BAE Systems plc is a global defense, aerospace, and security company headquartered in London. In 2008, BAE had sales of £18.5 billion and 106,400 employees worldwide. The company operates through four business segments: Electronics, Intelligence & Support; Land & Armaments; Programmes & Support; and International. In 2008, BAE reported strong financial performance, further progress in delivering its strategy, accelerated development of its security business, and an exceptional year for its Land & Armaments segment.

1. BAE Systems plc
BAE Systems plc Annual Report 2008
6 Carlton Gardens Annual Report 2008 Contents
London SW1Y 5AD
United Kingdom
Telephone +44 (0)1252 373232
Registered in England and Wales No. 1470151
Website details See overleaf for an overview
www.baesystems.com of our business today
About this report…
BAE Systems at a glance
What we do… BAE Systems, with 106,400 employees1
worldwide, delivers a full range of systems
and services for air, land and naval forces,
as well as advanced electronics, information
technology solutions and customer
support services.
Group Electronics, Intelligence Land & Armaments Programmes & Support International
& Support
– Strong financial performance
– Further progress in delivery of strategy
– Accelerated development of security business
– Exceptional year for Land & Armaments
Sales1,2 by operating group3 (%)
£18,543m International Electronics, Principal operations The Electronics, Intelligence & Support Land & Armaments provides design, Programmes & Support comprises the The International operating group comprises
Sales for 2008
1 18% Intelligence &
24% Support operating group designs, develops, development, production, through-life Group’s UK-based air and naval activities, the Group’s businesses in Saudi Arabia and
produces and services systems and support and upgrade of armoured combat the activities of the acquired Detica security Australia, together with a 37.5% interest
subsystems for a wide range of military and vehicles, tactical wheeled vehicles, naval business and the Integrated System in the pan-European MBDA joint venture,
24%
commercial applications. It comprises four guns, missile launchers, artillery systems Technologies business. a 20.5% shareholding in Saab of Sweden
lines of business: Electronic Solutions, and munitions. and a 49% shareholding in Air Astana.
Programmes 34% Land & Information Solutions, Platform Solutions
& Support Armaments
and Support Solutions.
Underlying EBITA4 by operating group3 Main operating
(%) locations
£1,897m International Electronics,
Underlying EBITA4 Intelligence &
22% 25% Support
for 2008
25% 28%
Programmes Land &
& Support Armaments
Number of 33,900 21,300 30,200 19,200
employees1,3
HQ & Other Businesses Key points
from 2008
– Maintained leadership in electronic
warfare systems
– High volume of vehicle reset and – Successful transition to start of Typhoon – Saudi Typhoon programme (Salam)
upgrade activity Tranche 2 deliveries progressing to schedule
– Won key IT, situational awareness and – Successfully addressed US mine – BVT Surface Fleet naval joint venture formed – Tenix Defence acquisition completed;
aviation sustainment contracts
HQ & Other Businesses comprises the regional aircraft protected vehicle requirements – Manufacturing contract for Future Carriers price adjustments in negotiation
– Addressing market for vehicle power
asset management and support activities, head office management systems – 15-year UK munitions partnering secured – Impairment taken of £120m on Saab
and UK shared services activity, including research centres – Sustained leadership in US non-nuclear agreement secured – Detica acquisition completed carrying value
and property management. ship repair – Wheeled armoured vehicle successes – First Type 45 successfully delivered off
– Increased research and development – Joint Light Tactical Vehicle down select contract
investment
FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION
p44 SEE PAGE 44 p36 SEE PAGE 36 p38 SEE PAGE 38 p40 SEE PAGE 40 p42 SEE PAGE 42
1 Including share of equity accounted investments.
2 Before elimination of intra-group sales.
3 Excluding HQ & Other Businesses.
4 Earnings before amortisation and impairment of intangible assets, finance costs and taxation
expense (EBITA) excluding profit/(loss) on disposal of businesses and uplift on acquired
inventories. Restated to exclude profit/(loss) on disposal of businesses. See page 29.
Directors’ report: Business review Directors’ report: Business review
Overview
Results in brief, highlights and outlook
1 1
Strategy
Chief Executive’s review
2 6
Chairman’s letter 2 Strategic overview 10
Strategy in action 12
Market review – global 15
Market review – home markets 16
Operational Framework 18
Executive leadership 19
Resources 20
Leveraging global capability
Directors’ report: Business review Directors’ report: Business review
Performance
Key Performance Indicators (KPIs)
3 24
Responsibility
Corporate responsibility review
4 48
Financial review 28 Risk management 56
Operating group reviews 35 Principal risks 58
Electronics, Intelligence & Support 36
Land & Armaments 38
Programmes & Support 40
International 42
HQ & Other Businesses 44
Operating group performance summary 45
Directors’ report
Governance
Board of directors
5 64
Financial statements
and shareholder information
Independent auditors’ report
6 105
Corporate governance 66 Consolidated financial statements 106
Remuneration report 75 Notes to the Group accounts 110
Other statutory and regulatory information, Company balance sheet 159
including statement of directors’ responsibilities 94 Notes to the Company accounts 160
Five-year summary 168
Shareholder information 170
Financial calendar 171
Glossary 172
Annual Report online 173
Shareholder feedback 173
Cautionary statement: All statements other than statements of historical fact included in this document, including, without limitation, those regarding the financial condition, results, operations
and businesses of BAE Systems and its strategy, plans and objectives and the markets and economies in which it operates, are forward-looking statements. Such forward-looking statements
which reflect management’s assumptions made on the basis of information available to it at this time, involve known and unknown risks, uncertainties and other important factors which could
cause the actual results, performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Nothing in this document shall be regarded as a profit forecast. BAE Systems plc and its directors accept no liability to third
parties in respect of this report save as would arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall
be determined in accordance with section 90A of the Financial Services and Markets Act 2000. It should be noted that section 90A and section 463 Companies Act 2006 contain limits on the
liability of the directors of BAE Systems plc so that their liability is solely to BAE Systems plc.
REAL PERFORMANCE. REAL ADVANTAGE.

2. BAE Systems plc
BAE Systems plc Annual Report 2008
6 Carlton Gardens Annual Report 2008 Contents
London SW1Y 5AD
United Kingdom
Telephone +44 (0)1252 373232
Registered in England and Wales No. 1470151
Website details See overleaf for an overview
www.baesystems.com of our business today
About this report…
BAE Systems at a glance
What we do… BAE Systems, with 106,400 employees1
worldwide, delivers a full range of systems
and services for air, land and naval forces,
as well as advanced electronics, information
technology solutions and customer
support services.
Group Electronics, Intelligence Land & Armaments Programmes & Support International
& Support
– Strong financial performance
– Further progress in delivery of strategy
– Accelerated development of security business
– Exceptional year for Land & Armaments
Sales1,2 by operating group3 (%)
£18,543m International Electronics, Principal operations The Electronics, Intelligence & Support Land & Armaments provides design, Programmes & Support comprises the The International operating group comprises
Sales for 2008
1 18% Intelligence &
24% Support operating group designs, develops, development, production, through-life Group’s UK-based air and naval activities, the Group’s businesses in Saudi Arabia and
produces and services systems and support and upgrade of armoured combat the activities of the acquired Detica security Australia, together with a 37.5% interest
subsystems for a wide range of military and vehicles, tactical wheeled vehicles, naval business and the Integrated System in the pan-European MBDA joint venture,
24%
commercial applications. It comprises four guns, missile launchers, artillery systems Technologies business. a 20.5% shareholding in Saab of Sweden
lines of business: Electronic Solutions, and munitions. and a 49% shareholding in Air Astana.
Programmes 34% Land & Information Solutions, Platform Solutions
& Support Armaments
and Support Solutions.
Underlying EBITA4 by operating group3 Main operating
(%) locations
£1,897m International Electronics,
Underlying EBITA4 Intelligence &
22% 25% Support
for 2008
25% 28%
Programmes Land &
& Support Armaments
Number of 33,900 21,300 30,200 19,200
employees1,3
HQ & Other Businesses Key points
from 2008
– Maintained leadership in electronic
warfare systems
– High volume of vehicle reset and – Successful transition to start of Typhoon – Saudi Typhoon programme (Salam)
upgrade activity Tranche 2 deliveries progressing to schedule
– Won key IT, situational awareness and – Successfully addressed US mine – BVT Surface Fleet naval joint venture formed – Tenix Defence acquisition completed;
aviation sustainment contracts
HQ & Other Businesses comprises the regional aircraft protected vehicle requirements – Manufacturing contract for Future Carriers price adjustments in negotiation
– Addressing market for vehicle power
asset management and support activities, head office management systems – 15-year UK munitions partnering secured – Impairment taken of £120m on Saab
and UK shared services activity, including research centres – Sustained leadership in US non-nuclear agreement secured – Detica acquisition completed carrying value
and property management. ship repair – Wheeled armoured vehicle successes – First Type 45 successfully delivered off
– Increased research and development – Joint Light Tactical Vehicle down select contract
investment
FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION FOR MORE INFORMATION
p44 SEE PAGE 44 p36 SEE PAGE 36 p38 SEE PAGE 38 p40 SEE PAGE 40 p42 SEE PAGE 42
1 Including share of equity accounted investments.
2 Before elimination of intra-group sales.
3 Excluding HQ & Other Businesses.
4 Earnings before amortisation and impairment of intangible assets, finance costs and taxation
expense (EBITA) excluding profit/(loss) on disposal of businesses and uplift on acquired
inventories. Restated to exclude profit/(loss) on disposal of businesses. See page 29.
Directors’ report: Business review Directors’ report: Business review
Overview
Results in brief, highlights and outlook
1 1
Strategy
Chief Executive’s review
2 6
Chairman’s letter 2 Strategic overview 10
Strategy in action 12
Market review – global 15
Market review – home markets 16
Operational Framework 18
Executive leadership 19
Resources 20
Leveraging global capability
Directors’ report: Business review Directors’ report: Business review
Performance
Key Performance Indicators (KPIs)
3 24
Responsibility
Corporate responsibility review
4 48
Financial review 28 Risk management 56
Operating group reviews 35 Principal risks 58
Electronics, Intelligence & Support 36
Land & Armaments 38
Programmes & Support 40
International 42
HQ & Other Businesses 44
Operating group performance summary 45
Directors’ report
Governance
Board of directors
5 64
Financial statements
and shareholder information
Independent auditors’ report
6 105
Corporate governance 66 Consolidated financial statements 106
Remuneration report 75 Notes to the Group accounts 110
Other statutory and regulatory information, Company balance sheet 159
including statement of directors’ responsibilities 94 Notes to the Company accounts 160
Five-year summary 168
Shareholder information 170
Financial calendar 171
Glossary 172
Annual Report online 173
Shareholder feedback 173
Cautionary statement: All statements other than statements of historical fact included in this document, including, without limitation, those regarding the financial condition, results, operations
and businesses of BAE Systems and its strategy, plans and objectives and the markets and economies in which it operates, are forward-looking statements. Such forward-looking statements
which reflect management’s assumptions made on the basis of information available to it at this time, involve known and unknown risks, uncertainties and other important factors which could
cause the actual results, performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Nothing in this document shall be regarded as a profit forecast. BAE Systems plc and its directors accept no liability to third
parties in respect of this report save as would arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall
be determined in accordance with section 90A of the Financial Services and Markets Act 2000. It should be noted that section 90A and section 463 Companies Act 2006 contain limits on the
liability of the directors of BAE Systems plc so that their liability is solely to BAE Systems plc.
REAL PERFORMANCE. REAL ADVANTAGE.