
NET INCOME -3.203 -4.992 -1.269
Net income per share in - 0.52 - 0.82 -
0.21
€Number of shares used 6,105,195 6,105,189 5,977,074
Diluted net income per share in - 0.52 - 0.82 -
0.21
€Number of shares used 6,105,195 6,105,189 5,977,074

20.1.2.3 Cash-flow statement for the financial year ended December 31, 2004
In €thousands
Cash-flow statement covering the periods from 1 January to 31 December 2004, from 1
January to 31 December 2003 and from 1 January to 31 December 2002
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From 1 January to
31 December 2004
From 1 January to From 1 January to
31 December 2003 31 December 2002
Operating cash flows
Net income for the financial year -3.203 -4.992 -1.269
Intangible assets amortization expenses 2.456 2.187 1.164
Tangible assets depreciation expenses
324 344 272
Change in inventories
Change in trade receivables
Change in other receivables
7.134
-788
-2.233
-853
-720
9.891
-9.345
-5.244
-6.142
Change in trade payables -219 -5.780 14.049
Change in tax and social security liabilities
Change in other liabilities
1.664
921
295
141
600
561
Change in the translation reserve
Change in deferred tax
Expenses (provision reversal)
228
-2.180
-1.306
387
-2.664
1.270
-148
-2.008
-3
Total operating cash flows 2.797 -493 -7.514
Cash flows from investing operations
Acquisition of intangible assets -2.657 -2.600 -2.200
Acquisition of tangible assets -236 -412 -511
Total cash flows from investing operations -2.893 -3.012 -2.711
Cash-flow from financing operations
Change in the capital stock 0 -18 12.755
Increase in long-term financial investments
Decrease in long-term financial investments -2 -33 192
Increase in borrowings and loans from credit institutions 1.000 3.150
Decrease in borrowings and loans from credit institutions
-48 -97 -96
Change in the cash position associated with borrowings and loans from credit
institutions
-791 -732
Increase in miscellaneous financial borrowings and loans
Decrease in miscellaneous financial borrowings and loans
254 -55 55
Total cash-flow from financing operations
413 -935 16.056
Total financing flows generated during the period 317 -4.440 5.831
Cash and cash equivalents at the beginning of the financial year 1.603 6.043 212
Cash and cash equivalents at the end of the financial year 1.920 1.603 6.043
Total change in the cash position over the period 317 -4.440 5.831

20.1.2.4 Notes to the consolidated financial statements for the financial year ended
December 31, 2004
Note 1 – Accounting principles
1.1 – Consolidation principles
The ARCHOS Group consolidated financial statements are prepared in accordance with
accounting principles generally applied in France, i.e. C.R.C. Regulation No. 99-02.
The scope of consolidation of the ARCHOS Group includes the following entities as of
December 31, 2004:
ARCHOS, parent company and its subsidiaries:
ARCHOS Inc. based in Irvine, California, United States
ARCHOS UK Limited, based in the United Kingdom, with start of operations on 1 July 2002,
ARCHOS Deutschland GmbH, based in Germany, with start of operations on
October 1, 2002.
ARCHOS Inc., ARCHOS UK and ARCHOS Deutschland are fully consolidated, as the Group has
exclusive control over the said entities. Full consolidation covers all assets, liabilities and income
statement items of the relevant companies. No minority interest was recognised, as the same were
found immaterial.
The financial statements of consolidated companies are closed on December 31 of
each year.
1.2 – Translation of financial statements denominated in foreign currencies
The balance sheets of ARCHOS Inc. and ARCHOS UK are converted into euro on the basis of the
exchange rates prevailing on the closing date. Income statements are translated on the basis of the
average foreign exchange rates for the financial year. Shareholders’ equity accounts are translated on
the basis of historical foreign exchange rates. Translation
differentials so released are applied directly against the shareholders’ equity account on the balance
sheet under the “translation reserve” item.
Transactions denominated in foreign currencies are translated on the basis of the foreign exchange
rate prevailing as of the date of the transaction. At the end of the financial year, receivables and
liabilities denominated in foreign currencies are translated on the basis
of the foreign exchange rate. Unrealised foreign exchange gains appearing upon such
translation are recorded as financial revenues or expenses, depending on the direction of the
differential.
1.3 – Goodwill upon first consolidation
No goodwill upon first consolidation was recognised, as the Group did not acquire any
interest. The ARCHOS Inc., ARCHOS UK and ARCHOS Deutschland subsidiaries were fully formed
by ARCHOS which wholly owns the same.
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1.4 – Intangible assets
The gross value of the intangible assets is stated on the basis of their historical cost.
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ARCHOS S.A. recognises research and development expenses determined according to
the time actually spent by the engineering unit’s engineers as well as the related expenses. Research
and development expenses are determined project per project.
The projects are amortised starting from the date of the initial sales in respect of the products
concerned. Projects for which sales started prior to January 2004 are amortised over 2 years. In order
to recognise faster product innovation on the market, those new projects in respect of which sales
started after January 2004 are amortised over 18 months.
The other intangible assets are amortised over their anticipated life:
Amortisation method
Description Amortisation method Amortisation term
Research and development expenses Straight-line 18 months and 2 years
Patents Straight-line 5 years
IT program expenses Straight-line 1 year and 3 years
When the fixed assets’ net book value exceeds their current values, an asset impairment provision is
recognised in respect of these assets.
In particular, research and development projects prior to 31 January 2004 and amortised over 2 years,
are amortised faster when their sales outlook is insufficient.
1.5 – Tangible assets
The Group’s tangible assets are stated at cost. Depreciation is calculated as follows:
Material fixed assets acquired through a leasing agreement are activated as if they had been acquired
on credit, up to the amount of their fair value as of their contract execution date. Fixed assets so
recorded are depreciated in the same manner as described above for
property of the same type.
When these fixed asset’s net book value exceeds their current value, an asset impairment provision is
recognised in respect of these assets.
1.6 – Inventories
Description Depreciation method Depreciation term
Technical facilities, equipment and tools Straight-line 2,6,8 and 10 yrs
Office and IT equipment
Declining 3 and 8 years
Furniture Straight-line 8 and 10 years
Other tangible assets Declining 3 to 10 yrs
Raw materials and components are valued on a FIFO basis according to purchasing
invoices. ARCHOS carries out most of its purchases of components in USD, and standard production
costs are calculated in the same currency. The introduction of an ERP now makes it possible to record
each purchase of raw materials and components made in USD in the amount of its exchange value in
euro, on the basis of the USD/EUR exchange rate for the months concerned.
Inventories are thus valued in euro in the amount of the historical exchange value of their initial cost in
US dollars.

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Also, the introduction of the ERP made it possible to allocate more directly transportation costs to the
products. From now on, the cost of the works in progress and finished goods includes, in addition to
the price of raw materials and components, the delivery costs directly attributable to each product, i.e.
transportation and customs duties. Indirect delivery expenses (production labour, taxes and rents)
remain integrated overall into inventories on the basis of actual expenses.
In the event that a product’s cost exceeds its sale price, an inventories impairment provision is
recognised in an amount corresponding to the difference between these two amounts. Inventories
having a low turnover or a high risk of non-utilisation in the future give rise to the recognition of an
inventories impairment provision.
1.7 – Trade receivables
Trade receivables are recognised on the basis of their nominal value.
Receivables denominated in foreign currencies as of December 31, 2004 and December 31, 2003 were
valued on the basis of foreign exchange rates prevailing as of the said closing dates.
Doubtful receivables give rise to the recognition of trade receivables impairment provisions, which are
determined customer per customer, taking into account the age and estimated non-collection risk.
1.8 – Pension commitments and other employee benefits
According to CNC recommendation No. 03-R.01, pension commitments were determined and
thereafter provisioned on a valuation base taking into account staff turnover forecasts, the foreseeable
change in compensation as well as the discounting of the liabilities according to the future date of
materialisation of the relevant commitments.
1.9 – Tax position – Deferred taxation
Deferred taxation determined, according to the "variable deferment" method and in
connection with the "extended definition," results from the timing difference between the
expenses and revenues used for the preparation of the consolidated financial statements and the
expenses and revenues used for the calculation of the tax due by each affiliate.
Deferred tax assets and liabilities, whenever maturing, are set off when they are related to the same
tax entity.
1.10 – Earnings per share
The consolidated net income per share is calculated on the basis of the average weighted number of
shares outstanding during the period after deduction of treasury shares.
The number of shares so held (99.934 shares) did not change over the financial year.

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The fully diluted consolidated net income per share is calculated on the basis of the average weighted
number of shares outstanding during the period, plus the number of shares that would result from the
exercise of all dilutive instruments, in accordance with opinion No.27 issued by the OEC, taking into
account in particular the following:
As of 1 January 2002, 51,296 BSPCE (Entrepreneurs’ Warrants) were issued pursuant to a decision
of the Extraordinary General Meeting of 13 August 2001. After exercise of 16,296 BSPCE on 18 April
2002 (see above), the balance of the BSPCE issued was equal to 35,000. Since 31 January 2004, the
said BSPCE are no longer exercisable and are no longer integrated into the calculation.
The Board of Directors of 21 September 2004 awarded 10.314 stock subscription or
purchase options to employees. Such award closes the stock-option program authorised by the
General Meeting of 13 August 2001, for a total number of options equal to 205.184. Out of all of the
said options, only 91.014 options remain exercisable as of December 31, 2004.
The Extraordinary General Meeting of 29 November 2004 authorised the issue of 310.256 new shares
in respect of which no award has been made by the Board of Directors.
However, in the specific case where the basic earnings per share are negative, the diluted earnings
per share are identical to the basic earnings.
1.11 – Revenues recognition methods
The revenues recognition methods are in accordance with French GAAP, to wit:
the receivable arises upon the exchange of consents, and its principle and amount become
certain upon the transfer of title. In such event, the receivable is recognised as it becomes
certain.
the sale is perfected, and the title is vested of right in the buyer as regards the seller when
an agreement is reached on the subject matter of the sale and price, although the property
has not yet been delivered or the price paid, in accordance with Article 1583 of the French
Civil Code.
As regards the ARCHOS Group, products are deemed sold when they have been ordered, invoiced
and have left one of the Group’s or subcontractor’s warehouses before being delivered to the end
client.
In connection with certain commercial agreements with mass-merchandisers, the Company may have
to record product returns or retroactive discounts giving rise to the issuance of credit notes after the
initial sale. The Company values returns and likely future discounts
on contractual and statistical bases and recognises credit notes to be issued in the
corresponding amounts.
1.12 – Extraordinary expenses and revenues
In accordance with the COB recommendation of January 2002, the Group defines:
ordinary operations as any operations in which the Group is engaged in the normal course
of business,
extraordinary operations as any operations clearly separate from ordinary operations and
deemed not to repeat in a frequent and regular manner.

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Note 2 – Main events for the period from 1 January to December 31, 2004 and events occurred
after the closing date
2.1 – Main events for the period between 1 January and December 31, 2004
The financial year 2004 was marked by a sharp contrast between a difficult first half and buoyant
growth during the second half of 2004.
ARCHOS earned during the first half of 2004 revenues in the amount of €17,939,000, down 15% from
the same period of 2003, but managed to maintain its operating income at a level close to that of the
first half of 2003 (-2%) thanks to a margin improvement and cost
reduction policy. During the same period, the restructuring of the US subsidiary continued, the product
range was rationalised and the Company sought to conclude cooperation
arrangements in order to continue to grow.
ARCHOS earned during the second half of 2004 revenues in the amount of €41,858,000, up 26% from
the same period of 2003 and recorded growth in each of its regions. These
dynamics accelerated during the fourth quarter, with growth of 37% from the same period of 2003.
This also made it possible for ARCHOS to post a positive operating income for the second half of
2004.
Cooperation agreement with EchoStar
On 27 December 2004, EchoStar and ARCHOS executed an agreement, including a
financial side and a commercial side, and approved for 2005 (see paragraph on the Main events
occurred since the closing date).
EchoStar holds the Dish Network satellite digital television network, which recorded the
fastest growth in the United States over 4 years. Dish Network has
10,4 million subscribers and is one of the leaders on the US market.
As regards commercial matters, ARCHOS shall develop and sell to EchoStar products
supplementing the satellite solutions proposed by EchoStar. Such commercial partnership is strategic
for ARCHOS as regards the distribution of its products in the TV environment and for its success on
the US market.
The financial side consists in an investment made by EchoStar in the amount of €7 million, in the form
of bonds convertible into shares (OCA) reserved for EchoStar and likely to
give EchoStar access to 26% of ARCHOS’ capital. EchoStar should also subscribe a preference share
to be issued by ARCHOS. The agreement governing such investment is supplemented by:
an issuance agreement concerning the OCAs, between EchoStar and ARCHOS, stipulating
in particular that the OCAs shall be issued at a price of €3.16, that
the OCAs shall bear interest at a rate of 5% per annum and that they shall be convertible at
any time at OCA’s request, on the basis of a “one share for one bond” exchange ratio,
subject to various adjustments. ARCHOS shall have in any event the right to “force” the
conversion or repayment of part of the OCAs, in three consecutive instalments of 25% if the
average weighted value of the ARCHOS share exceeds certain thresholds,
Henri Crohas (majority shareholder of ARCHOS) and EchoStar shall execute a
shareholders’ agreement that shall come into force starting from the issuance of the OCAs.
The AMF shall be informed.

2.2 – Events occurred after the closing date
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Following the decision made by the AMF on 4 February 2005 releasing the signatories
from the obligation to file a public offer in respect of the shares, the General Meeting of shareholders
of ARCHOS, meeting on 29 March 2005, approved the issuance of bonds
convertible into shares and the issuance of the preference share. The final completion of these
issuances was acknowledged during the meeting of the Board of Directors of
7 April 2005.
2.3 – Reminders
The various subsidiaries’ key corporate data are as follows:
ARCHOS Inc.
In USD thousands
Description 31-Dec-04 31-Dec-03
Control percentage 100% 100%
Stake 100% 100%
Revenues 18.560 21.985
Operating income -1.142 -2.835
Net income -1.328 -2.347
ARCHOS UK Limited
In GBP thousands
Description 31-Dec-04 31-Dec-03
Control percentage 100% 100%
Stake 100% 100%
Revenues 5.460 4.196
Operating income 249 301
Net income 168 163
ARCHOS Deutschland GmbH
In €thousands
Description 31-Dec-04 31-Dec-03
Control percentage 100% 100%
Stake 100% 100%
Revenues 5.504 5.366
Operating income -402 75
Net income -385 44

Note 3 – Intangible assets
Intangible assets may be analysed as follows:
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In €thousands
31-Dec-04 31-Dec-03
Description
Gross
value
Amortis.
Net
value
Gross
value
Amortis. Net value
R&D expenses (1) 10.108 -6.350 3.758 7.710 -3.994 3.716
Patents 135 -75 60 110 -57 53
Software 415 -284 131 342 -202 140
Other intangible fixed assets
Assets in progress (2)
161 161
Total 10.819 -6.709 4.110 8.162 -4.253 3.909
(1) Of which €2,166,000 in fixed assets in progress as of 31/12/2004 and €1,679,000 as of 31/12/2003.
Intangible fixed assets in progress correspond to the R&D expenses whose projects are not yet marketed
and which are therefore not yet amortisable
(2) Other intangible fixed assets in progress correspond to expenses incurred in connection with the search conducted by the
company in order to identify a financial partner, such search being still in progress at the end of the year.
Research and development expenses capitalised by ARCHOS S.A. as of December 31, 2004 may be
analysed as follows:
In €thousands
Capitalisation year Payroll expenses
Purch.
studies
Purch.
prototypes
Rental
expenses
Total
Gross
value
Amortis.
Total
net
value
value
Expenses capitalized in 1998 230 230 -230 0
Expenses capitalized in 2000 413 274 85 23 795 -795 0
Expenses capitalized in 2001 780 666 354 19 1.819 -1.819 0
Expenses capitalized in 2002 1.017 1.234 230 18 2.499 -2.225 274
Expenses capitalized in 2003 1.397 750 200 21 2.368 -972 1.396
Expenses capitalized in 2004 1.209 698 464 28 2.398 -309 2.089
Of which:
Photo / Video MP4 770 541 284 19 1.614 -196 1.419
Music MP3 409 155 168 9 741 -113 627
Mass-Storage 29 2 12 0 43 0 43
Total 5.045 3.621 1.333 109 10.108 -6.350 3.759
The amount of expenditures incurred by ARCHOS in respect of R&D over financial year 2004 was
equal to €2,650,000, of which €2,398,000 gave rise to the recognition of fixed assets.
In 2004, four products were marketed, generating an amortisation expense of €694.000.
The total 2004 expense amounted to €2,356,000.

Note 4 – Tangible assets
Tangible assets may be analysed as follows:
In €thousands
Note 5 – Long-term financial investments
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Long-term financial investments are comprised of security deposits and financial guarantees primarily
related to property rentals.
Note 6 – Inventories
The Group’s inventories as of December 31, 2004 and December 31, 2003 were as follows:
Delivery expenses accounted for approximately 3.15% of inventories as of December 31, 2004.
The increase in the inventories impairment provision corresponds to the Group’s constant resolve to
adopt a conservative position as regards the provisioning of inventories having a low turnover rate.
This change in provision includes the transfer of the risk provision recognised as of December 31,
2003 in the amount of €600.000, in order to have an inventories provision detailed per component.
Furthermore, a risk and contingencies provision in the amount of €500,000, recognised as of
December 31, 2003 in order to cover the transition to the ERP completed at the end of the first quarter
2004, was reversed as of the first half of 2004.
These two issues are detailed in Note 11.
31-Dec-04 31-Dec-03
Description Gross value Amortis. Net value Gross value Amortis. Net value
Technical facilities 894 -833 61 889 -725 164
Other tangible assets 1.350 -702 648 1.119 -486 633
Total 2.244 -1.535 709 2.008 -1.211 797
In €thousands
Description 31-Dec-04 31-Dec-03
Raw materials and components
Work in progress
Finished goods
6.221
2.947
5.026
8.448
2.347
9.236
Total Gross inventories 14.194 20.031
Raw materials and components -1.932 -668
Work in progress
-467 -186
Finished goods
-146 -393
Total Provisions for inventories impairment -2.545 -1.247
Total 11.650 18.784

Note 7 – Trade receivables
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The Group’s trade receivables as of December 31, 2004 and December 31, 2003 were as follows:
In €thousands
Description 31-Dec-04 31-Dec-03
Gross amount 10.162 9.519
Impairment provisions -258 -403
Net amount 9 904 9 116
Note:
In 2000, the Group signed two factoring agreements, i.e. in France for ARCHOS SA,
and in the USA for ARCHOS Inc.
In 2002, subsidiary ARCHOS UK executed a factoring agreement.
At the end of 2002, the factoring agreement executed by ARCHOS Inc. was terminated.
Trade receivables assigned to factors are recognised as “Other receivables” under the
current accounts maintained with each factor (see Note 8).
Note 8 – Other receivables
The Group’s Other Receivables as of December 31, 2004 and December 31, 2003 were as follows:
In €thousands
Description 31-Dec-04 31-Dec-03
Recoverable VAT 0 0
Other tax receivables 51 438
Suppliers in a debit position 319 153
Accrued expenses 281 299
Factoring accounts 5.137 2.926
Other debtors 288 26
Net amount 6.075 3.842
The Other Receivables mature within less than one year.
The amounts stated under “Factoring Accounts” are net of any trade receivables impairment
provisions related to accounts transferred under the relevant factoring agreements.
As of December 31, 2004 and December 31, 2003, the amount of the provisions related to Factoring
Accounts was immaterial.
The increase in the amount of the factoring accounts is explained by the fact that revenues were much
greater during the first quarter of 2004 and in particular in December.

Note 9 – Deferred taxation
The Group’s deferred tax items were as follows as of December 31, 2004 and December 31, 2003
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In €thousands
Description
31-Dec-04
Base Deferred tax
31-Dec-03
Base Deferred tax
Unrealized foreign exchange gain 0 0 0 0
Unrealized foreign exchange loss 0 0 0 0
Organic 68 23 54 19
Retirement indemnity provision 28 10 21 7
Warranty provision 146 50 146 50
Provision for credit notes to be issued 0 0 100 34
Provision not deductible for tax purposes -553 -190 -7 -2
Elimination of inventory margins 202 69 562 193
INC timing differences 1.572 682 2.114 830
RTC capitalization 1.073 847 423
Base loss carryover 12.607 4.324 7.567 2 596
Base loss UK and Germany 402 138
Base loss carryover INC 2.075 885 1.720 736
Total 16.547 7.065 13.123 4.885
The Group’s losses before tax gave rise to the recognition of deferred tax assets, so that the
consolidated tax corresponds in 2004 to a revenue (including translation differentials) in the amount of
€2,069,000 compared with €2,981,000 in 2003.
As of December 31, 2004, deferred tax assets amounted to €7,065,000 compared with
€4,885,000 as of December 31, 2003, broken down as follows:
€5,347,000 in tax loss carryovers,
€1,073,000 in refundable research tax credits,
€645,000 in timing differences.
The Group decided to maintain the capitalisation of the deferred tax assets for the following reasons:
recovery of the operational volume during the second half of 2004, confirming the
assumption of a break-even in 2005,
industrial and financial agreement with EchoStar, which should enable the group to
step up its growth.
The updated income statement forecasts confirm this analysis and give reason to consider that these
deferred tax assets arising from earlier losses might be recovered because of
profits earned within acceptable lead times.

Note 10 – Change in consolidated shareholders’ equity
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The change in consolidated shareholders’ equity between December 31, 2002 and
December 31, 2003 may be analysed as follows:
In €thousands
As of 31 Adjustment Allocation Allocation As of 31
Description December treasury of profits of the December
shares
translation
2002 held reserve 2003
Capital stock 3.103 3.103
Share premium 16.761 16.761
Reserves / Retained earnings 6.487 -18 -1.269 5.201
Translation reserve -78 387 309
2002 net income -1.269 1.269 0
Net income as of 31 Dec. 2003 0 -4.992 -4.992
Total 25.004 -18 -4.992 387 20.382
The change in consolidated shareholders’ equity between December 31, 2003 and
December 31, 2004 can be analysed as follows:
In €thousands
As of 31 Adjustment Allocation Allocation As of 31
Description December treasury of profits of the December
shares
translation
2003 held reserve 2004
Capital stock 3.103 3.103
Share premims 16.761 16.761
Reserves / Retained earnings 5.201 -4.992 209
Translation reserve 309 228 537
2003 net income -4.992 4.992 0
Net income as of 31 Dec. 2004 0 -3.203 -3.203
Total 20.382 0 -3.203 228 17.407
As of December 31, 2003 and December 31, 2004, the Company held 99.934 shares for a total
residual value of €1,028,000 and an average share price of €10.29.
As authorised by the Combined General Meeting of 25 June 2004, such buy-back program serves
multiple purposes and accordingly, under CNC opinion No. 98-D and the COB
release of 26 January 1999, these shares are applied against consolidated shareholders’ equity in the
“reserves” item.
As part of the share buy-back program approved by the General Meeting of 31 July 2003, during the
second half of 2003 and during financial year 2004, the Company did not allocate any share to cash
management transactions, as no share transfer was effected.

Potential capital stock
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The extraordinary general meeting of 13 August 2001 authorised the award of 205,184 share
subscription options.
Through the introduction of six successive stock option plans, the Board of Directors made full use of
such authorisation. These plans set, for the exercise of the awarded options,
target-related conditions that were to be satisfied. Certain options have lapsed following
the non-attainment of certain of the objectives set. Thus, the number of awarded options
remaining exercisable is equal to 91,014.
Furthermore, the extraordinary general meeting of 29 November 2004 authorised
the issuance of 310,256 new options, which have not yet been awarded by the Board of Directors.
Note 11 – Risk provisions
As of December 31, 2004 and December 31, 2003, the Group’s risk provisions were as
follows:
In €thousands
Description
31 December
2003
2004
expenses
The inventory risks are broken down into two components:
2004 reversals
A risk provision of €600,000 was set aside on the value of inventories of excess components
as of December 31, 2003.
At the end of financial year 2003, the Company updated its product plan and the
transition phases between existing and future models. In order to concentrate the range on
products generating the best volumes and the strongest margins, it was
decided to discontinue more quickly certain existing models. In this respect, certain
components present in the inventory risk ceasing being consumable in full after
the stoppage of production of these products.
This risk provision was reversed, and an inventory impairment provision detailed per
component was set aside in a similar amount (see Note 6).
A risk provision in the amount of €500.000 was set aside in respect of production
components as of December 31, 2003.
From the end of 2002, ARCHOS initiated the introduction of an ERP that shall cover all financial and
operating functions, including procurement, production and inventories. The introduction of this system
will allow for a much more detailed and prompt monitoring of inventories, manufacturing costs and
sales per product and must allow for a monitoring of the margin improvement program. The inventory
management module (in units and in value) was
introduced at the beginning of 2004 and led the Company to make certain adjustments.
This provision was reversed with the introduction of the ERP as of the first quarter.
31 December
2004
Used Unused
Provisions for inventory risks 1.100 -1.100 0
Provisions for disputes 198 -179 19
Provisions for warranties 226 192 -226 192
Provisions for retirement indemnities 21 7 28
Provisions for foreign exchange risks 0 0
Total 1.545 199 -1.505 0 239

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The warranty provision covers the warranty costs that the Company is likely to incur over
the twelve months following the closing date, in relation to products sold during the twelve months
preceding the closing date. The provision was determined on the basis of the
foreseeable future of the unit dedicated to warranty issues.
The warranty provision was fully reconstituted as of December 31, 2004.
The Group’s commitments in relation to pensions and other similar benefits cover defined benefit
plans:
Termination indemnities in France
Employees of the group’s subsidiaries do not, to date, qualify for any additional pension or expense
reimbursement benefit.
Discount rates were determined by reference to the returns generated by bonds issued by first-ranking
enterprises over periods equivalent to the periods of the commitments as of the valuation date. As of
December 31, 2004, the discount rate used was equal to 5.10%.
Note 12 – Borrowings and loans from credit institutions
The Group’s borrowings and loans from credit institutions, miscellaneous borrowings and financial
liabilities as of December 31, 2004 were as follows:
In €thousands
Amounts outstanding 31-Dec-04 31-Dec-03
Medium-term loans (not including the short-term portion)
Bank loans in euros 0 24
Total medium-term debt 0 24
Short-term debt
Short-term portion of long-term debt 61 85
Banking facilities and other long-term debt 2.660 2.451
Total short-term debt 2.721 2.536
Total gross debt 2.721 2.560
Investment securities 0 -425
Cash and cash equivalents -1.920 -1.178
Net debt with accrued interest 801 957
ARCHOS SA subscribed three medium-term loans, showing as of December 31, 2004 the
following respective balances:
settled in 2004 as regards BNP Paribas,
€61,000 as regards BDPME (previously CEPME),
settled in 2004 as regards Crédit du Nord.
These borrowings are remunerated on the basis of an identical floating rate, i.e. 1% over the 3-month
Euribor.
The Group is funded primarily by short-term credit lines, renewable annually, whose next renewal
maturity is set at 30 June 2005. In connection with the impending renewal, the Group’s position is
strengthened by the finalisation of the EchoStar cooperation agreement.

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The Group also uses documentary credit lines (see Note 22), whose renewal is negotiated with the
cash management lines.
Taking into account the debt structure, the Group did not set up any interest rate risk management
system.
The Group does not rely on any foreign exchange risk management instruments. Part of
the debt is denominated in USD, thus contributing to the equilibrium on the balance sheet between
USD-denominated receivables and liabilities.
Note 13 – Other liabilities
The Group’s other liabilities as of December 31, 2004 and December 31, 2003 were as
follows:
In €thousands
Description 31-Dec-04 31-Dec-03
Provision for credit notes to be issued 2.231 1.407
Other accrued expenses 397 300
Total 2.628 1.707
Note 14 –Tax and social security liabilities
The Group’s tax and social security liabilities as of December 31, 2004 and December 31, 2003 were
as follows:
In €thousands
Description 31-Dec-04 31-Dec-03
Social security liabilities 1.151 671
VAT 1.840 661
Other tax liabilities 326 335
Corporate income tax due 98 85
Total 3.415 1.752
The VAT item increased strongly, primarily because of the mere effect of increased
invoicing in December 2004 as compared with December 2003, in the areas subject to VAT (France,
UK, Germany).
Note 15 – Revenues
The geographic breakdown of consolidated revenues is as follows:
In €thousands
From 1 January From 1 January to
Description to 31 December 2004 31 December 2003
USA 14.915 19.669
Europe 41.346 33.116
Asia 3.535 1.458
Total revenues 59.796 54.244
With successful product launches over the second half of 2004, the Group achieved
a marked operational recovery, in contrast with the first quarter 2004. Thus, revenues achieved over
the second half of 2004 are equal to €41,858,000, up 26% from the second half of 2003.

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For the record only, the discontinuation of the cutter head operations corresponds to a
€2,200,000 decrease in revenues.
Note 16 – Gross margin
The change in consolidated gross margin as of December 31, 2004 and December 31, 2003 can be
analysed as follows:
In €thousands
Description
The gross margin, which is again heading towards an anticipated level, is the combined
result of efforts made concerning the procurement and inventory management policies and the greater
share of high-margin products in revenues.
For the record only, with the introduction of the ERP, the Group had anticipated adjustments
concerning the valuation of the inventories and set aside risks and contingencies provisions in the
amount of €500.000 as of December 31, 2003. These adjustments recognised over the first half of
2004 thus impacted the margin in the same amounts.
Note 17 – Other revenues
From 1 January
to 31 December 2004
From 1 January to
31 December 2003
Revenues 59 796 54 244
Purchase of raw materials and subcontracing -34 130 -38 771
Net change in inventories -5 830 1 197
Gross margin 19 836 16 670
% Gross margin +33.2% +30.7%
Other revenues as of December 31, 2004 and December 31, 2003 can be analysed as
follows:
In €thousands
From 1 January From 1 January to
Description
to 31 December 2004 31 December 2003
R&D expense capitalisation 2.398 2.367
Change in inventories of WIP and finished goods -3.603 -154
Miscellaneous 222 24
Total -983 2.237

Note 18 – Other operating expenses
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Other changes in operating expenses, other than materials and changes in inventories, are as follows:
Other external purchases and expenses
Other external purchases and expenses may be analysed as follows as of December 31, 2004 and
December 31, 2003:
In €thousands
Description
From 1 January From 1 January to
to 31 December 2004 31 December 2003
Rents and rental expenses 499 445
Maintenance and repairs 157 226
Insurance 323 292
External staff 1.126 1.648
Commissions 545 483
Freight forwarders’ fees 217 307
Fees 1.910 1.684
Marketing and advertising 4.613 3.904
Transportation related to purchases 2.059 1.910
Transportation related to sales 829 1.063
Travel expenses 653 552
Post and telecommunication expenses 214 251
Banking fees 239 229
Other purchases 663 580
Total 14.045 13.572
Other external expenses are under control, with a 3% increase from 2003, while actual revenues
exceeded by more than 10% the 2003 level, and marketing expenses are increasing.
The items that recorded the most important changes are as follows:
Marketing and advertising: + €709.000, the expenses incurred in particular during the 2nd half
of the year reflecting the Group’s intent to support the launch of new products and
communicate more broadly,
Fees: €+226.000, in particular recruitment expenses,
External staff: €-522.000 reflecting the rationalisation of payroll expenses, with lesser reliance
on interim arrangements; in exchange, payroll expenses increased by €428.000,
Transportation expenses related to sales: €-234.000.
Taxes other than corporate income tax
The increase in the amount of €+982,000 is explained primarily through the increase in
indirect taxes, and in particular customs duties applied to a number of products.
Other expenses
This item increased by €+238.000, following the writing off by the Company of former trade
receivables, which are fully provisioned.

Note 19 – Average staffing levels
The Group’s average staffing levels are broken down as follows:
Description 31-Dec-04 31-Dec-03
Executives 47 55
Supervisors, technicians 36 44
Clerical staff 57 32
Total 140 131
ARCHOS SA 90 81
ARCHOS UK 4 3
ARCHOS Germany 11 8
ARCHOS Inc 35 39
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The apparent increase in average staffing levels includes the integration of certain interim workers
now hired under fixed-term or unlimited-term agreements. Overall, staffing levels (including interim
workers) have not increased.
Note 20 – Net financial income
The net financial income can be analysed as follows:
In €thousands
Description
Note 21 – Net extraordinary income
The net extraordinary income is as follows:
The other exceptional items include the following:
From 1 January to
31 December 2004
From 1 January to
31 December 2003
Net foreign exchange result 353 -127
Discounts granted to customers -78 -57
Net interest expense (1) -163 -97
Total 112 -281
Note 1: The net interest expense includes financial revenues generated by Investment Securities
In €thousands
From 1 January to
31 December 2004
From 1 January to
31 December 2003
Description
Capital gains (losses) upon disposal 0 0
Losses on share disposals 0 -11
Other exceptional items -243 -187
Total -243 -198
€127.000 corresponding to the US subsidiary’s restructuring expenses, primarily termination
expenses,
€116.000 corresponding to surcharges for late payment in France to the URSSAF social security fund
and to the French Treasury.
In 2003, the capital gain arising in connection with disposals corresponds to the sale of treasury
shares held by the Company.

Note 22 – Corporate income tax
The breakdown of the tax burden between current tax and deferred tax was as follows:
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In €thousands
Description
From 1 January to
31 December 2004
From 1 January to
31 December 2003
Current tax 79 -126
Deferred tax 1.990 3.107
Total 2.069 2.981
The reconciliation between the tax burden and the theoretical tax (on the basis of ARCHOS SA’s 2003
actual taxation rate) can be analysed as follows, in absolute value, and in % of the tax rate:
Tax burden Tax rate
Description in €thousands in %
Net income before tax -5.272
Tax at the standard rate -1.808 34.3%
Research tax credit -250 4.7%
Impact foreign rate difference (USA-UK-Germany) -64 1.2%
Non-deductible expenses 53 -1.0%
Tax rate differential for France 0 0.0%
Deferred tax on translation differential 0 0.0%
Total -2 069 39.3%
Note 23 – Financial commitments
Commitments given
Counter-guarantees on contracts
Amount
incl.
Officers
incl.
Subsidiaries
Others
Assigned and non-matured receivables
Dailly receivables under the Research Tax Credit 786 786
Pledges, mortgages and other security interests in rem
Pledges of inventories of finished goods to BNP 1.600 1.600
First pledge of the Company’s goodwill to the
banking pool
Second pledge of the Company’s goodwill to
1.708
1.708
200
URSSAF 200
Second pledge of the Company’s goodwill to
the French Treasury 680
Endorsements, bonds and guarantees given
Documentary credits 1.891 1.891
Other commitments given
Leasing agreements 5 5
TOTAL 6 870 0 0 6.870
680

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23.1 – Pledge
The Company executed a loan agreement with BNP Paribas and Crédit du Nord in
an amount of €229,000. In consideration, ARCHOS S.A. entered a first pledge, pari passu
between the banks, in respect of the IT product distribution goodwill. On the other hand,
Banque Sofaris guaranteed the loan up to 40% of its nominal value.
Such pledge was released upon repayment of the loan in 2004.
In connection with the renewal of its short-term loans as of the first half of 2004, the Group entered a
pledge pari passu between the banks, in respect of the IT product distribution goodwill, which had
become unencumbered following the release of the first pledge above.
Over the 2 nd half of 2004, with the execution of an agreement for the rescheduling of
liabilities vis-à-vis URSSAF and the French Treasury, the Company granted a second pledge in
respect of the IT product distribution goodwill.
23.2 – Movable property leasing agreements
ARCHOS SA executed four leasing agreements covering various electronic, IT and
office equipment assets representing a purchase value of €41.000 not including VAT. The terms of the
agreements do not exceed 48 months. Monthly payments are equal to €720 not including VAT.
Because of their immaterial impact, these agreements were not restated in accordance with the
methods indicated in 1.5 hereof.
Note 24 – Compensation and pension commitments awarded to members of the
governing bodies
The total amount of the compensation, pension commitments, advances and loans granted to
members of the board of directors in respect of their role in the controlled enterprises is broken down
as follows:
In €thousands
Description ARCHOS SA ARCHOS Inc (*) ARCHOS UK Total
Compensation and assimilated items 81 16 54 151
Pension commitments 0 0 0 0
Advances 0 0 0 0
Total 81 16 54 151
Note 25 – Country risk
Nil.

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20.1.2.5 Report submitted by the Statutory Auditors on the consolidated financial statements as of
December 31, 2004
Dear Shareholders,
Pursuant to the engagement entrusted to us by your general meeting, we audited the ARCHOS S.A.
consolidated financial statements for the financial year ended December 31, 2004, as attached to this
report.
The consolidated financial statements were drawn up by the Board of Directors. On the basis of our
audit, we are responsible for issuing an opinion on the said financial statement.
1.3. I - Opinion on the consolidated financial statements
We conducted our audit in accordance with the auditing standards generally applicable
in France. These standards require that we plan and perform the audit in order to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management as well as evaluating the
financial statements’ presentation. We believe that this audit provides a reasonable basis for this
opinion.
We certify that the financial statements referred to above give a true and fair picture of the assets,
financial position and results of the companies included in the scope of consolidation.
II - Justification of our assessments
In accordance with the provisions of Article L. 225-235 of the French Commercial Code concerning the
justification of our assessments, we inform you of the following:
It is indicated, under note 1-11, that the revenues recognition methods are in
accordance with accounting principles generally applied in France, i.e.: the receivable arises upon
the exchange of consents and becomes certain as to its principle and amount upon the transfer of
title. The Company may have to record product returns or retroactive discounts giving rise to the
issuance of credit notes after the initial sale. Companies from the ARCHOS Group value returns
and likely future discounts on contractual and statistical bases and
recognise credit notes to be issued in the corresponding amounts. On the basis of data
available to date, our assessment of these returns is based on experience and on tests
carried out by Management in order to assess the same and on a review of subsequent events
corroborating the estimate.
As indicated under Notes 1-9 and 9, deferred taxation is determined according to the "variable
deferment" method and in connection with the "extended definition" and results from the timing
difference between the expenses and revenues used for the preparation
of the consolidated financial statements and the expenses and revenues used for the calculation
of the tax due by each affiliate. As of December 31, 2004, deferred tax assets related to tax loss
carryovers amounted to €5,347,000. Management decided to maintain such assets on the balance
sheet as they should be recoverable in the near future.

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In connection with our assessments, we ensured that the above estimates were reasonable and
material.
The assessments so made form an integral part of our approach for the audit of the
consolidated financial statements, taken as a whole, and thus contributed to our opinion, without any
reservation, expressed in the first part of this report.
III - Specific checks and information
Furthermore, we also verified the information contained in the report on the management of the group.
We have no observation to make concerning its fairness and consistency with the consolidated
financial statements.
Made in Paris, on 19 April 2005
Frédéric Bitbol
The Statutory Auditors
Members of the Paris Regional Professional Association
20.1.3 Consolidated financial statements as of December 31, 2003
20.1.3.1 Consolidated balance sheet for the financial year ended December 31, 2003
PricewaterhouseCoopers Audit
Vincent Gaide

Balance sheet as of 31 December 2003 and 31 December 2002
In €thousands
ASSETS 31 December 2003 31 December 2002
Research and Development Expenses 7.710 5.343
Other intangible fixed assets
452 219
Amortisation
-4.253 -2.066
Total intangible assets
3.909 3.496
Technical facilities and industrial equipment
Other tangible assets
Depreciation
Total tangible assets
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889 1.116
1.119 480
-1.211 -867
797 729
Long-term interests
Security deposits and guarantees
0
101
0
68
Total long-term financial investments 101 68
TOTAL FIXED ASSETS
4.807 4.293
Inventories, net of provisions
Trade receivables
18.784
9.116
17.931
8.396
Other net receivables
Deferred tax assets
3.842
4.885
13.733
2.221
Cash and cash equivalents
1.603 6.043
TOTAL CURRENT ASSETS
38.230 48.324
TOTAL ASSETS 43.037 52.617
LIABILITIES AND SHAREHOLDERS’ EQUITY
Share capital
Share premium
Reserves / Retained earnings
Translation reserve
Net income for the financial year
TOTAL SHAREHOLDERS’ EQUITY
RISK PROVISIONS
Borrowings and loans from credit institutions
Miscellaneous borrowings and loans
Trade payables
Tax and social security liabilities
Other liabilities
TOTAL LIABILITIES
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
31 December 2003 31 December 2002
3.103 3.103
16.761
5.201
16.761
6.487
309 -78
-4.992 -1.269
20.382 25.004
1.545 275
2.560 3.389
55
15.091 20.872
1.751 1.456
1.707 1.566
21.110 27.338
43.037 52.617

20.1.3.2 Consolidated income statement for the financial year ended December 31, 2003
Income statement for the periods from 1 January to 31 December 2003 and from
1 January to 31 December 2002
In €thousands
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168
From 1/1 to
31/12/2003
From 1/1 to
31/12/2002
Revenues
54.244 61.604
Other revenues
2.237 6.044
TOTAL OPERATING REVENUES 56.481 67.648
Purchases of raw materials and production subcontracting
Change in inventories
Purchase of subcontracting services, studies and prototypes
Other purchases and external expenses
Taxes other than corporate income tax
Wages, salaries and social security contributions
Amortization and depreciation expenses
Provision expenses
Other expenses
TOTAL OPERATING EXPENSES
OPERATING INCOME
Financial revenues
Financial expenses
38.771 53.654
-1.351 -7.539
673 1.349
13.572 14.013
818 548
6.986 4.831
2.551 1.450
1.874 969
80 19
63.974 69.294
-7.493 -1.646
2.869 2.282
3.150 2.599
NET FINANCIAL INCOME -281 -317
Extraordinary revenues
Extraordinary expenses
EXTRAORDINARY INCOME
83 842
281 1.577
-198 -735
Mandatory profit-sharing scheme 0 0
Corporate income tax
2.981 1.429
NET INCOME
Net income per share in €
Diluted net income per share in €
-4.992 -1.269
- 0.82 - 0.21
- 0.80 - 0.21

20.1.3.3 Cash-flow statement for the financial year ended December 31, 2003
Cash-flow statement covering the periods from 1 January to 31 December 2003
and 1 January to 31 December 2002
In €thousands
Operating cash flows
Net income for the financial year
Intangible assets amortization expenses
Tangible assets depreciation expenses
Change in inventories
Change in trade receivables
Change in other receivables
Change in trade payables
Change in tax and social security liabilities
Change in other liabilities
Change in the translation reserve
Change in deferred tax
Expenses (provision reversal)
Total operating cash flows
Cash flows from investing operations
Acquisition of intangible assets
Acquisition of tangible assets
Total cash flows from investing operations
Financing flows funded by financing resources
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From 01/01/2003
To 31/12 2003
From 01/01/02
to 31/12/2002
-4.992 -1.269
2.187 1.164
344 272
-853 -9.345
-720 -5.244
9.891 -6.142
-5.780 14.049
295 600
141 561
387 -148
-2.664 -2.008
1.270 -3
-493 -7.514
-2.600 -2.200
-412 -511
-3.012 -2.711
Change in capital -18 12.755
Change in long-term financial assets -33 192
Change in borrowing and loans from credit institutions -829 3.054
Change in miscellaneous borrowings and liabilities -55 55
Total financing flows funded by financing resources
-935 16.056
Total financing flows generated during the period -4.440 5.831
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Total change in the cash position over the period
6.043 212
1.603 6.043
-4 440 5 831

20.1.3.4 Notes to the consolidated financial statements
Note 1 – Accounting principles
1.1 – Consolidation principles
The ARCHOS Group consolidated financial statements are prepared in accordance with
accounting principles generally applied in France, i.e. C.R.C. Regulation No. 99-02.
The scope of consolidation of the ARCHOS Group includes the following entities as of
December 31, 2003:
- ARCHOS, parent company and its subsidiaries:
- ARCHOS Inc. based in Irvine, California, United States
- ARCHOS UK Limited, based in the United Kingdom, with start of operations on 1 July 2002,
- ARCHOS Deutschland GmbH, based in Germany, with start of operations on 1 October 2002.
ARCHOS Inc., ARCHOS UK and ARCHOS Deutschland are fully consolidated, as the Group has
exclusive control over the said entities. Full consolidation covers all assets, liabilities and income
statement items of the relevant companies. No minority interest was recognised, as the same were
found immaterial.
The financial statements of consolidated companies are closed on 31 December of
each year.
1.2 – Translation of financial statements denominated in foreign currencies
The balance sheets of ARCHOS Inc. and ARCHOS UK are translated into euro on the basis of the
exchange rates prevailing on the closing date. Income statements are translated on the basis of the
average foreign exchange rates for the financial year. Shareholders’ equity accounts are translated on
the basis of historical foreign exchange rates. Translation differentials so released are applied directly
against the shareholders’ equity account on the balance sheet under the “translation reserve” item.
Receivables and liabilities denominated in foreign currencies are translated on the basis of the foreign
exchange rate on the closing date. Unrealised foreign exchange gains appearing upon such
translation are recorded as financial revenues or expenses, depending on the direction of the
differential.
Expenses and revenues for the financial year that are denominated in foreign currencies are
translated on the basis of the average foreign exchange rate for the financial year.
1.3 – Goodwill upon first consolidation
No goodwill upon first consolidation was recognised, as the Group did not acquire any interest. The
ARCHOS Inc., ARCHOS UK and ARCHOS Deutschland subsidiaries were fully formed by ARCHOS
which wholly owns the same.
1.4 – Intangible assets
The gross value of intangible assets is stated on the basis of their historical costs.
ARCHOS S.A. recognises research and development expenses determined according to
the time actually spent by the engineering unit’s engineers as well as the related expenses. Research
and development expenses are determined project per project. Projects are
amortised over a period of two years from the date of the initial sales.
Other intangible assets are amortised over their anticipated life.
When the fixed assets’ net book value exceeds their current value, an asset impairment provision is
recognised in respect of these assets.
1.5 – Tangible assets
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The Group’s tangible assets are stated at cost. Depreciation is calculated as follows:
Description Depreciation method Depreciation term
Technical facilities, equipment and tools Straight-line 2,6,8 and 10 years
: Office and IT equipment
Furniture
Declining
Straight-line
3 and 8 years
8 and 10 years
Other tangible assets Declining 3 to 10 years
Material fixed assets acquired through a leasing agreement are recognised as assets as if they had
been acquired on credit, in the amount of their fair value as of the agreement execution date. Fixed
assets so recorded are depreciated in the same manner as for the assets described above for
property of the same type.
When these fixed assets’ net book value exceeds their current value, an asset impairment provision is
recognised in respect of these assets.
1.6 – Trade receivables
Doubtful receivables give rise to the recognition of trade receivables impairment provisions, which are
determined customer per customer, taking into account the age and estimated non-collection risk.
1.7 – Retirement indemnities
All employees’ retirement indemnities were determined and thereafter provisioned on a valuation base
taking into account staff turnover forecasts, the foreseeable change in compensation as well as the
discounting of the liabilities according to the future date of materialisation of the relevant commitments.
1.8 – Tax position – Deferred taxation
Deferred taxation, determined, according to the "variable deferment" method and in connection with
the "extended definition," results from the timing difference between the expenses and revenues used
for the preparation of the consolidated financial statements and the expenses and revenues used for
the calculation of the tax due by each affiliate.
1.9 – Earnings per share
The consolidated net income per share is calculated on the basis of the average weighted number of
shares outstanding during the period.
The main data taken into consideration for the calculation of earnings per share for the
period between 1 January and December 31, 2002 were as follows:
- The capital of ARCHOS as of 1 January 2002 was comprised of 5,129,600 shares
following the decision made by the Extraordinary General Meeting of 13 August 2001 to
increase the capital stock by 320.600 shares in the amount of €2,404,500 to be deducted from
the share premium,
- The Board of Directors of 14 February 2002 set at €529,616.50 the final amount of the capital
increase with removal of the pre-emption right decided by the Extraordinary General Meeting
of 13 August 2001 through issuance of 1,059,233 new shares having a par value of €0.50
each, against a subscription price of €13.90, i.e. a share premium of €13.40,
- on 18 April 2002, the Company’s capital was increased to 6,205,129 shares through exercise
of 16,296 BSPCE, i.e. the addition of 16.296 new shares having a nominal value of €0.50
each,
€5.90,
against a subscription price of €6.48, i.e. a share premium of
- in connection with the share buy-back programme approved by the General Meeting of 13
August 2001, the Company became the owner of treasury shares (see Note 10). These
treasury shares were applied against shareholders’ equity and are excluded from the
calculation of the average weighted number of outstanding shares.
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CHAPTER 20
The fully diluted consolidated net income par share is calculated on the basis of the average weighted
number of shares outstanding during the period, plus the number of shares that would result from the
exercise of all dilutive instruments, in accordance with opinion No.27 issued by the OEC, taking into
account in particular the following:
As of 1 January 2002, 51,296 BSPCE (Entrepreneurs’ Warrants) were issued pursuant to a
decision of the Extraordinary General Meeting of 13 August 2001. After exercise of 16,296 BSPCE
on 18 April 2002 (see above), the balance of the BSPCE issued was equal to 35.000.
For the period from 1 January to December 31, 2003, the main factor affecting the calculation of the
net income per share was as follows:
Slight increase in the average number of treasury shares held by the Company
1.10 – Revenues recognition
The revenues recognition methods are in accordance with French GAAP, to wit:
the receivable arises upon the exchange of consents, and its principle and amount become certain
upon the transfer of title. In such event, the receivable is recognised as it becomes certain.
the sale is perfected, and the title is vested of right in the buyer as regards the seller when an
agreement is reached on the subject matter of the sale and price, although the property has not
yet been delivered or the price paid, in accordance with Article 1583 of the French Civil Code.
As regards the ARCHOS Group, products are deemed sold when they have been ordered,
invoiced and have left one of the Group’s or subcontractor’s warehouses before being
delivered to the end client.
In connection with certain commercial agreements with mass-merchandisers, the Company may have
to record product returns or retroactive discounts giving rise to the issuance of credit notes after the
initial sale. The Company values returns and likely future discounts on contractual and statistical
bases and recognises credit notes to be issued in the corresponding amounts.

Note 2 – Main events for the period from 1 January to December 31, 2003 and events occurred
after the closing date
2.1 – Main events for the period between 1 January and December 31, 2003
Difficulties encountered on the US market
When denominated in euro, the revenues of the US subsidiary decrease sharply (-45%),
under the combined effect of the following factors:
sharp slowdown of the general economy and consumption during the first quarter of 2003, the
effect continuing during the second quarter of 2003,
weakening of the USD versus the euro (-18% on average over the period). On a
like-for-like basis, US operational volume would have decreased by -34% (instead
of -45%).
continuation of the restructuring of the management team, initiated at the end
of 2002.
Hard disk procurement difficulties over the third quarter 2003
The Group’s overall operations were adversely affected by an interruption of the supply of hard disks
throughout the month of October 2003, generating a material loss in revenues, as operations are
particularly significant at that time of year.
2.2 – Events occurred after the closing date
Nil
2.3 – Reminders
The key figures of the various subsidiaries are as follows:
ARCHOS Inc.
In USD thousands
Description 31-Dec-03 31-Dec-02
Revenues 21.985 31.385
Operating income -2.835 -1.991
Net income -2.347 -2.305
ARCHOS UK Limited
In GBP thousands
Description 31-Dec-03 31-Dec-02
Revenues 4.196 2.696
Operating income 301 61
Net income 163 49
ARCHOS Germany GmbH
In €thousands
Description 31-Dec-03 31-Dec-02
Revenues 5.366 2.133
Operating income 75 42
Net income 44 25
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Note 3 – Intangible assets
Intangible assets can be analysed as follows:
In €thousands
Description
R&D expenses
Patents
Software
Intangible assets in
progress (1)
Gross value
6 031
110
342
1 679
31-Dec-03
Amortis.
-3 994
-57
-202
0
Net value Gross value
2 037 3.881
53 86
140 133
1 679 1.462
31-Dec-02
Amortis.
-1.930
-43
-93
0
Net value
1.951
43
40
1.462
Total 8 162 -4 253 3 909 5.562 -2.066 3.496
(1) As of 31/12/02 and 31/12/03, the company recorded as intangible assets in progress the R&D expenses
for which the relevant projects were not yet marketed and therefore not yet amortizable..
The R&D expenses capitalised by ARCHOS S.A. as of December 31, 2003 can be analysed as
follows:
In €thousands
Capitalisation year Payroll expenses
R&D expenses are amortised over a period of two years starting from the initial date of the sales
related to the projects concerned.
Note 4 – Tangible assets
Tangible assets can be analysed as follows:
Note 5 – Long-term financial investments
Purch.
studies
Long-term financial investments are comprised of security deposits and financial guarantees primarily
related to property rentals.
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Purch.
prototypes
Rent Total gross
expenses value
Amortis.
Total net
value
Expenses capitalized in 1998 230 230 -230 0
Expenses capitalized in 2000 413 274 85 23 795 -795 0
Expenses capitalized in 2001 780 666 354 19 1.819 -1.627 192
Expenses capitalized in 2002 1.017 1.234 230 18 2.499 -1.186 1.313
Expenses capitalized in 2003
Photo / Video MP4 699 647 149 11 1.506 -112 1.394
Music MP3 669 99 49 9 826 -38 789
Mass-Storage 29 4 2 1 36 -6 30
Total 3.836 2.924 869 81 7.710 -3.994 3.716
In €thousands
Description
Technical facilities
Other tangible assets
Total
31-Dec-03
Gross value Amortis. Net value Gross value
889 -725 164 1 116
1.119 -486 633 480
2.008 -1.211 797 1.596
31-Dec-02
Amortis.
-693
-174
-867
Net value
423
306
729

Note 6 – Inventories
The Group’s inventories as of December 31, 2003 and December 31, 2002 were as follows:
Raw materials and components are valued on a FIFO basis according to purchasing invoices.
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CHAPTER 20
In €thousands
Description 31-Dec-03 31-Dec-02
Raw materials and components, of which 8.448 7 097
China 6.625 5.170
France (Igny) 1.824 1.926
USA (Irvine,CA) (1) 0 0
Works in progress, of which: 2.347 2.409
China 2.105 1.545
France (Igny) 242 864
USA (Irvine,CA) (1) 0 0
Finished goods, of which: 9.236 8.974
China 401 0
France (Igny) 3.337 3.704
UK (Swindon) (1) 503 486
Germany (Dusseldorf) (1)
USA (Irvine,CA) (1)
Total gross inventory
294
4.701
20.031
4.784
18.480
Inventory impairment provision (2) -1.247 -549
Total
Notes:
18.784 17.931
(1) The subsidiaries’ inventories are net of the intra-Group margin.
(2) Of which Europe (€950,000), USA (€297,000)
The inventories of ARCHOS S.A. are valued throughout the year in USD, as an extremely
large part of purchases is actually made in USD. Therefore, as of December 31, 2003 and
December 31, 2002, inventories were translated into euro by using the USD average translation rate
over the period corresponding to the average inventory holding time. The translation rate used was €1
= USD 1.1608.
The cost of the work in progress and finished goods is comprised of the cost of raw materials and
components. Expenditures corresponding to delivery expenses (production labour, transportation and
commission on purchases, forwarders’ fee, taxes, etc.) are integrated overall into inventories on the
basis of actual expenses recorded during the year, divided by the amount of purchases. Delivery
expenses accounted approximately for 10.28% of inventories as of December 31, 2003.
In the event that a product’s cost exceeds its sale price, an inventories impairment provision is
recognised in an amount corresponding to the difference between these two amounts. Inventories
having a low turnover or a high risk of non-utilisation in the future give rise to the recognition of an
inventories impairment provision.

Note 7 – Trade receivables
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CHAPTER 20
The Group’s trade receivables were as follows as of December 31, 2003 and December 31, 2002:
In €thousands
Description 31-Dec-03 31-Dec-02
Gross amount 9.519 8.571
Impairment provisions -403 -176
Net amount
Note:
9.116 8.396
In 2000, the Group signed two factoring agreements, i.e. in France for ARCHOS SA
and in the USA for ARCHOS Inc.
. In 2002, subsidiary ARCHOS UK executed a factoring agreement.
At the end of 2002, the factoring agreement executed by ARCHOS Inc. was terminated.
Receivables are stated on the basis of their nominal value. Trade receivables assigned to factors are
recognised as “Other receivables” under the current accounts maintained with each factor (see Note
8).
Trade receivables having a risk of non-collection in the future give rise to the setting aside of a
receivables impairment provision.
Receivables denominated in foreign currencies as of December 31, 2003 and December 31, 2002 were
valued on the basis of foreign exchange rates prevailing as of the said closing dates.
Note 8 – Other receivables
The Group’s other receivables as of December 31, 2003 and December 31, 2002 were
as follows:
In €thousands
Description 31-Dec-03 31-Dec-02
Recoverable VAT 0 198
Other tax receivables 438 1.161
Suppliers in a debit position 153 439
Accrued expenses 299 450
Factoring accounts 2.926 11.457
Other debtors 26 29
Net amount 3.842 13.733
As of December 31, 2003, following the termination at the end of 2002 of the agreement executed in
the United States, no factoring account remained in the US subsidiary’s financial statements.
The amounts stated under “Factoring Accounts” are net of any trade receivables impairment
provisions related to accounts transferred under the relevant factoring agreements.
As of December 31, 2003, the amount of the provisions related to Factoring Accounts was immaterial.
Such provisions amounted to €748.000 as of December 31, 2002, primarily in respect of the United
States.
Note 9 – Deferred taxation
The Group’s deferred tax items were as follows as of December 31, 2003 and December 31, 2002:

In €thousands
31-Dec-03 31-Dec-02
Description Base Deferred tax Base Deferred tax
Unrealised foreign exchange gain 0 0 0 0
Unrealised foreign exchange loss 0 0 0 0
Organic 54 19 35 13
Retirement indemnity provision
Warranty provision
21
146
7
50
20
149
7
53
Warranty provision (1)
0 57 25
Provision for credit notes to be issued 100 34 100 35
Provision non deductible for tax purposes -7 -2
Provisions for non-deductible credit notes (1)
0 1.710 738
Elimination of inventory margins 562 193 502 178
RTC capitalisation 847 423 724 362
Base loss caryrover
Base loss UK and Germany
7.567 2 596 1.763 625
Base loss carryover INC (1)
3.834 1.565 430 186
Total
Note:
(1) Deferred tax related to ARCHOS Inc.
13.123 4.885 5.490 2.221
Note 10 – Change in consolidated shareholders’ equity
The change in consolidated shareholders’ equity between December 31, 2001 and December 31,
2002 can be analysed as follows:
In €thousands
As of 31
Description December
2001
Capital stock 2.565
Share premium 3.535
Reserves 2.033
Retained earnings 2.166
Translation reserves 128
2001net income 3.297
Net inc. 31 December 2002 0
Total 13.723
Capital Subscription Adjustment
increase BSPCE treasury
shares
14-Feb-02 2002
held
530 8
13.129 97
-1.010
13.658 106 -1.010
Allocation
profits
62
3.236
-3.297
-1.269
-1.268
Allocation
translation
reserve
-206
-206
As of 31
December
2002
3 103
16.761
1.085
5.402
-78
0
-1.269
25.004
The change in consolidated shareholders’ equity between December 31, 2002 and 31
December 2003 can be analysed as follows:
In €thousands
As of 31 Adjustment Allocation Allocation As of 31
Description December treasury Of profits of the translation December
2002 shares
held
Capital stock 3.103
Under the share buy-back programme authorised by the General Meeting of 13 August 2001, the
Company became the holder of 107.189 treasury shares, acquired at an average price of €12.74 with
a total maximum value of €1,365,000.
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reserve
Share premium 16.761 16.761
Reserves / Retained earnings 6.487 -18 -1.269 5.201
Translation reserve -78 387 309
2002 net income -1.269 1.269 0
Net income as of 31 December 2003 0 -4.992 -4.992
Total 25.004 -18 -4.992 387 20.382
2003
3.103

Taking into account the substantial decrease in the share price observed over the year 2003, these
transactions generated capital losses in the amount of €11,000 which the Company recognised as an
extraordinary item.
As of December 31, 2003, the Company held 99.931 shares with a total residual value of
€1,028,000 and an average price of €10.29.
As described in the final listing prospectus which received the visa of the COB (reference
02-142), such buy-back programme serves multiple purposes, and, accordingly, under CNC opinion
No. 98-D and the COB release of 26 January 1999, these shares are applied against consolidated
shareholders’ equity in the “reserves” item.
As part of the share buy-back programme approved by the General Meeting of 31 July 2003, during
the second half of 2003, the Company did not allocate any share to cash management transactions,
as no share transfer was effected.
Note 11 – Risk provisions
As of December 31, 2003 and December 31, 2002 the Group’s risk provisions were as follows:
In €thousands
Description
31 December
2002
None of the provisions existing as of December 31, 2002 was used during financial year 2003, except
for the warranty provision which was reconstituted as of December 31, 2003 in the amount of
€226,000.
The inventory risk provision is broken down into two components:
- A risk provision of €600,000 was set aside on the value of inventories of excess components
as of December 31, 2002.
At the end of financial year 2003, the Company updated its product plan and the transition phases
between existing and future models. In order to concentrate its range on products generating the
best volumes and the strongest margins, it was decided to discontinue more quickly certain
existing models. In this respect, certain components present in the inventory risk ceasing being
consumable in full after the stoppage of production of these products.
- A risk provision in the amount of €500.000 was set aside in respect of production
components.
From the end of 2002, ARCHOS initiated the introduction of an ERP that shall cover all financial and
operating functions, including procurement, production and inventories. The introduction of this system
will allow for a much more detailed and prompt monitoring of inventories, manufacturing costs and
sales per product and must allow for a monitoring of the margin improvement program. The inventory
management module (in units and in value) was introduced at the beginning of 2004 and led the
Company to make certain adjustments.
The provision for disputes covers disputes with customers and suppliers, in respect of which the
Company has provisioned against the total relevant amount the fraction corresponding to the
estimated risk of a loss. The relevant percentage varies between 50% and 100% depending on the
specific circumstance of each dispute.
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Expenses
2003
Reversals
2003
31 December
2003
Provisions for inventory risks 0 1.100 1.100
Provisions for disputes 48 150 198
Provisions for warranty 207 19 226
Provisions for retirement indemnity 20 1 21
Provisions for foreign exchange risks 0 0
Total 275 1.270 0 1.545

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CHAPTER 20
The warranty provision covers the warranty costs that the Company is likely to incur over the twelve
months following the closing date, in relation to products sold during the twelve months preceding the
closing date. The provision was determined on the basis of the foreseeable future of the unit dedicated
to warranty issues.
All employees’ retirement indemnities were determined and thereafter provisioned on a valuation base
taking into account staff turnover forecasts, the foreseeable change in compensation as well as the
discounting of the liabilities according to the future date of materialisation of the relevant commitments.
Note 12 – Borrowings and loans from credit institutions
Borrowings and loans from credit institutions, as well as miscellaneous loans and financial liabilities
incurred by the group as of December 31, 2003 were as follows:
In €thousands
Description 31-Dec-03 31-Dec-02
Loans fr. Cred. Inst. < 1 yr.
Loans fr. Cred. Inst. > 1 yr 1 an (1)
2.451
108
3.184
205
Total
2.560 3.389
Note (1) Of which > 1 yr: €24,000 and < 1 yr: €84.000.
ARCHOS SA incurred three loans having the following balances as of December 31, 2003:
€23.000 for BNP Paribas,
€73.000 for BDPME (previously CEPME),
€11.000 for Crédit du Nord.
These borrowings are remunerated on the basis of an identical floating rate, i.e. 1% over the 3-month
Euribor.
Note 13 – Trade payables
Liabilities denominated in foreign currencies as of December 31, 2003 and December 31, 2002 were
valued on the basis of the foreign exchange rates prevailing as of these closing dates.
Note 14 – Revenues
The geographic breakdown of consolidated revenues was as follows:
In €thousands
Description
From 1 January
to 31 December 2003
From 1 January
to 31 December 2002
France (1) 15.428 10.954
USA 19.669 33.151
Other countries 19.147 17.499
Total revenues 54.244 61.604
Note (1) French revenues stated in the table below include the following:
- French revenues proper €14,131,000 as of 31 December 2003, €9,545,000 in 2002.
- Web revenues subject to VAT € 1,461,000 as of 31 December 2003, €1,409,000 in 2002.

Note 15 – Gross margin
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CHAPTER 20
The change in the consolidated gross margin as of December 31, 2003 and December 31, 2002 can
be analysed as follows:
In €thousands
Description
Despite a first half sharply impacted by inventory reductions in the mobile peripheral equipment sector,
margins over 2003 sharply increased because of the MP4 products.
Note 16 – Other revenues
From 1 January
to 31 December 2003
From 1 January
to 31 December 2002
Revenues 54.244 61.604
Purchase of raw materials and subcontracting -38.771 -53.654
Net change in inventories 1 197 9.778
Gross margin 16.670 17.728
% gross margin +30.7% +28.8%
Other revenues as of December 31, 2003 and December 31, 2002 can be analysed as follows:
In e thousands
Description
From 1 January
To 31 December
2003
From 1 January to
31 December 2002
R&D expense capitalization 2.367 2.499
Transfer of expenses linked to a capital increase 0 1.270
Change in WIP and finished goods inventories -154 2.239
Miscellaneous 24 36
Total 2.237 6.044

Note 17 – Other external expenses
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CHAPTER 20
Other external expenses as of December 31, 2003 and December 31, 2002 can be analysed as
follows:
In €thousands
Description
From 1 January to
31 December 2003
From 1 January to
31 December 2002
Rents and rental expenses 445 347
Maintenance and repairs 226 90
Insurance 292 112
External staff 1.648 1.077
Commissions 483 1.066
Freight forwarders’ fees
307 184
Fees 1.684 2.666
Marketing and advertising 3.904 3.088
Transportation related to purchases
1.910 2.802
Transportation related to sales
1.063 878
Travel expenses 552 481
Post and telecommunication expenses 251 221
Banking fees
229 529
Other purchases
580 472
Total 13.572 14.013
During financial year 2002, the Group recorded as fees expenses in the amount of
€1,270,000 in relation to the IPO. These amounts were applied against the share premium through an
expense transfer account (see Note 16).
Other net external expenses related to these IPO fees can be analysed as follows:
Description
From 1 January to
31 December 2003
From 1 January to
31 December 2002
Total other external expenses 13.572 14.013
Transfer of IPO fees -1.270
Total other external expenses net of expense transfers 13 572 12 743
The slight increase in other external expenses net of expense transfers (+829,000) results from the
following:
an increase in this item over the first half of 2003 as compared with the first half of 2002 (+29%),
thereafter a decrease in the same expenses over the second half of 2003 as
compared with the second half of 2002 (-8%).
The expenses undergoing the main changes are as follows:
Marketing and advertising: €+816,000, corresponding to the increased efforts made by the
Company in this area,
External staff: €+571.000. It is necessary to note that this item was stabilised during the second
half of 2003 and reduced in 2004,
Transportation expenses: €-708.000, because of better control of prices and logistics,
Commercial commissions: €-582,000, because of the decrease in US operations and the
reduction in the number of sales agents external to the Company.
Furthermore, consolidated expenses include the other purchases and external expenditures of the UK
and German subsidiaries, whose operations started during the second half of
2003 only.

Note 18 – Average staffing levels
The average staffing levels employed by the Group are broken down as follows:
Description 31-Dec-03 31-Dec-02
Executives 55 37
Supervisors, technicians 44 21
Clerical 32 30
Total 131 88
ARCHOS SA 81 61
ARCHOS UK 3 1
ARCHOS Germany 8 1
ARCHOS Inc 39 25
Note 19 – Net financial income
Net financial income can be analysed as follows:
In €thousands
Description
Note 20 – Net extraordinary income
Net extraordinary income is as follows:
From 1 January to
31 December 2003
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182
From 1 January to
31 December 2002
Net foreign exchange result -127 -38
Discounts to customers
Net interest expense (1)
-57
-97
-108
-171
Total -281 -317
Note 1: The net interest expense includes income from Investment Securities
In €thousands
From 1 January to From 1 January to
Description
31 December 2003 31 December 2002
Capital gains (losses) on sales 0 0
Loss on share disposal -11 -338
Other extraordinary items -187 -396
Total -198 -735
CHAPTER 20
The capital loss on disposals corresponds to the capital loss on the sale of the treasury shares held by
the Company (see Note 10).

Note 21 – Corporate income tax
The breakdown of the tax burden between current tax and deferred tax is as follows:
In €thousands
From 1 January to From 1 January to
Description
31 December 2003 31 December 2002
Current tax -126 -232
Deferred tax 3 107 1 661
Total 2 981 1 429
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CHAPTER 20
The reconciliation between the tax burden and the theoretical tax (on the basis of ARCHOS SA’s 2003
actual taxation rate) can be analysed as follows, in absolute value, and in % of the tax rate:
Description
Tax burden
In €thousands
Taxation rate
in %
Net income before tax
-7.973
Tax at the standard rate
-2.735 34.3%
Research tax credit
-423 5.3%
Impact foreign rate difference (USA-UK-Germany) 150 -1.9%
Non-deductible expenses
1 0.0%
Tax rate differential for France
26 -0.3%
Deferred tax on translation differential
0 0.0%
Total -2.981 37.4%
Note 22 – Financial commitments
22.1 – Pledge
The Company executed a loan agreement with BNP Paribas and Crédit du Nord in an amount of
€229.000. In consideration, ARCHOS S.A. entered a first pledge, pari passu between the banks, in
respect of the IT product distribution goodwill. On the other hand, Banque Sofaris guaranteed the loan
up to 40% of its nominal value.
22.2 – Movable property leasing agreements
ARCHOS SA executed three leasing agreements covering various electronic, IT and office equipment
assets representing a purchase value of €38,000 not including VAT. The term of the agreements does
not exceed 48 months. Monthly payments are equal to €907 not including VAT. Because of their
immaterial impact, these agreements were not restated in accordance with the methods indicated in
1.5 hereof.

Note 23 – Chart of subsidiaries and interests
The tables of subsidiaries and interests was as follows as of December 31, 2003:
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CHAPTER 20
In €thousands
Description
Shareh.
share equity
capital
Gross Net
loans
Stake Dividends value value
Revenues
of the shares Of the shares Profits
Advances
Subsidiariess
(>50%)
Achos Inc.
ARCHOS UK
ARCHOS DE
240 -2.550
15 314
25 95
100% 0 240 240 0 19.669 -2.104
100% 0 15 15 0 6.056 225
100% 0 25 25 0 5.366 44
Interests
(10 to 50%)
Nil
Other shares
Nil
Total 280 -2.141 0 280 280 0 31.091 -1.835
Note 24 – Compensation and pension commitments awarded to members of the governing
bodies
The total amount of the compensation, pension commitments, advances and loans granted to
members of the board of directors in respect of their role in the controlled enterprises is broken down
as follows:
(in €thousands)
Description ARCHOS SA ARCHOS Inc ARCHOS UK Total
Remuneration and assimilated items 175 55 130 230
Pension commitments 9 0 0 9
Advances 0 0 0 0
Total 184 55 130 239
Note 25 – Country risk
Nil
20.1.3.5 Report submitted by the Statutory Auditors on the consolidated financial statements au
December 31, 2003
Dear Shareholders,
Pursuant to the engagement entrusted to us by your general meeting, we audited the ARCHOS S.A
consolidated financial statements for the financial year ended December 31, 2003, as attached to this
report.
The consolidated financial statements were drawn up by the Board of Directors. On the basis of our
audit, we are responsible for issuing an opinion on the said financial statements.

I - Opinion on the consolidated financial statements
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CHAPTER 20
We conducted our audit in accordance with the auditing standards generally applicable in France.
These standards require that we plan and perform the audit in order to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the financial statements’ presentation. We believe that
this audit provides a reasonable basis for this opinion.
We certify that the financial statements referred to above give a true and fair picture of the assets,
financial position and results of the companies included in the scope of consolidation.
II - Justification of our assessments
In accordance with the provisions of Article L. 225-235 of the French Commercial Code concerning the
justification of our assessments, as introduced by the Financial Safety Act of
1 August 2003 and applicable for the first time to this financial year, we hereby inform you of the
following:
It is indicated under note 1-10, that the revenues recognition methods are in accordance with
accounting principles generally applied in France, i.e: the receivable arises upon the exchange of
consents and becomes certain as to its principle and amount upon the transfer of title. In such
event, the receivable is recognised as it becomes certain. The Company may have to record
product returns or retroactive discounts giving rise to the issuance of credit notes after the initial
sale. Companies from the ARCHOS Group value returns and likely future discounts on contractual
and statistical bases and recognise credit notes to be issued in the corresponding amounts. On
the basis of data available to date, our assessment of these returns is based on experience and
on tests carried out by Management in order to assess the same, and on a review of subsequent
events corroborating the estimate.
As indicated in Note 6, the ARCHOS S.A. inventories are valued throughout the year in US
dollars, taking into account the fact that an extremely material part of the purchases is made in the
said currency. Therefore, as of December 31, 2003 and December 31, 2002, inventories were
converted into euro by using the USD average translation rate over the period corresponding to
the average holding of the inventories. Delivery costs directly attributable to each product
(production labour, transportation and commissions on purchases, freight forwarders’ fees, taxes,
etc.) are integrated overall into inventories on the basis of actual expenses recorded during the
year and divided by the amount of the purchases. In the event that a product’s cost exceeds its
sale price, an inventories impairment provision is recognised in an amount corresponding to the
difference between these two amounts. Inventories having a low turnover or a high risk of nonutilisation
in the future give rise to the recognition of an inventories impairment provision. Our work
consisted in assessing the data and assumptions on which these estimates are based, in revising
the calculations made by the Company, in comparing the accounting estimates for earlier periods
with corresponding actual expenditures and in reviewing the procedures for the approval of these
estimates by Management.

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CHAPTER 20
As indicated in note 11, an inventory risk provision in the amount of €1,100,000 was recognised in
order to cover the two risks below: A risk provision of €600.000 was set aside on the value of
inventories of excess components as of December 31, 2003. Indeed, at the end of financial year
2003, the Company updated its product plan and the transition phases between existing and
future models. In order to concentrate the range on products generating the best volumes and the
strongest margins, it was decided to discontinue more quickly certain existing models. In this
respect, certain components present in the inventory risk ceasing being consumable in full after
the stoppage of production of these products. Also, a €500.000 risk provision was set aside in
respect of production components. From the end of 2002, ARCHOS initiated the introduction of an
ERP that shall cover all financial and operating functions, including procurement, production and
inventories. The introduction of this system will allow for a much more detailed and prompt
monitoring of inventories, manufacturing costs and sales per product and must allow for a
monitoring of the margin improvement program. The inventory management module (in units and
in value) was introduced at the beginning of 2004 and led the Company to make certain
adjustments. On the basis of the data available to date, our assessment of the provisions is based
on the analysis of the processes set up by the Company in order to identify and assess such risk.
As indicated in note 1-8, deferred taxation is determined according to the "variable deferment"
method and in connection with the "extended definition" and results from the timing difference
between the expenses and revenues used for the preparation of the consolidated financial
statements and the expenses and revenues used for the calculation of the tax due by each
affiliate. As of December 31, 2003, deferred tax assets related to tax loss carryovers amounted to
€4,768,000. Management decided to maintain such assets on the balance sheet as they should
be recoverable in the near future.
In connection with our assessments, we ensured that the above estimates were reasonable and
material. The assessments so made form an integral part of our approach for the audit of the
consolidated financial statements, taken as a whole and thus contributed to our opinion expressed,
without any reservation, in the first part of this report.
III - Specific checks and information
Furthermore, we also verified the information contained in the report on the management of the
Group. We have no observation to make concerning its fairness and consistency with the consolidated
financial statements.
Made in Paris, on 1 June 2004
Frédéric Bitbol
The Statutory Auditors
Members of the Paris Regional Professional Association
PricewaterhouseCoopers Audit
Vincent Gaide

20.2 IFRS
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CHAPTER 20
Please refer to notes 29 et seq. or the consolidated financial statements as of December 31, 2005.
20.3 Dividend
The Company did not pay any dividend to date and does not intend, as of the date of this Reference
Document, to pay any dividend in the near future.
20.4 Judicial and arbitration procedures
Sisvel
ARCHOS and Sisvel, an Italian company, are currently parties to court proceedings. This litigation
focuses on industrial property rights contained in the Company’s products. SISVEL considers that
ARCHOS is using three of its European patents covering the encryption and decoding technology
used for the MP3 format.
ARCHOS pays each year all of the royalties due in relation to license agreements granting it the right
to use the technologies licensed by its commercial partners. As regards the MP3 products, ARCHOS
executed a license agreement, in respect of which it pays each year royalties to Thomson, owner of
the MP3 technology.
In this respect, ARCHOS, as well as certain industrial users of the MP3 format, asked for an
assessment by an expert in order to determine the validity of the said patents.
In a dispute on the merits with the Sisvel company, ARCHOS also initiated legal action against Sisvel
in France.
Smartdisk
Smartdisk Corporate Communications is a US company specialised in data storage media sold to
consumers in the United States. ARCHOS and Smartdisk are currently parties to legal proceedings
before a Texas court.
The dispute, which is currently at its preliminary phase, covers the alleged violation of Smartdisk’s
intellectual property rights and more specifically the use of its US patent covering a technology
allowing for the transfer and viewing of photo files by certain ARCHOS products through data transfers
relying on a memory card system.
Texas courts have scheduled the date of the trials and hearings for April 2007.
ARCHOS has not to date been subject to any court order based on patent infringement and entered
by any European or even by any US court.

20.5 Material changes to the commercial and financial position
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CHAPTER 20
The forced conversion of the second 25% instalment of the convertible bonds was requested by the
Company from EchoStar. On 14 March 2006, date on which the Board of Directors approved the
financial statements for financial year 2005, the conversion process is still pending and has not yet
given rise to the corresponding capital increase.
The forced conversion of the 2 nd 25% installment of the convertible bonds was requested from
EchoStar by the Company and executed on April 14, 2006 by return receipt from EchoStar.
In a letter dated March 3, 2006, EchoStar informed the Company of its intention to convert another
25% installment of the convertible bonds in addition to the forced conversion. For this reason, the
Company waived its right concerning the forced conversion of the third tranche. Thus, the conversion
was executed on April 14, 2006 by return receipt from EchoStar.
On the date of this document, 3 25% tranches have been converted.
The 4 th tranche can be converted only at EchoStar's initiative. EchoStar may convert the
remaining 553,040 bonds at any time until maturity. Fees paid to the statutory auditors for the
financial year ended
December 31, 2005
(in €not including VAT) Price Waterhouse
Coopers
Audit
Statutory auditorship, certification, review of the
individual and consolidated financial statements
% Fréderic Bitbol %
108 85% 52 60%
Incidental engagements 3 3% 5 6%
Other services
Accounting, financial and organisation advice
Legal, tax and labour
Information technology
Internal audit
Sub-total 111 88% 57 66%
Others 15 29
Sub-total 15 12% 29 34%
TOTAL 126 100% 86 100%
Other services consists of fees for time spent following the issue of the EchoStar bond and
the time spent for the CENA control.

Chapter 21. Additional Information
21.1 Capital stock
21.1.1 Stock exchange listing
21.1.2 Amount of capital subscribed with breakdown by category of shares
21.1.3 Number and principal features of shares not representingcapital
21.1.4 Shares held by the Company or its subsidiaries (number, book value,
par value)
21.1.5 Convertible or exchangeable transferable securities or with
equity warrants attached
21.1.6 Information on rights of acquisition and/or obligations attached to capital
subscribed not paid up
21.1.7 Options
21.1.8 History of the capital stock
21.2 Deed of incorporation and by-laws
21.2.1 Corporate purpose
21.2.2 Provisions concerning members of the Company’s administration,
management and supervisory bodies.
21.2.3 Rights, privileges, and restrictions attached to each class of
shares in existence
21.2.4 Procedures required to amend shareholder rights
21.2.5 General Meetings of Shareholders (convening, etc.)
21.2.6 Provisions that have the effect of delaying, deferring or
preventing a change in its control
21.2.7 Provisions defining the thresholds in excess of which any
holding must be reported
21.2.8 Conditions governing changes in the capital
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21 ADDITIONAL INFORMATION
21.1 Capital stock
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CHAPTER 21
The capital is €3,932,124 fully paid up, composed of 7,864,248 shares with a par value of €0.50,
including one preference share issued on March 29, 2005.
21.1.1 Stock exchange listing
The ARCHOS share is listed on Eurolist by Euronext, Compartment C under ISIN code:
FR0000182479.
The Company has not issued any other negotiable financial instrument.
21.1.2 Amount of capital subscribed with breakdown by category of shares
The capital totals 3,932,124 euros and is composed of 7,864,248 shares; all these shares have been
issued and are fully paid up. Each share has a par value of €0.50 and they are all of the same class
except for one class P preference share (see section 21.2.3 of the Reference Document).
21.1.3 Number and principal features of shares not representing capital
None.

21.1.4 Shares held by the Company or its subsidiaries (number, book value, par value)
None.
21.1.5 Convertible or exchangeable transferable securities or with equity warrants attached
At its Extraordinary General Meeting of Shareholders of March 29, 2005, the Company
decided to issue 2,212,158 convertible bonds to EchoStar. The features and terms of this bond issue,
which were described in a Memorandum approved by the Autorité des Marchés Financiers (AMF) on
March 25, 2005, are as follows:
Total borrowing: €7,000,000
Number of convertible bonds issued: 2,212,158
Par value per convertible bond: €3.16
Issue price per convertible bond: €3.16
Conversion parity: One convertible bond for one share
Maturity: 10 years
Interest rate: 5% per annum
This issue was described in a Memorandum approved by AMF under number 05-182 on March 25,
2005. This Memorandum can be viewed on AMF’s website: www.amf.france.org.
Under the terms of the issue contract, the Company is entitled to oblige bondholders to convert or
redeem prior to term their convertible bonds in three successive installments of 25% each, subject to
the following conditions:
− In respect of the first 25% installment of the bonds: if the Company’s average share
price weighted for volumes reaches and remains at or above five (5) euros for ninety
(90) consecutive stock market trading days;
− In respect of the second 25% installment of the bonds: if the Company’s average
share price weighted for volumes reaches and remains at or above ten (10) euros for
ninety (90) consecutive stock market trading days;
− In respect of the third 25% installment of the bonds: if the Company’s average share
price weighted for volumes reaches and remains at or above fifteen (15) euros for
ninety (90) consecutive stock market trading days;
The Company is prohibited from demanding the conversion or redemption of only one 25% installment
of the bonds.
To date, 25% of the bonds have been converted to shares (see section 20.5 of the
Reference Document).
The forced conversion of the second 25% installment of the convertible bonds was requested by the
Company from EchoStar. On March 14, 2006, when the Board of Directors approved the financial
statements for fiscal year 2005, the conversion process is still pending and has not yet given rise to
the corresponding capital increase.
In a letter dated March 3, 2006, EchoStar informed the Company of its intention to convert another
25% installment of the convertible bonds in addition to the forced conversion. For this reason, the
Company waived its right concerning the forced conversion of the third tranche. Thus, the conversion
was executed on April 14, 2006 by return receipt from EchoStar.
On the date of this document, 3 25% tranches have been converted.
The 4 th tranche can be converted only at EchoStar's initiative. EchoStar may convert the remaining
553,040 bonds at any time until maturity.
Rapport Annuel – Document de Référence
191

Date
Dec.
28,
2000
Dec.
28,
2000
May
15,
2001
Aug.
13,
2001
Feb.
14,
2002
May 3,
2002
March
29,
2005
21.1.6 Information on rights of acquisition and/or obligations attached to capital subscribed not paid
up
None.
21.1.7 Options
None.
21.1.8 History of the capital stock
Table showing changes to the capital stock in the last five years
Type of
transaction
Reduction in
par value of
shares from
FRF200 to
FRF2
Cash share
issue
Conversion of
capital to euros
and
capitalization of
reserves
Increase in par
value of shares
and allotment
of 15 bonus
shares for one
old share (by
capitalization of
share premium)
Flotation on
Second Marché
and cash share
issue
Cash share
issue by
exercise of
BSPCE*
Cash share
issue of one
preference
share
Change in
capital
0
FRF141,200
€1,635.69
€2,465,414
€529,616.50
Share premium
0
FRF47,866,800
0
0
€14,193,722
Rapport Annuel – Document de Référence
192
Number of
new
shares Number of
shares
247,500
70,600
0
4,809,000
1,059,233
250,000
320,600
320,600
5,129,600
6,188,833
Capital after transaction
Par
value
FRF2
FRF2
€0.31
€0.50
€0.50
Amount
FRF500,000
FRF641,200
€99,386
€2,564,800
€3,094,416.50
€8.148 €97,450.08 16,296 6,205,129 €0.50 €3,102,564,50
€0.50
€99.50
1
6,205,130
€0.50
€3,102,565

Oct.
12,
2005
April
14,
2006
Capital
increase by
conversion of
part of the
convertible
bonds held by
EchoStar
Capital
increase by
conversion of
part of the
convertible
bonds held by
EchoStar
€276,519.50
21.2 Deed of incorporation and by-laws
21.2.1 Corporate purpose
€1,471,083.74
Rapport Annuel – Document de Référence
193
553,039
6,758,169
€0.50
€3,379,084.50
€553,039.50 €2,946,960.50 1,106,079 7,864,248 €0.50 €3,932,124
Pursuant to Article 3 of the Company’s by-laws, the Company’s purpose is:
The design, manufacture, marketing, and distribution of information technology and
electronic products.
And generally, all financial, commercial, industrial, movables or real estate transactions that may be
associated directly or indirectly with the corporate purpose.
21.2.2 Provisions concerning members of the Company’s administration, management and
supervisory bodies.
The Company’s administration and management regulations are defined in Articles 9 and 10 of the
Company’s by-laws, worded as follows:
ARTICLE 9 – BOARD OF DIRECTORS
“1 The Company is managed by a Board of Directors composed of nine members, the
physical individuals of which must be under the age of 85 years. The shareholder owning the
preference share is represented on the Board of Directors by three directors.
2. The directors appointed by the Ordinary General Meeting of Shareholders during the life of the
Company have a mandate of six years.
In order to ensure that the shareholder owning the preference share is represented on the Board of
Directors, three of the nine directors must be chosen by the Company’s Ordinary General Meeting of
Shareholders from among the candidates appearing on a list presented by the shareholder owning the
preference share.
In the event of the resignation, revocation or death of one of the directors appointed from among the
candidates presented by the shareholder owning the preference share, all
practical or necessary measures shall be taken – notably the convening of and deliberation by the
competent bodies – in order to ensure that the representation of the shareholder
owning the preference share is continued through one-third of the members of the Board of Directors
as quickly as possible. The appointment of the new director shall be made either by co-opting from
within the Board of Directors at the earliest opportunity following notification by the shareholder owning
the preference share of its list of candidates.
Each director must own at least one share.

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CHAPTER 21
3. Fees and expenses (especially reasonable expenses for travel and lodging) incurred by the
directors in connection with their mandate (meetings of the Board of Directors, performance of
engagements assigned by the Board of Directors) shall be the entire responsibility of the Company.
The amount of directors’ fees awarded to directors shall be determined by the Company’s
shareholders’ general meeting and the directors’ fees shall be distributed equally between the
directors.
4. The Board of Directors shall exercise the authority assigned to it by law and these by-laws.
For this purpose, the Board shall meet, as often as required by the Company’s activity, at the
registered office or at any other place stated on the notice of convocation from its Chairman, sent by
any means, even verbally, with at least five (5) business days’ advance notice.
The decisions of the Board of Directors are taken under the legally stipulated conditions for a quorum,
with the additional specification that the Board of Directors may not validly
deliberate unless at least one of the three directors representing the shareholder owning the
preference share is present or considered as such for the purposes of establishing a quorum. The
Board of Directors may nevertheless validly deliberate in the event that, provided the members were
convened with a notice period of at least five (5) business days, none of the aforementioned three
directors is present or deemed as such for the purposes of establishing a quorum.
Directors participating in the meeting of the Board of Directors by means of
videoconferencing, the nature and application provisions of which are determined by decree, shall be
deemed to be present for the calculation of a quorum and a majority except in cases where this mode
of participation is excluded by law. Directors may participate in meetings of the Board of Directors by
means of telephone conferencing, although they cannot then be deemed to be present for the
calculation of a quorum or majority.
Decisions of the Board of Directors are taken under legally defined majority conditions.
However, it is specified that the following decisions may only be validly taken by the
competent bodies after approval by the Board of Directors voting unanimously with all its members
present or represented minus one vote:
a) Any proposal to amend these by-laws or the by-laws of any of the Company’s subsidiaries;
b) Any transfer or disposal of, or deed of arrangement or constitution of a guarantee on any material
asset of the Company or of one of its subsidiaries, or any transfer, disposal or deed of arrangement for
a price below the market value of the asset in question;
c) Any acquisition of an interest or granting of a loan (whether this involves a new loan or the
extension of a line of credit) in favor of a third party by the Company or any of its
subsidiaries, for an amount exceeding €500,000;
d) Any investment, capital acquisition or lease by the Company or any of its subsidiaries, for an
amount exceeding €500,000, unless this is included in the annual budget;
e) Any borrowing by the Company or any of its subsidiaries (not appearing in the annual budget) or
any line of credit for the Company or any of its subsidiaries for an amount
exceeding €500,000;

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CHAPTER 21
f) The foregoing provisions do not prevent the Company’s governing bodies (without the need for them
to seek prior approval from the Board of Directors ruling by qualified majority) from:
a) Granting, during the normal course of business, customer credits not exceeding
€2,000,000; and
b) Drawing on short-term lines of credit, within the limits defined in the annual budget
of the Company and its subsidiaries;
g) Approval of the annual budget of the Company and its subsidiaries. It is specified that if the annual
budget of the Company and its subsidiaries is not approved at the first meeting of the Board of
Directors to which it is submitted, an independent expert shall be appointed by the President of the
Commercial Court of Evry ruling on the application presented by the Chief Executive Officer of the
Company or by the party bringing the case in order to resolve the disagreement in the best interests of
all the shareholders of the Company. The independent expert shall deliver his report on the annual
budget as quickly as possible and, preferably, within 60 days of his appointment. The annual budget
thus decreed shall be firm and final and no appeal can be made;
h) Any decision coming under the law of businesses in difficulty (Part One or Part Two of the Sixth
Book of the French Commercial Code), except for those that must be taken by the Chairman or the
Chief Executive Officer of the Company by law;
i) Appointment of the Chief Executive Officer of the Company and its subsidiaries (or of any agent to
whom similar or equivalent functions may be entrusted), with the exception of the mandate of the
Company’s Chairman and Chief Executive Officer entrusted to Mr. Henri
Crohas until the date of the Company’s shareholders’ general meeting ruling on the financial
statements for the year ending December 31, 2008 and any renewal of this mandate at its expiration;
j) Adoption of any significant employee stock option incentive or profit-sharing scheme, or any
significant amendment to such schemes;
k) Any hiring by the Company or any of its subsidiaries of personnel with an annual salary exceeding
€150,000 or any increase taking the annual compensation for an employee to over €150,000; except
for an increase in the compensation to Mr. Henri Crohas decided by the Board of Directors in 2005 in
order to align his compensation with market norms;
l) Appointment of independent auditors for the Company and its subsidiaries;
m) Approval of the Company’s biannual research plan in the field of personal video readers connected
to television decoders by satellite or cable;
n) Approval of any closure of, or any significant change to, the activity or line of products
related to personal video readers connected to television decoders by satellite or cable
(except for any closure of a “loss making” activity or product line after the Company has made
reasonable commercial efforts to make the relevant activity or product line profitable);
o) Any significant change to the insurance cover of the Company and its subsidiaries;
p) The declaration or payment by the Company or any of its subsidiaries, of dividends or any other
shareholder distribution;
q) Any conclusion or termination by the Company or any of its subsidiaries of contracts
involving a sum exceeding €2,000,000 or concerning assets of a value exceeding €2,000,000;

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r) Any renunciation of court proceedings concerning the Company or any of its subsidiaries for an
amount exceeding €500,000;
s) Any material change to the accounting principles applied by the Company and its
subsidiaries, except for any change required due to an amendment to applicable law.
Any proposed decision regarding one of the matters specified in clauses (a) to (s) above must be
brought to the attention of the directors prior to the meeting of the Board of Directors with a reasonable
notice period that may not under any circumstances be less than
5 business days.
ARTICLE 10 – GENERAL MANAGEMENT
1. The Company is managed by a Board of Directors composed of nine members who exercise the
authority accorded to them by law.
2. For the term and under the conditions stipulated by law, the Board of Directors appoints a Chairman
from among its members. The Chairman of the Board of Directors organizes and directs the work of
the Board, and presents a report thereon to the shareholders’ general meeting. He supervises the
proper functioning of the Company’s committees and, in
particular, ensures that the directors are able to carry out their duties.
3. The general management of the Company is performed, under its responsibility, either by the
Chairman of the Board of Directors or by another individual appointed by the Board of Directors voting
under the majority conditions defined in Article 9 of these by-laws, and
holding the title of Chief Executive Officer, who cannot be a director.
The Board of Directors chooses, at the time of the appointment of the Chairman or during the course
of his mandate, to adopt one or other of the two methods of exercising general
management.
When the general management of the Company is performed by the Chairman of the Board of
Directors, the following provisions related to the Chief Executive Officer are applicable to him.
The shareholders and third parties shall be informed of this choice under the conditions
defined by decree of the Conseil d'Etat.
On the proposal of the Chief Executive Officer, the Board of Directors, under the conditions defined in
Article 9 above, may appoint one or more individuals charged with assisting the Chief Executive
Officer, having the title of Deputy Chief Executive Officer.
The number of Deputy Chief Executive Officers shall not exceed 5.
The Chairman, Chief Executive Officer and Deputy Chief Executive Officers must be under the age of
85.
4. The Chief Executive Officer is invested with the fullest powers to act in all circumstances in the
name of the Company. He exercises these powers within the confines of the corporate purpose and
subject to those that the law and these by-laws expressly attribute to shareholders’ general meetings
and to the Board of Directors.
He represents the Company in its relations with third parties.

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In agreement with the Chief Executive Officer, the Board of Directors, within the conditions defined in
Article 9 above, determines the extent and term of the powers conferred on the Deputy Chief
Executive Officers. The Deputy Chief Executive Officers have the same powers as the Chief Executive
Officer with regard to third parties.
In the context of the internal organization of the Company, the above powers may be limited by the
Board of Directors,
21.2.3 Rights, privileges, and restrictions attached to each class of shares in existence
With the exception of the preference share that is the subject of a specific sub-section in this
Reference Document, all the other shares of the Company adhere to an identical regime and conform
to the rights and obligations specified in the French Commercial Code.
A specific provision in Article 14 of the Company’s by-laws deals with the rules for the transfer of
shares of the Company.
“The shares of the Company may be freely transferred.
Until such time as the convertible bonds issued by the Company on March 29, 2005 have all been
converted, the preference share may only be transferred to a wholly-owned subsidiary of the holder(s)
of the said convertible bonds or to a third party with the Company’s
agreement.
After conversion of all the convertible bonds issued on March 29, 2005, the preference share may only
be transferred by its holder to the transferee of the block of securities (i) made up of all the shares of
the Company held by the former on the date of that transfer and (ii) resulting from the conversion of
the convertible bonds.”
Furthermore, the Company has issued a preference share of a particular class distinct from all the
other shares.
This preference share is governed by a very specific regime insofar as it gives rise to an
entire set of prerogatives for its holder due to the simple fact of its ownership.
Accordingly, it is stipulated in Article 7 of the by-laws concerning the capital stock:
“The preference share may be converted to an ordinary share of the Company, at any time, on the
simple decision of the shareholder owning the preference share.
In addition, the preference share shall be automatically converted to an ordinary share of the
Company if the stake of the shareholder owning the preference share falls below the threshold of 10%
of the capital and voting rights of the Company (taking account of all the transferable securities
convertible to shares of the Company held by the bearer of the preference share), as long as the
dilution in question has been performed in accordance with the agreements relating to the investment
of the shareholder owning the preference share and the agreements relating to the convertible bonds
issued by the Company on March 29, 2005. Lastly, the preference share shall be automatically
converted to an ordinary share of the Company in the event of the repayment of all the sums owed by
the Company to holders of convertible bonds issued by the Company on March 29, 2005.
If so required, it is specified that the preference share shall not be automatically converted to an
ordinary share of the Company if the Company opposes the early redemption request presented by
the holders of the convertible bonds issued on March 29, 2005 on the fifth anniversary of the issue of
the said convertible bonds.
The preference share confers on its holder the rights described in these by-laws.”

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The aforementioned rights notably include the possibility of appointing to the Board of Directors three
directors whose mission is to represent the interests of the holder of this preference share in the
management of the Company and for taking the decisions previously stated in Articles 9 and 10 of the
by-laws. (see 2.1.2.3 of this Reference Document)
The preference share also gives its holder the right to conduct an audit, the terms of which are
specifically defined in Article 16 entitled: “Access to information and the right to conduct an audit”.
This clause is worded as follows:
“1. Privileged and enhanced access to Company data is granted to the shareholder owning the
preference share. In this respect, the documents and information listed below shall be sent to the
shareholder owning the preference share under the following conditions:
A copy of all the documents registered with the Autorité des Marchés Financiers or any
other administrative authority, as soon as possible after their registration;
As soon as possible, the annual budget of the Company and its subsidiaries;
As soon as possible, and in any case before the final date for filing the Company’s audited
financial statements with the Autorité des Marchés Financiers, the Company’s audited
consolidated financial statements (balance sheet, income statement, notes to the financial
statements) for the year just ended (the "Audited Financial Statements").
The Audited Financial Statements shall be prepared in accordance with generally accepted
accounting principles in France accompanied by a reconciliation with generally accepted
accounting principles in the United States ("US GAAP"), and must also be accompanied by a
certificate issued by the Company’s auditors.
The Audited Financial Statements shall be prepared according to principles consistent with the
principles applied during the preparation of the annual financial statements for previous years,
and must be faithful and give a true and fair view of the consolidated financial situation of the
Company and of the results of the Company’s operations. The Company shall do its utmost to
send these Audited Financial Statements to the shareholder owning the preference share
within the period of time compatible with the latter’s financial communication constraints;
As soon as possible and in any case within 10 business days from the end of a given month,
the unaudited monthly consolidated balance sheet and the monthly income statement of the
Company and its subsidiaries (the "Monthly Accounts"). The Monthly Accounts shall be
prepared in accordance with IFRS, accompanied by a quarterly reconciliation with US GAAP;
The Monthly Accounts shall be prepared in accordance with the rules and methods previously
applied by the Company, and must be faithful and give a true and fair view of the consolidated
financial situation of Company and of the results of the Company’s operations for the relevant
month;
All other Company accounts or other financial or operational data that the shareholder owning
the preference share could reasonably require to be communicated; and
The minutes of the meetings of the Board of Directors and shareholders’ general meetings of
the Company, within ten days from the date of holding the said meetings.

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2. The shareholder owning the preference share shall have a right of audit that may be exercised
under the following conditions:
The representatives of the shareholder owning the preference share (corporate officers, employees,
auditors, agents and consultants) may, with reasonable advance notification sent to the Company,
have access, during business hours, to the offices, production facilities and stores of the Company
and its subsidiaries and to the books and registers of the Company and its subsidiaries, and may
interview the representatives of the Company and its subsidiaries (corporate officers, employees,
auditors, agents and consultants) who have information relating to the Company and its subsidiaries.
The representatives of the Company and its subsidiaries shall also promptly send to the
representatives of the shareholder owning the preference share any information and financial and
operating data related to the Company and its subsidiaries that the latter may reasonably request.
In addition, once a year, the shareholder owning the preference share shall be entitled to have an
audit conducted by an approved auditor to assess the proper execution of the agreements relating to
the investment of the shareholder owning the preference share.”
21.2.4 Procedures required to amend shareholder rights
The by-laws do not stipulate any particular regulation that varies from standard corporate law.
ARCHOS therefore has no special clause within the Company for amending shareholder rights.
21.2.5 General Meetings of Shareholders (convening, etc.)
The procedures for holding general meetings of shareholders and the regime applicable to them are
set forth in Article 11 of the Company’s by-laws:
“General Meetings of Shareholders are convened and business is conducted as stipulated by law.
Meetings are held at the registered office or any other location specified in the Notice of Meeting.
For the calculation of a quorum and majority, shareholders are deemed to be present if they attend the
Meeting by videoconferencing or by another means of telecommunication that enables them to be
identified, and for which the nature and conditions of application are determined by decree.
The decision of a general meeting (i) to amend the rights relating to the preference share issued by
the Shareholders General Meeting of March 29, 2005 (as concerns the rights described in the present
Article 11), (ii) to buy back this preference share or (iii) to convert it to an ordinary share outside the
cases specified in Article 7 of the by-laws, shall only become firm and final after the approval of the
holder of the preference share.”
21.2.6 Provisions that have the effect of delaying, deferring or preventing a change in its control
None.

21.2.7 Provisions defining the thresholds in excess of which any holding must be reported
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The statutory provisions defining the thresholds in excess of which any holding must be reported are
set forth in Article 13 bis of the Company’s by-laws and formulated as follows:
“Under the conditions prescribed by legal and regulatory provisions, every shareholder is bound to
inform the Company and the Autorité des Marchés Financiers of the number of shares or voting rights
(when the number or distribution of voting rights does not correspond to the number or distribution of
the shares) that he comes to own representing more than one-twentieth, one-tenth, one-fifth, onethird,
one-half or two-thirds of the capital of the Company or any other thresholds stipulated in Article
L.233-7 of the French Commercial Code should this be amended in the future.
Shares exceeding the thresholds that should have been declared shall be deprived of their voting right
as prescribed by law.
The same obligation of disclosure is applicable when the foregoing thresholds are crossed in the
opposite direction.”
21.2.8 Conditions governing changes in the capital
Article 15 of the by-laws on changes in the capital specifies that:
“The capital stock may be reduced or increased by any legally authorized means.
A capital stock increase or reduction shall be made without reference to the existence of fractional
shares, and where applicable, shareholders should make their own arrangements for the necessary
acquisition or transfer of rights.
Generally, whenever it is necessary to hold a certain number of shares for the exercise of a given
right, it is the responsibility of the shareholders of isolated shares or of an insufficient number of
shares, to make their own arrangements for grouping the necessary shares.”

Chapter 22. Significant contracts (To which all members of
the group are party)
22.1 Canon Bretagne contract
22.2 Wong contract
22.3 Namtaï contract
22.4 Commercial agreement with EchoStar
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22 SIGNIFICANT CONTRACTS (TO WHICH ALL MEMBERS OF THE GROUP ARE PARTY)
In 2005, ARCHOS Group increased its efforts to reduce its dependence on sub-contractors.
The main manufacturing sub-contracting contract was signed with Canon Bretagne and covers two
aspects. The first concerns the assembly of some ARCHOS products in France and the second,
ancillary to the first, concerns repairs and after-sales service. This contract contains a financial clause
under which ARCHOS sells the parts for assembly to Canon Bretagne FOB Hong Kong and Canon
Bretagne resells the finished products are assembly to ARCHOS with a term payment.
Two other contracts have been signed with manufacturers with operations in China: Namtaï and
Wong.
Accordingly, ARCHOS now has three new sub-contractors following the signing of these contracts,
thereby reducing the risk of dependence on a single sub-contractor.
Assembly of the Company’s products is performed in Wong and Namtaï by two Chinese
subcontractors located in the zone known as Shenzhen, north of Hong Kong.
Final assembly, imports and repairs of the video and music players designed for the European market
is managed by Canon Bretagne.
22.1 Canon Bretagne contract
Co-contractor: Canon Bretagne
Corporate status: A French société par actions simplifiée (simplified joint-stock company)
with capital of €28,178,760
Registered office: at Liffre, (35) France
Registered in the Rennes Trade and Companies Register (RCS) under
number 327 991 774
Purpose: Definition of the terms and conditions of the blanket agreement for the supply by
Canon Bretagne of products for ARCHOS
ARCHOS sells Canon the parts and components which it requires for supply, FOB Hong Kong, for
payment upon receipt of the invoice. The invoice and payment are in US Dollars.
Canon sends ARCHOS monthly invoices covering:
the invoice in US Dollars for the purchase cost FOB of the parts, components and subassemblies
purchased from ARCHOS or other suppliers required by ARCHOS;
the assembly price of the products delivered in the month, in Euros, "DDP INCOTERM
2000";
the management costs for carrying the inventory;
the reinvoicing of the costs for loading, unloading, shipping, insurance, taxes and
customers for the supply of the parts and components from ARCHOS or suppliers
required by the Company, and for the shipment of the finished products.

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The contract includes an obligation to buy back the inventory held by Canon Bretagne at the request
of ARCHOS.
The audio/video products for the European market have been assembled by Canon Bretagne since
July 2005 under this contract.
22.2 Wong contract
Co-contractor: Wong’s Electronics
Corporate status: Limited company
Registered office: Wong’s Industrial Centre, 180 Wai Yip Street, Kwun Tong, Kowloon, Hong
Kong (China).
Purpose: Definition of the terms and conditions of the blanket agreement for the supply by
Wong of products for ARCHOS
22.3 Namtaï contract
Co-contractor: Namtaï Electronic
Corporate status: Limited company
Registered office: Gusu Industrial Estate, XIxiang, Baoan, Shenzhen (China)
Purpose: Definition of the terms and conditions of the blanket agreement for the supply by
Namtaï of products for ARCHOS
22.4 Commercial agreement with EchoStar
EchoStar and the Company signed a commercial agreement in December 2004. Under the terms of
this agreement, the Company undertakes to develop and sell to EchoStar audio-video players
compatible with satellite decoders used by Dish Network on which subscribers can record programs
broadcast.
22.5 Partnership with CANAL +
The Company and Groupe CANAL+, a leader in pay television in France, signed an exclusive
memorandum of understanding on November 24, 2005 for the production, promotion and distribution,
in a limited series, of a film player, the AV 700 CANAL+ and CanalSat, which allows CANAL+ and
CanalSat subscribers to record their programs directly from the program guide.
On March 15, 2006, ARCHOS and Groupe CANAL+ announced an extension of their partnership
agreement. This second phase of the partnership between the two companies is to allow films
downloaded from CANALPLAY to be played on the ARCHOS players.
Thanks to this initiative, the first of its kind in Europe, it is now possible to legally download the latest
movies onto a computer from the CANALPLAY website, and then to transfer them to an ARCHOS
player to watch them whenever and wherever the consumer wants, on the player or on a television,
with unequaled video quality. The content license is automatically transferred to the player, offering
the same level of protection as on the PC. The new offerings in the CANALPLAY video catalogue will
be made compatible with the ARCHOS video players (the AV 500, AV 700, Gmini 402 and 402
Camcorder models). Joint promotional offers will be proposed in the near future both on the
CANALPLAY and ARCHOS sites and in stores to allow consumers to discover this capability.

22.6 Other agreements.
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ARCHOS has also recently signed a similar partnership agreement in the United States in the VOD
(Video on Demand) market with CinemaNow. This agreement lets CinemaNow customers download
and watch films over the entire ARCHOS audio-video line.
Moreover, ARCHOS has recently signed an agreement with AlloCiné, the French leader in Internet
film information, to allow ARCHOS owners to benefit from the program of AlloCiné Podcast movie
trailers. This program, which is updated every Wednesday, lets them download for free all trailers for
new releases for the week and the previews for future theater movies.
Apart from the above-mentioned contracts, ARCHOS has not, in the two years preceding the date of
this Reference Document, signed any other significant contracts as defined by regulation 808/2004 of
the European Community. Its other contracts are contracts concluded in the normal course of the
Group’s business.

Chapter 23. Information from third paties,
Declarations by experts and declarations of interest
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CHAPTER 23
23 INFORMATION FROM THIRD PARTIES, DECLARATIONS BY EXPERTS AND
DECLARATIONS OF INTEREST
None.

Chapter 24. Documents accessible to the public
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24 DOCUMENTS ACCESSIBLE TO THE PUBLIC
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CHAPTER 24
The by-laws, minutes of meetings and all the Company’s corporate and legal documents may be
consulted at the Group’s registered office at 12, Rue Ampère, ZI Igny, 91430 Igny and on the
Company’s website at the following address: www.ARCHOS.com

Chapter 25. Information on equity interests
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25 INFORMATION ON EQUITY INTERESTS
See Chapter 7 of the Reference Document.
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CHAPTER 25

APPENDIX
GLOSSARY
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APPENDIX: GLOSSARY
AAC
Advanced Audio Coding: audio coding used by APPLE, with superior compression to that of MP3.
AV
Audio-Visual.
AVI
Audio-Visual Interleave is a file format designed to store audio and video data.
AUDIO READER
A program that converts the 0 and 1 of an audio file into an audio signal.
AVOS
Operating system integrated in all ARCHOS pocket audio and video lines capable of supporting the
full range of codecs, DRM and synchronization systems with PCs currently on the market.
BPS
Abbreviation for bit per second. A unit of measurement used to express the quantity of data
transmitted by a channel of communication at a time t. 1 kbps equals 1024 bps. 1 Mbps equals 1024
kbps. As 1 octet equals 8 bits, 1 ko/s corresponds to 8 kbps.
CODEC
(Short for coder/decoder) Algorithm enabling compression and decompression of audio and video files
without loss of a considerable amount of data. Once a file has been compressed by a codec such as
MP3 or RealAudio, it is smaller and easier to transmit on the web, but retains a sound quality true to
the original.
COMPRESSION AUDIO
Consists of keeping the sound volume within audible limits while reducing the loudest sounds and
increasing the quietest, depending on the level of compression defined. Overall, it helps limit volume
differences in a song.
DATA THRUPUT RATE
The quantity of data transmitted via a communication channel within a given interval of time. The
thruput rate of an Internet connection is generally expressed in kbps (kilobits per second). The thruput
rate of an ADSL line can be 1,024 kbps per example on reception. On reception, this value refers to
the speed of data transmission from the access provider to the Internet user’s computer. The thruput
rate on sending (ascendant rate) reflects the quantity of data transferred from the internet user’s
computer to his access provider.
DRM
Digital Rights Management is a secure technology that allows the copyright owner of an object
governed by intellectual property (such as an audio, video or text file) to specify what a user is entitled
to do. Generally, it is used to offer downloading without fear that the user will distribute the file freely
on the Internet.
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APPENDIX: GLOSSARY
DTT
Digital Terrestrial Television enables homes connected to a set-top box (over three-quarters of French
homes) to receive an offer of over thirty public and private, national and local channels, in digital
quality. The digital process makes it possible to show five or six channels per frequency while analog
only allows a single one, with sharper image and sound quality.
DVD R
Allows one-time recording of an image and sound from any source connected to a DVD recorder.
ENCODER
Software that converts uncompressed AIFF or WAV (Windows) files into compressed files, using a
CODEC such as MP3 or RealAudio.
FIRMWARE
Program attached to a physical medium (read-only memory) of an electronic device, such as a DVD
recorder or a router, indispensable to its functioning. It can be upgraded, giving the apparatus new
functions or better operation.
FLASH MEMORY
Type of small, flat memory with a semi-conductor used in MP3 readers, digital cameras and personal
digital assistants. It covers CompactFlash, SmartMedia and Memory Stick memories. If the price is
calculated by megaoctet, this is a very expensive form of storage.
Go
Giga octet, one billion octets.
GPS
Global Positioning System is a system of positioning by satellite. It was set up by the US Defense
Ministry and makes it possible to establish one’s position anywhere on the earth’s surface. The system
makes it possible to determine a geographic position in three dimensions, through the triangular
intersection of coordinates transmitted by several satellites.
IPTV
(Internet Protocol Television) Distribution of televised programs or videos using Internet protocol.
Telecoms operators generally offer this service at the same time as Internet access. IPTV is not then a
protocol.
MACROVISION SYSTEM
System for protection against analog copying. The video signal of a pre-recorded VHS cassette or
DVD video will be properly displayed on the televiewer, but will be deformed if recorded. This
protection only concerns analog copying (via S-Video adapter or composite).
MASS STORAGE
Storage of a very great quantity of data on a hard disk.
MPEG-2, MP3
Motion Pictures Experts Group: a family of codecs currently constituting the industry standard.
MPEG-1 is used for CD ROM and CD Video
MPEG-2 is used for DVD and TV decoders
MP3, also called MPEG-1 Layer III, is an audio codec, using intermediate technology between the
MPEG-1 and MPEG-2.

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APPENDIX: GLOSSARY
MPEG 4
Video image compression format that is much more effective than MPeg-2 that is found on
commercially available DVDs. This compression format is ideal for the high definition that it broadcasts
without taking up too much space on the vector used (satellite, cable, TNT).
As for MPeg-2, the definition of the image depends on the rate used for encoding it.
OEM
Original Equipment Manufacturer. A manufacturer selling equipment to builders and assemblers. By
extension, the products that the latter sell under their name is called OEM equipment.
PCMCIA CARD
An additional card, on sale since 1990, conforming to PCMCIA (Personal Computer Memory Card
International Association) specifications. It is a removable device, the size of a credit card, designed to
be inserted in a PCMCIA connector. PCMCIA cards can be used for a modem, fax, or network card, or
as additional memory.
PDA
Personal Digital Assistant. Primarily a diary and address book, these devices are becoming
increasingly sophisticated and now bear almost no relation to an office PC – reading an MP3 or
videos, added to which are programs that can transform them into navigation tools when linked to
GPS, for example. There are two main competing families: Palm OS and PocketPC, with a host of
additional programs for each.
PMA
Pocket Media Assistant: a new class of product, specific to ARCHOS, with multiple functions (audiovideo
walkman reader and recorder, having direct connectivity to the Internet by WiFi or Ethernet like
a PC, and access to office functionalities).
PMC
Portable Media Center: Microsoft presents a strategy that is intended to offer equipment builders an
integrated hardware and software solution covering audio, photo and video simultaneously. The
solution includes Windows Media Audio and Video (WMA and WMV), Windows Media Player,
Windows Media DRM, Windows Media Center (WMC) for TV on PC and Portable Media Center
(PMC) for audio-video walkmans. Samsung, Creative Labs, iRiver, Sanyo and ViewSonic have all
announced moves to PMC.
PWA
Protected work area.
RGB
Red Green Blue. Denotes a video signal that uses three primary colors to transport and reconstitute
an image. It is generally found on video adapters or on RCA or BNC files to link up with a monitor or
video projector. Requires a synchronization signal which takes the number of connections necessary
to four. Excellent quality of detail and color depiction.
UMTS
Universal Mobile Telecommunications System. This is a mobile phone system also called 3G
(standing for 3rd Generation). With a maximum thruput rate of 2 Mbps, it enables videoconferencing
on a mobile phone at a quality close to that of a PC. Sending video from phone to phone will become
as simple as sending SMS.

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APPENDIX: GLOSSARY
USB
Universal Serial Bus is a business standard for instant connection of external compatible devices. It
enables up to 127 devices to be connected at the same time (in theory). USB offers theoretical thruput
rate of 12 Mbps in version 1.1 and 480 Mbps in version 2.0.
VGA
Video Graphics Array is a standard display often found in PC, personal assistant and mobile
telephone environments. Standards with the VGA suffix are available according to the display
resolution (the size of image displayed). VGA resolution goes up to 480 x 640 pixels, in 16 or 256
colors, or even more, depending on the memory available. S-VGA (Super-VGA) is more sophisticated,
with resolution of up to 800 x 600 pixels, and XVGA has 1024 x 768 pixels, in 256 colors. There is also a
QVGA standard of 240 x 320 pixels.
VIDEOTEX SERVER
A server operating a system enabling on-demand visualization on a television screen of pages of
information coded in digital form and stored in a remote database.
VOD
Video on Demand is an interactive video system offered by the cable networks. The user can order
films or television programs and watch them with the same functionalities as a videotape recorder,
making it pause, fast forward or rewind at different speeds.
WiFi
Wireless Fidelity – by analogy with Hi-Fi (High Fidelity) in the audio field. Behind these four letters are
hidden a number of wireless network standards defined by the IEEE (Institute of Electrical and
Electronics Engineers), the most known and used are 802.11b and 802.11g.
WMA
Windows Media Player. A format which (according to independent tests) offers a sound quality as
good as the MP3 at half the binary rate (and, consequently, a size of files reduced by half).