Business, Legal and Corporate Responsibility 2007 EUROPEAN AERONAUTIC DEFENCE and SPACE COMPANY EADS N.V

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Business, Legal and Corporate Responsibility 2007 EUROPEAN AERONAUTIC DEFENCE and SPACE COMPANY EADS N.V EUROPEAN AERONAUTIC DEFENCE AND SPACE COMPANY EADS N.V. COMPANY DEFENCE AND SPACE AERONAUTIC EUROPEAN BOOK THREE www.eads.com 3 European Aeronautic Defence and Space Company EADS N.V. Le Carré, Beechavenue 130 -132 Business, 1119 PR Schiphol-Rijk The Netherlands Legal This document is also available at the following addresses: and 2007 Responsibility and Corporate Business, Legal European Aeronautic Defence and Space Company Corporate EADS N.V. In France Responsibility 37, boulevard de Montmorency 75781 Paris cedex 16 – France 2007 In Germany 81663 Munich – Germany In Spain Avenida de Aragón 404 28022 Madrid – Spain 3 The complete EADS Annual Report Suite 2007 consists of: >@FKD @E>IIBKDBP RPFKBPP BD>I BIFSBOFKD FK>K@F>I >KA OBPRIQP Q>QBJBKQP LOMLO>QB >KA LOMLO>QB BPMLKPF?FIFQV LSBOK>K@B BOOK 1 BOOK 2 BOOK 3 FACING CHALLENGES FINANCIAL STATEMENTS AND BUSINESS, LEGAL AND DELIVERING RESULTS CORPORATE GOVERNANCE 2007 CORPORATE RESPONSIBILITY 2007 Annual Review Registration Document Part 1 Registration Document Part 2 Management & Responsibility Risk Factors Information on EADS Activities Together. Facing challenges. Net Assets – Financial Position – Results Corporate Social Responsibility Delivering results. Corporate Governance General Description of the The Business Year 2007 Company and its Share Capital EADS Drivers Useful Information www.eads.com The online version of the Annual Report Suite 2007 is available at www.reports.eads.com 1 2 3 4 Back to Contents Business, Legal and Corporate Responsibility EADS REGISTRATION DOCUMENT 2007 - PART 2 1 2 3 4 Back to Contents EADS REGISTRATION DOCUMENT - PART 2 Business, Legal and Corporate Responsibility (BOOK 3) European Aeronautic Defence and Space Company EADS N.V. (the “Company” or “EADS” and together with its subsidiaries, the “Group”) is a Dutch company, which is listed in France, Germany and Spain. Given this fact, the applicable regulations with respect to public information and protection of investors, as well as the commitments made by the Company to securities and market authorities, are described in this registration document (the “Registration Document”). This Registration Document was prepared in accordance with Annex 1 of EC Regulation 809/2004, fi led in English with, and approved by, the Autoriteit Financiële Markten (the “AFM”) on 24 April 2008 in its capacity as competent authority under the Wet op het fi nancieel toezicht (as amended) pursuant to Directive 2003/71/EC. The Registration Document is composed of two parts which must be read together: (i) this document entitled Business, Legal and Corporate Responsibility – (Registration Document Part 2) and (ii) the document entitled Financial Statements and Corporate Governance – (Registration Document Part 1). This Registration Document may be used in support of a fi nancial transaction as a document forming part of a prospectus in accordance with Directive 2003/71/EC only if it is supplemented by a securities note and a summary approved by the AFM. EADS BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY 1 2 3 4 Back to Contents Business, Legal and Corporate Responsibility 1 INFORMATION ON EADS ACTIVITIES 2 CORPORATE SOCIAL RESPONSIBILITY GENERAL DESCRIPTION OF THE COMPANY 3 AND ITS SHARE CAPITAL ENTITY RESPONSIBLE 4 FOR THE REGISTRATION DOCUMENT EADS BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY 1 TABLE OF CONTENTS | REGISTRATION DOCUMENT PARTS 1 AND 2 1 2 3 4 Back to Contents REGISTRATION DOCUMENT | PART 1 Financial Statements and Corporate Governance (BOOK 2) NONACTIVE SUMMARY. PLEASE, GO TO BOOK 2 RISK FACTORS 7 Consolidated Research and Development Expenses 36 Consolidated Other Income and Other Expenses 37 Consolidated Share of Profi t from Associates Accounted for under the Equity Method 1. Financial Market Risks 8 and Other Income from Investments 37 Consolidated Interest Result 37 2. Business-Related Risks 10 Consolidated Other Financial Result 37 Consolidated Income Taxes 38 3. Legal Risks 15 Consolidated Minority Interests 38 Consolidated Net Income (Loss) (Profi t (loss) for 4. Industrial and Environmental Risks 17 the Period Attributable to Equity Holders of the Parent) 38 Earnings per Share (EPS) 38 1.1.6 CHANGES IN CONSOLIDATED TOTAL EQUITY NET ASSETS, FINANCIAL (INCLUDING MINORITY INTERESTS) 39 POSITION AND RESULTS 19 IAS 39 Related Impact on AOCI 40 1 Currency Translation Adjustment Impact on AOCI 40 1.1.7 LIQUIDITY AND CAPITAL RESOURCES 41 1.1 Management’s Discussion 1.1.7.1 Cash Flows 41 and Analysis of Financial Condition 1.1.7.2 Consolidated Cash and Cash Equivalents and Securities 43 and Results of Operations 20 1.1.7.3 Consolidated Financing Liabilities 44 1.1.1 CERTAIN INFORMATION 20 1.1.7.4 Sales Financing 44 Exchange Rate Information 20 1.1.8 HEDGING ACTIVITIES 49 Ratings 20 1.1.8.1 Foreign Exchange Rates 49 1.1.2 OVERVIEW 21 1.1.8.2 Interest Rates 50 1.1.2.1 Signifi cant Programme and Restructuring Developments in 2006 and 2007 21 1.2 Financial Statements 51 1.1.2.2 Trends 22 1.2.1 EADS N.V. CONSOLIDATED FINANCIAL 1.1.3 CRITICAL ACCOUNTING CONSIDERATIONS, STATEMENTS (IFRS) 52 POLICIES AND ESTIMATES 23 Basis of Presentation 57 1.1.3.1 Scope of and Changes Notes to the Consolidated Income Statements (IFRS) 70 in Consolidation Perimeter 23 Notes to the Consolidated Balance Sheets (IFRS) 80 1.1.3.2 Employee Benefi ts — IAS 19 24 Notes to the Consolidated Statements 1.1.3.3 U.K. Pension Commitments 24 of Cash-Flows (IFRS) 101 1.1.3.4 Fair Value Adjustments 25 Other Notes to the Consolidated Financial 1.1.3.5 Impairment/Write-down of Assets 25 Statements (IFRS) 103 1.1.3.6 Research and Development Expenses 25 Appendix “Information on Principal 1.1.3.7 Accounting for Hedged Foreign Exchange Transactions in the Financial Statements 26 Investments” – Consolidation Scope 128 1.1.3.8 Foreign Currency Translation 26 AUDITOR‘S REPORT ON THE CONSOLIDATED 1.1.3.9 Accounting for Sales Financing Transactions FINANCIAL STATEMENT (IFRS) 134 in the Financial Statements 27 Report on the Consolidated Financial Statements 134 1.1.3.10 Provisions for Loss-Making Contracts 28 Report on other legal and regulatory requirements 135 1.1.4 MEASUREMENT OF MANAGEMENT’S 1.2.2 COMPANY FINANCIAL STATEMENTS 136 PERFORMANCE 28 1.1.4.1 Order Backlog 28 1.3 Statutory Auditors’ Fees 146 1.1.4.2 Use of EBIT* 30 1.1.4.3 EBIT* Performance by Division 30 1.4 Information Regarding 1.1.5 EADS RESULTS OF OPERATIONS 33 the Statutory Auditors 147 Consolidated Revenues 33 Consolidated Cost of Sales 36 Consolidated Selling and Administrative Expenses 36 2 EADS BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY TABLE OF CONTENTS | REGISTRATION DOCUMENT PARTS 1 AND 2 1 2 3 4 Back to Contents NONACTIVE SUMMARY. PLEASE, GO TO BOOK 2 2 CORPORATE GOVERNANCE 149 3 FINANCIAL CALENDAR 185 2.1 Management and Control 153 2008 Calendar of Financial Communication 186 2.1.1 BOARD OF DIRECTORS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER 153 2.1.2 AUDIT COMMITTEE 164 2.1.3 REMUNERATION AND NOMINATION COMMITTEE 164 2.1.4 STRATEGIC COMMITTEE 165 2.1.5 EXECUTIVE COMMITTEE 165 2.1.6 INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS 167 2.1.6.1 Overview 167 2.1.6.2 RM System 168 2.1.6.3 IC System 168 2.1.6.4 Business Processes Covered by the IC System 169 2.2 Interests of Directors and Principal Executive Offi cers 172 2.2.1 COMPENSATION GRANTED TO DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS 172 2.2.1.1 General Principles 172 2.2.1.2 Compensation of the Members of the Board of Directors 173 2.2.1.3 Compensation of the Members of the Executive Committee 175 2.2.2 LONG TERM INCENTIVES GRANTED TO THE CHIEF EXECUTIVE OFFICER 176 2.2.3 RELATED PARTY TRANSACTIONS 176 2.2.4 LOANS AND GUARANTEES GRANTED TO DIRECTORS 176 2.3 Employee Profi t Sharing and Incentive Plans 177 2.3.1 EMPLOYEE PROFIT SHARING AND INCENTIVE AGREEMENTS 177 2.3.2 EMPLOYEE SHARE OWNERSHIP PLANS 177 2.3.2.1 ESOP 2000 177 2.3.2.2 ESOP 2001 177 2.3.2.3 ESOP 2002 178 2.3.2.4 ESOP 2003 178 2.3.2.5 ESOP 2004 178 2.3.2.6 ESOP 2005 179 2.3.2.7 ESOP 2007 179 2.3.3 LONG TERM INCENTIVE PLANS 179 EADS BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY 3 TABLE OF CONTENTS | REGISTRATION DOCUMENT PARTS 1 AND 2 Back to Contents REGISTRATION DOCUMENT | PART 2 Business, Legal and Corporate Responsibility (BOOK 3) INFORMATION 2.2 Sustainable Growth 58 1 ON EADS‘ ACTIVITIES 7 2.2.1 PRODUCT QUALITY AND CUSTOMER SATISFACTION 58 2.2.1.1 Policy 58 1.1 Presentation of the EADS Group 8 2.2.1.2 Organisation 58 2.2.1.3 Performance and Best Practices 59 1.1.1 OVERVIEW 8 2.2.2 SUSTAINING AND PROTECTING INNOVATION 60 1.1.2 AIRBUS 13 2.2.2.1 Innovation Strategy 60 1.1.3 MILITARY TRANSPORT AIRCRAFT 21 2.2.2.2 Protecting Innovation: Intellectual Property 63 1.1.4 EUROCOPTER 25 2.2.3 SUPPLIER MANAGEMENT: FOSTERING A MUTUALLY BENEFICIAL 1.1.5 DEFENCE & SECURITY 29 RELATIONSHIP WITH EADS’ SUPPLIERS 64 1.1.6 ASTRIUM 35 2.2.3.1 Policy 64 2.2.3.2 Organisation 64 1.1.7 OTHER BUSINESSES 40 2.2.3.3 Performances and Best Practices 65 1.1.8 INVESTMENTS 42 2.3 Environmental Care 68 1.1.9 INSURANCE 43 1.1.10 LEGAL AND ARBITRATION PROCEEDINGS 44 2.3.1 POLICY 68 1.1.11 INCORPORATION BY REFERENCE 45 2.3.2 ORGANISATION 68 2.3.3 PERFORMANCE AND BEST PRACTICES 69 1.2 Recent Developments 45 2.4 Human Resources: Employer – Employee Relationship 72 CORPORATE SOCIAL 2.4.1 WORKFORCE INFORMATION 2 RESPONSIBILITY 49 AND ORGANISATION OF WORK 72 2.4.2 HUMAN RESOURCES ORGANISATION 73 2.4.3 HUMAN RESOURCES POLICIES 2.1 Business Ethics 52 AND PERFORMANCE 74 2.4.3.1 Health and Safety: Providing a Safe Workplace 2.1.1 PROPER BUSINESS PRACTICES 52 for EADS Employees and Subcontractors
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