BUSINESS, LEGAL AND CORPORATE Book RESPONSIBILITY 2006 3 The complete EADS Annual Report Suite 2006 consists of: ANNUAL REVIEW 2006 Book Management & Responsibility TAKE The Full Picture: Transformation EADS Annual Review 2006 A The Business Year 2006 LOOK Inside EADS 1 Useful Information FINANCIAL FINANCIAL STATEMENTS AND CORPORATE GOVERNANCE 2006 Book STATEMENTS AND Registration Document Part 1: CORPORATE Risk Factors Book GOVERNANCE Net Assets Financial Position Results 2 2006 2 Corporate Governance BUSINESS, BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY 2006 Book LEGAL AND Registration Document Part 2: CORPORATE (available on request) Book RESPONSIBILITY Information on EADS Activities 2006 3 Corporate Social Responsibility General Description of the Company and its Share Capital 3 Entity Responsible for the Registration Document The online version of the Annual Report Suite 2006 is available at www.reports.eads.com Back to Contents business, legal anD coRPoRate ResPonsibility eaDs RegistRation Document – PaRt 2 Back to Contents Back to Contents EADs RegistRation Document PaRt 2 Business, legal and corporate responsibility European Aeronautic Defence and Space Company EADS N.V. (the “Company” or “EADS”) 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 Annexe 1 of the EC Regulation 809/2004, filed in English with, and approved by, the Autoriteit Financiële Markten (the “AFM”) on 25th April 2007 in its capacity as competent authority under the Wet op het financieel toezicht (as amended) pursuant to the 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 financial 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 Back to Contents business, legal anD coRPoRate ResPonsibility 1 infoRmation on eaDs activities 2 corpoRate social ResPonsibility geneRal DescRiPtion 3 of the comPany anD its shaRe caPital entity ResPonsible 4 foR the RegistRation Document eaDs EADS BUSINESS, LEGAL AND CORPORATE RESPONSIBILITY GENERAL TABLE OF CONTENTs/REGIsTRATION DOCUMENT - PARTs 1 and 2 Back to contents Back to contents FINANCIAL sTATEMENTs AND CORPORATE GOVERNANCE RegistRation Document - PaRt 1 nonactive summary. PLease, go to Book 2 Consolidated Share of Profit from Associates RIsk Factors 7 Accounted for under the Equity Method and Other Income (Expense) from Investments 35 1. Financial Market Risks 8 Consolidated Interest Result 35 Consolidated Other Financial Result 36 Consolidated Income Taxes 36 2. Business-Related Risks 10 Consolidated Minority Interests 36 Consolidated Net Income (Profit for the Period 3. Legal Risks 14 Attributable to Equity Holders of the Parent) 36 Earnings per Share (EPS) 37 1.1.6 Changes in Consolidated Total Equity 4. Industrial and Environmental Risks 15 (including Minority Interests) 37 IAS 39 Related Impact on AOCI 38 Currency Translation Adjustment Impact on AOCI 39 1.1.7 Liquidity and Capital Resources 39 Net Assets - Financial 1.1.7.1 Cash Flows 39 1 position - REsults 17 1.1.7.2 Consolidated Cash and Cash Equivalents 41 1.1.7.3 Consolidated Financial Liabilities 42 1.1.7.4 Sales Financing 42 1.1 Management’s Discussion and Analysis 1.1.8 Hedging Activities 46 of Financial Condition and Results 1.1.8.1 Foreign Exchange Rates 46 of Operations 18 1.1.8.2 Interest Rates 48 1.1.1 Certain Information 18 Exchange Rate Information 18 1.2 Financial Statements 49 Ratings 18 1.2.1 EADs N.V. Consolidated Financial statements (IFRs) 50 1.1.2 Overview 19 Basis of Presentation 56 1.1.2.1 Significant Programme and Restructuring Develop- Notes to the Consolidated Statements ments in 2006 19 of Income (IFRS) 67 1.1.2.2 Outlook 20 Notes to the Consolidated Balance Sheets (IFRS) 76 1.1.3 Critical Accounting Considerations, Policies Notes to the Consolidated Statements of Cash-Flows (IFRS) 95 and Estimates 21 Other Notes to the Consolidated Financial 1.1.3.1 Scope of and Changes in Consolidation Perimeter 21 Statements (IFRS) 97 1.1.3.2 Employee Benefits — IAS 19 22 1.1.3.3 U.K. Pension Commitments 22 Appendix: Information on principal 1.1.3.4 Fair Value Adjustments 23 investments - Consolidation Scope 113 1.1.3.5 Impairment of Assets 23 Auditors‘ Report on the Consolidated Financial 1.1.3.6 Research and Development Expenses 24 statements (IFRs) 119 1.1.3.7 Accounting for Hedged Foreign Exchange Transac- Report on the Consolidated Financial Statements 119 tions in the Financial Statements 24 Report on other legal and regulatory requirements 120 1.1.3.8 Foreign Currency Translation 25 1.1.3.9 Accounting for Sales Financing Transactions 1.2.2 Company Financial statements 121 in the Financial Statements 25 1.1.4 Measurement of Management’s Performance 26 1.3 Statutory Auditors’ Fees 132 1.1.4.1 Order Backlog 26 1.1.4.2 Use of EBIT* 28 1.4 Information Regarding 1.1.4.3 EBIT* Performance by Division 28 the Statutory Auditors 133 1.1.5 EADs Results of Operations 31 Consolidated Revenues 31 Consolidated Cost of Sales 34 Consolidated Selling and Administrative Expenses 34 Consolidated Research and Development Expenses 35 Consolidated Other Income and Other Expenses 35 EADs BUSINESS, LEGAL AND CORPoRATE RESPONSIBiLIT Y GENERAL TABLE OF CONTENTs/REGIsTRATION DOCUMENT - PARTs 1 and 2 Back to contents Back to contents nonactive summary. PLease, go to Book 2 Corporate Financial 2 Governance 135 3 Calendar 167 2.1 Management and Control 137 2007 Calendar of Financial Communication 168 2.1.1 Board of Directors, Chairmen and Chief Executive Officers 137 2.1.2 Audit Committee 145 2.1.3 Remuneration and Nomination Committee 146 2.1.4 Executive Committee 146 2.1.5 Internal Control and Risk Management systems 148 2.1.5.1 Overview 148 2.1.5.2 RM System 150 2.1.5.3 IC System 150 2.1.5.4 Business Processes Covered by the IC System 151 2.2 Interests of Directors and Principal Executive Officers 154 2.2.1 Compensation Granted to Directors and Principal Executive Officers 154 2.2.1.1 General Principles 154 2.2.1.2 Compensation of the Members of the Board of Directors 154 2.2.1.3 Compensation of the Members of the Executive Committee 157 2.2.2 Long Term Incentives Granted to the Two Chief Executive Officers 158 2.2.3 Related Party Transactions 158 2.2.4 Loans and Guarantees Granted to Directors 158 2.3 Employee Profit Sharing and Incentive Plans 159 2.3.1 Employee Profits haring and Incentive Agreements 159 2.3.2 Employee share Ownership Plans 159 2.3.2.1 ESOP 2000 159 2.3.2.2 ESOP 2001 159 2.3.2.3 ESOP 2002 160 2.3.2.4 ESOP 2003 160 2.3.2.5 ESOP 2004 160 For the Contents of this book 2.3.2.6 ESOP 2005 161 2.3.2.7 ESOP 2007 161 pleasE turn to the nexT page 2.3.3 Long Term Incentive Plans 162 ➔ EADs BUSINESS, LEGAL AND CORPoRATE RESPONSIBiLIT Y GENERAL TABLE OF CONTENTs/REGISTRATION DOCUMENT - PaRts 1 anD 2 Back to Contents Back to Contents eaDs business, legal anD coRPoRate ResPonsibility REGISTRATION DOCUmENT - PART 2 infoRmation on EADs 2.2.2 Sustaining and Protecting innovation 64 1 activities 7 2.2.2.1 Innovation Strategy 64 2.2.2.2 Protecting Innovation: Intellectual Property 67 2.2.3 Supplier management: fostering a mutually 1.1 Presentation of the EADS Group 8 beneficial Relationship with EADs’ suppliers 68 1.1.1 Overview 8 2.2.3.1 Policy 68 2.2.3.2 Organisation 68 1.1.2 Airbus 14 2.2.3.3 Performances and Best Practices 69 1.1.3 Military transport aircraft 23 1.1.4 Eurocopter 26 2.3 Environmental Care 71 1.1.5 Defence & security 30 2.3.1 Policy 72 1.1.6 Astrium 38 2.3.2 Organisation 72 1.1.7 Other businesses 44 2.3.3 Performance and best Practices 73 1.1.8 Investments 46 1.1.9 Insurance 47 2.4 Human Resources: Employer – Employee Relationship 75 1.1.10 Legal and arbitration Proceedings 48 1.1.11 Incorporation by Reference 49 2.4.1 Workforce information and organisation of Work 75 2.4.2 Human Resources organisation 77 1.2 Recent Developments 49 2.4.3 Human Resources Policies and Performance 77 2.4.3.1 Health and Safety: Providing a Safe Workplace for EADS Employees and Subcontractors 77 2.4.3.2 Caring for EADS Employees and EADS Know-How 78 corpoRate social 2.4.3.3 Diversity: Commitment to Ensure Equal 2 Opportunity for all EADS Employees 78 ResPonsibility 53 2.4.3.4 Career Development: Efficient Management of Skills and Know-How 80 2.1 Business Ethics 56 2.4.3.5 Employee Relations: A Proactive Dialogue 82 2.1.1 Proper business Practices 56 2.5 Corporate Citizenship 84 2.1.1.1 Policy 56 2.5.1 Maintaining an open Dialogue with EADs’ 2.1.1.2 Organisation 56 stakeholders 84 2.1.1.3 Performance and Best Practices 57 2.5.1.1 Policy 84 2.1.2 Export control compliance 58 2.5.1.2 Organisation 84 2.1.2.1 Policy 58 2.5.1.3 Performance and Best Practices 84 2.1.2.2 Organisation 58 2.5.2 Encompassing community interests 2.1.2.3 Performance and Best Practices 59 in EADs’ global Strategy 85 2.1.3 Compliance with law Regarding all