More than half of EADS’ revenues are denominated in U.S. dollars (approximately U.S.$29 billion at Airbus in 2007), with approximately half of such currency exposure “naturally hedged” by U.S. dollar-denominated costs. The remainder of costs is incurred primarily in Euro, and to a lesser extent, in Pounds Sterling. Consequently, to the extent that EADS does not use financial instruments to hedge its net current and future exchange rate exposure from the time of a customer order to the time of delivery, its profits will be affected by market changes in the exchange rate of the U.S. dollar against these currencies. As EADS intends to generate profits only from its operations and not through speculation on foreign currency exchange rate movements, EADS uses hedging strategies solely to manage and minimise the impact on its EBIT* from the volatility of the U.S. dollar. See “Measurement of Management’s Performance — EBIT* Performance by Division — Hedging Impact on EBIT*”. See also “Financial Market Risks — Exposure to Foreign Currencies”.

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

Exposure on aircraft sales. For products such as aircraft, EADS typically hedges forecasted sales in U.S. dollars. The hedged items are defined as the first forecasted highly probable future cash inflows for a given month based upon final payments at delivery. The amount of the expected flows to be hedged can cover up to 100% of the equivalent of the net U.S. dollar exposure at inception. For EADS, a forecasted transaction is regarded as highly probable if the future delivery is included in the firm order book or is very likely to materialise in view of contractual evidence (e.g., a letter of intent). The coverage ratio is adjusted to take into account macroeconomic movements affecting the spot and interest rates as well as the robustness of the commercial cycle.

Exposure on non-aircraft business. For the non-aircraft business, EADS typically hedges inflows and outflows of foreign currencies from sales and purchase contracts following the same logic, typically in lower volumes.

Exposure on treasury operations. In connection with its treasury operations, EADS enters into foreign exchange swaps (notional amount of €2.1 billion at year-end 2007) to adjust for short-term fluctuations of non-Euro cash balances at the BU level. Year-to-year changes in the fair market value of these swaps are recorded in the consolidated income statement in the line item “other financial result”. These changes may have a material impact on EADS’ net income.

Embedded derivatives. EADS also has foreign currency derivative instruments which are embedded in certain purchase and lease contracts denominated in a currency other than the functional currency of the significant parties to the contract, principally U.S. dollar and Pounds Sterling. Gains or losses relating to such embedded foreign currency derivatives are reported in the line item “other financial result”. These changes may have a material impact on EADS’ net income. In addition, EADS hedges currency risk arising from financial transactions in other currencies than Euro, such as funding transactions or securities.

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

For financial reporting purposes, EADS mostly designates a portion of the total firm future cash flows as the hedged position to cover its expected net foreign currency exposure. Therefore, as long as the actual gross foreign currency cash inflows (per month) exceed the portion designated as being hedged, a postponement or cancellation of sales transactions and corresponding cash inflows have no impact on the hedging relationship. As hedging instruments, EADS primarily uses foreign currency forwards as well as synthetic forwards.

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

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