##### Table of Contents

As filed with the Securities and Exchange Commission on May 1, 2009





UNITED STATES

SECURITIES AND
EXCHANGE COMMISSION

Washington, DC 20549





FORM 20-F





| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------------------

OR



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------

For the fiscal year ended: December 31, 2008

OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------

OR



| ̈ |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | -------------------------------------------------------------------------------------------



Date of event requiring this shell company report
[            ]



For the transition period from [            ] to [            ]



Commission file number 333-132289





EMBRAER-EMPRESA BRASILEIRA DE AERONÁUTICA S.A.

|                                                      
|------------------------------------------------------
|(Exact name of Registrant as specified in its charter)





EMBRAER  Brazilian Aviation Company Inc.

|                                               
|-----------------------------------------------
|(Translation of Registrants name into English)





|                                                                                    
|------------------------------------------------------------------------------------
|Federative Republic of Brazil                                                       
|(Jurisdiction of Incorporation)                                                     
|                                                                                    
|Avenida Brigadeiro Faria Lima, 2170 12227-901 São José dos Campos, São Paulo, Brazil
|(Address of principal executive offices)                                            



Securities registered or
to be registered pursuant to Section 12(b) of the Act:



|                                                                                                                |  |  |  |                                           
|--------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------
|Title of each class:                                                                                            |  |  |  | Name of each exchange on which registered:
|                                                                                                                |  | 
|Common shares, without par value                                                                                |  |  |  | New York Stock Exchange*                  
|                                                                                                                |  | 
|American Depositary Shares (as evidenced by American Depositary Receipts), each representing four common shares |  |  |  | New York Stock Exchange                   



|* | Not for trading purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None.

Securities for which there is a
reporting obligation pursuant to Section 15(d) of the Act.

6.375% Guaranteed Notes due 2017

Number of outstanding shares of each of the issuers classes of capital or common stock as of December 31, 2008:

740,465,044 common shares, without par value

Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No   ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x    Accelerated Filer   ̈    Non-accelerated filer   ̈

Indicate by check mark which
basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x    International Financial Reporting Standards as issued by the International Accounting Standards Board   ̈    Other   ̈

Indicate by check mark which financial statement item the registrant has elected to follow.    Item
17   ̈    Item 18  x

If this is an
annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x









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##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                       |  |                                                         |  |     
|-------- |  | ----------------------------------------------------- |  | ------------------------------------------------------- |  | ----
|         |  |                                                       |  |                                                         |  | Page
|PART I  
|         |  |                                                      
|ITEM 1.  |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |  | 5                                                      
|         |  |                                                      
|ITEM 2.  |  | OFFER STATISTICS AND EXPECTED TIMETABLE               |  | 5                                                      
|         |  |                                                      
|ITEM 3.  |  | KEY INFORMATION                                       |  | 5                                                      
|         |  | 3A.                                                   |  | Selected Financial Data                                 |  | 5   
|         |  | 3B.                                                   |  | Capitalization and Indebtedness                         |  | 9   
|         |  | 3C.                                                   |  | Reasons for the Offer and Use of Proceeds               |  | 9   
|         |  | 3D.                                                   |  | Risk Factors                                            |  | 9   
|         |  |                                                      
|ITEM 4.  |  | INFORMATION ON THE COMPANY                            |  | 19                                                     
|         |  | 4A.                                                   |  | History and Development of the Company                  |  | 19  
|         |  | 4B.                                                   |  | Business Overview                                       |  | 22  
|         |  | 4C.                                                   |  | Organizational Structure                                |  | 40  
|         |  | 4D.                                                   |  | Property, Plant and Equipment                           |  | 41  
|         |  |                                                      
|ITEM 4A. |  | UNRESOLVED STAFF COMMENTS                             |  | 43                                                     
|         |  |                                                      
|ITEM 5.  |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS          |  | 43                                                     
|         |  | 5A.                                                   |  | Operating Results                                       |  | 44  
|         |  | 5B.                                                   |  | Liquidity and Capital Resources                         |  | 60  
|         |  | 5C.                                                   |  | Research and Development                                |  | 64  
|         |  | 5D.                                                   |  | Trend Information                                       |  | 65  
|         |  | 5E.                                                   |  | Off-Balance Sheet Arrangements                          |  | 70  
|         |  | 5F.                                                   |  | Tabular Disclosure of Contractual Obligations           |  | 72  
|         |  |                                                      
|ITEM 6.  |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            |  | 73                                                     
|         |  | 6A.                                                   |  | Directors and Senior Management                         |  | 73  
|         |  | 6B.                                                   |  | Compensation                                            |  | 79  
|         |  | 6C.                                                   |  | Board Practices                                         |  | 80  
|         |  | 6D.                                                   |  | Employees                                               |  | 82  
|         |  | 6E.                                                   |  | Share Ownership                                         |  | 82  
|         |  |                                                      
|ITEM 7.  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     |  | 83                                                     
|         |  | 7A.                                                   |  | Major Shareholders                                      |  | 83  
|         |  | 7B.                                                   |  | Related Party Transactions                              |  | 84  
|         |  | 7C.                                                   |  | Interests of Experts and Counsel                        |  | 85  
|         |  |                                                      
|ITEM 8.  |  | FINANCIAL INFORMATION                                 |  | 85                                                     
|         |  | 8A.                                                   |  | Consolidated Statements and Other Financial Information |  | 85  
|         |  | 8B.                                                   |  | Significant Changes                                     |  | 90  
|         |  |                                                      
|ITEM 9.  |  | THE OFFER AND LISTING                                 |  | 90                                                     
|         |  | 9A.                                                   |  | Offer and Listing Details                               |  | 90  
|         |  | 9B.                                                   |  | Plan of Distribution                                    |  | 92  
|         |  | 9C.                                                   |  | Markets                                                 |  | 92  
|         |  | 9D.                                                   |  | Selling Shareholders                                    |  | 95  
|         |  | 9E.                                                   |  | Dilution                                                |  | 95  
|         |  | 9F.                                                   |  | Expenses of the Issue                                   |  | 95  
|         |  |                                                      
|ITEM 10. |  | ADDITIONAL INFORMATION                                |  | 95                                                     
|         |  | 10A.                                                  |  | Share Capital                                           |  | 95  
|         |  | 10B.                                                  |  | Memorandum and Articles of Association                  |  | 95  
|         |  | 10C.                                                  |  | Material Contracts                                      |  | 108 



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|          |  |                                                                              |  |                             |  |    
|--------- |  | ---------------------------------------------------------------------------- |  | --------------------------- |  | ---
|          |  | 10D.                                                                         |  | Exchange Controls           |  | 108
|          |  | 10E.                                                                         |  | Taxation                    |  | 109
|          |  | 10F.                                                                         |  | Dividends and Paying Agents |  | 114
|          |  | 10G.                                                                         |  | Statements by Experts       |  | 114
|          |  | 10H.                                                                         |  | Documents on Display        |  | 115
|          |  | 10I.                                                                         |  | Subsidiary Information      |  | 115
|          |  |                                                                             
|ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 115                        
|          |  |                                                                             
|ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 119                        
|         
|PART II  
|          |  |                                                                             
|ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 120                        
|          |  |                                                                             
|ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 120                        
|          |  |                                                                             
|ITEM 15.  |  | CONTROLS AND PROCEDURES                                                      |  | 124                        
|          |  |                                                                             
|ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 125                        
|          |  |                                                                             
|ITEM 16B. |  | CODE OF ETHICS                                                               |  | 125                        
|          |  |                                                                             
|ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 126                        
|          |  |                                                                             
|ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  | 126                        
|          |  |                                                                             
|ITEM 16E. |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  | 127                        
|          |  |                                                                             
|ITEM 16F. |  | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                 |  | 127                        
|          |  |                                                                             
|ITEM 16G. |  | CORPORATE GOVERNANCE                                                         |  | 127                        
|         
|PART III 
|          |  |                                                                             
|ITEM 17.  |  | FINANCIAL STATEMENTS                                                         |  | 129                        
|          |  |                                                                             
|ITEM 18.  |  | FINANCIAL STATEMENTS                                                         |  | 129                        
|          |  |                                                                             
|ITEM 19.  |  | EXHIBITS                                                                     |  | 130                        



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INTRODUCTION

In this annual report, Embraer, we, us or our refer to Embraer-Empresa Brasileira de Aeronáutica S.A., formerly known as Rio Han Empreendimentos e
Participações S.A. (as successor in interest to Embraer-Empresa Brasileira de Aeronáutica S.A., or former Embraer, as predecessor company, as a result of the merger of former Embraer with and into Embraer pursuant to the
corporate reorganization described below), and its consolidated subsidiaries (unless the context otherwise requires). All references herein to the real, reais or R$ are to the Brazilian real,
the official currency of Brazil. All references to US$, dollars or U.S. dollars are to United States dollars.

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and
activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. For further information on our corporate
reorganization, see Item 4. Information on the CompanyHistory and Development of the CompanyCorporate Reorganization.

Presentation of Financial and Other Data

Financial Data

Our audited financial statements at December 31, 2007 and 2008 and for each of the years ended December 31, 2006, 2007 and 2008 are included in
this annual report.

Our financial statements as of and for the years ended December 31, 2004 and 2005 have not been included in this
annual report.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America, or U.S. GAAP. Because we export more than 90% of our production and operate in an industry that uses the U.S. dollar as its currency of reference, our management believes that the U.S. dollar is our functional currency and
the most appropriate currency in which to present our financial statements. As a result, amounts for all periods presented have been remeasured into U.S. dollars in accordance with the methodology set forth in Statement of Financial Accounting
Standards No. 52, or SFAS 52. Our financial statements and financial data presented herein and prepared in accordance with U.S. GAAP do not reflect the effects of inflation.

Pursuant to SFAS 52 as it applies to us, non-monetary assets and liabilities, including inventories, property, plant and equipment, accumulated
depreciation and shareholders equity, are remeasured at historical rates of exchange, while monetary assets and liabilities denominated in currencies other than U.S. dollars are remeasured at period-end rates. Export sales invoiced in
currencies other than the U.S. dollar are remeasured at the respective exchange rate on the date of sale. Cost of sales and services, depreciation and other expenses relating to assets remeasured at historical exchange rates are calculated based on
the U.S. dollar values of such assets and other non-U.S. dollar statement of income accounts are remeasured at the rate prevailing on the date of the charge or credit to income. Translation gains and losses are recorded under foreign exchange (gain)
loss, net in our statement of income.

In our 2006, 2007 and 2008 financial statements, gains or losses resulting from the remeasurement of
the financial statements and from foreign currency transactions have been reported in the consolidated statement of income as single line items.

In our Form 20-F/A filed with the U.S. Securities and Exchange Commission, or SEC, on November 26, 2007, we restated our financial statements for the years ended December 31, 2004, 2005 and 2006. For further information, see
Item 15. Controls and Procedures.

For certain purposes, such as providing reports to our Brazilian shareholders, filing
financial statements with the Comissão de Valores Mobiliários (Brazilian securities commission), or CVM, and determining dividend payments and other distributions and tax



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liabilities in Brazil, we have prepared, and will continue to be required to prepare, financial statements in accordance with Law No. 6,404 of
December 15, 1976, as amended, or Brazilian Corporate Law. Effective 2008, significant changes were introduced to the accounting aspects of the Brazilian Corporate Law by Law 11,638 of December 28, 2007. Further changes were introduced in
2008 to accounting practices adopted in Brazil, or Brazilian GAAP, by the Comitê de Pronunciamentos Contábeis (Brazilian Accounting Standards Setting Board). These changes to the accounting aspects of the Brazilian Corporate Law
and Brazilian GAAP impacted the basis of our distribution of minimum mandatory dividends. Other than that, such changes had no effect to our financial statements prepared in accordance with U.S. GAAP that are included in this annual report. Our
financial statements prepared in accordance with the Brazilian Corporate Law, which are not included in this annual report, are not adjusted to account for the effects of inflation.

As a result of the reconciliation of amounts to the functional currency and other adjustments related to the differences in accounting principles between
U.S. GAAP and Brazilian GAAP, the amounts of net income and shareholders equity as reported in our audited consolidated financial statements presented herein differ from those included in our statutory accounting records.

As a result of the listing of our common shares on the Novo Mercado segment of the Bolsa de Valores de São Paulo, or São
Paulo Stock Exchange, since January 2009 we are required to either translate into English our quarterly financial statements, including cash flow statements, prepared in accordance with the Brazilian Corporate Law, or prepare such quarterly
financial statements in accordance with, or reconciled to, U.S. GAAP or International Financial Reporting Standards, or IFRS.

Other Data and Backlog

In this annual report:



| |  |  | some of the financial data reflects the effect of rounding;
| | - |  | -----------------------------------------------------------



| |  |  | aircraft ranges are indicated in nautical miles;
| | - |  | ------------------------------------------------



| |  |  | one nautical mile is equal to approximately 1.15 ordinary or statute miles, or approximately 1.85 kilometers;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | aircraft speeds are indicated in nautical miles per hour, or knots, or in Mach, which is a measure of the speed of sound;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the term regional jets refers to narrow body jet aircraft with 30-60 passenger seats;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the term mid-capacity jets refers to jet aircraft with 70-120 passenger seats. All of our regional and mid-capacity jet aircraft are sold in the
commercial aviation segment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the term commercial aircraft, as it applies to Embraer, refers to our regional jets and mid-capacity jets;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | the terms entry-level jet and light jet refer to executive jets that carry from six to eight passengers and up to nine passengers,
respectively, that are designed for short take-off distances;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the term ultra-large refers to executive jets that have longer range and over-sized cabin space and carry, on average, 19 passengers; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the term executive jets, as it applies to Embraer, refers to our aircraft sold to companies, including fractional ownership companies, charter companies
and air-taxi companies and high net-worth individuals.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We calculate the value of our backlog by considering all firm
orders that have not yet been delivered. A firm order is a firm commitment from a customer, represented by a signed contract and customarily accompanied by a down payment, for which we have reserved a place on one of our production lines. Every time
we refer to our backlog in this annual report, we only make reference to



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firm orders and not to options. When we refer in this annual report to the number or value of commercial aircraft, we exclude two EMB 145s delivered to
Satena Airline, a state-owned Colombian airline, in 2004. These aircraft have been included in our defense and government data. In July 2005, we started to include the number of aircraft sold by the defense and government segment to state-owned
airlines, such as TAME and Satena, in our commercial aircraft backlog.

Special Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or
Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or Exchange Act, principally in Items 3 through 5 and Item 11 of this annual report. We have based these forward-looking statements largely on our
current expectations and projections about future events, industry and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:



| |  |  | general economic, political and business conditions, both in Brazil and in our markets;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the effects of the current world economic crisis on global and Brazilian economic and market conditions;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | changes in competitive conditions and in the general level of demand for our products;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | managements expectations and estimates concerning our future financial performance, financing plans and programs, and the effects of competition;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effects of customers cancelling, modifying and/or rescheduling contractual orders;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the effect of changing priorities or reductions in the Brazilian government or international government defense budgets on our revenues;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continued successful development and marketing of the EMBRAER 170/190 jet family, our line of executive jets (including the Phenom 100, Phenom 300, Lineage 1000,
Legacy 450 and Legacy 500) and our defense aircraft;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our level of indebtedness;
| | - |  | --------------------------



| |  |  | anticipated trends in our industry, including but not limited to the continuation of long-term trends in passenger traffic and revenue yields in the airline
industry;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our short- and long-term outlook for the 30-120 seat commercial airline market;
| | - |  | -------------------------------------------------------------------------------



| |  |  | our expenditure plans;
| | - |  | ----------------------



| |  |  | inflation and fluctuations in exchange rates;
| | - |  | ---------------------------------------------



| |  |  | the impact of volatile fuel prices and the airline industrys response;
| | - |  | -----------------------------------------------------------------------



| |  |  | our ability to develop and deliver our products on a timely basis;
| | - |  | ------------------------------------------------------------------



| |  |  | availability of sales financing for our existing and potential customers;
| | - |  | -------------------------------------------------------------------------



| |  |  | existing and future governmental regulation;
| | - |  | --------------------------------------------



| |  |  | our relationship with our workforce; and
| | - |  | ----------------------------------------



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| |  |  | other risk factors as set forth under Item 3D. Risk Factors.
| | - |  | --------------------------------------------------------------

The words believe, may, will, forecast, estimate, plan, continue,
anticipate, intend, expect and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information,
future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those
anticipated in our forward-looking statements. As a result of various factors such as those risks described in Item 3D. Risk Factors, undue reliance should not be placed on these forward-looking statements.



4



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##### Table of Contents

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not
applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------



|3A. | Selected Financial Data
|--- | -----------------------

The following table
presents our selected financial and other data at and for each of the periods indicated. Selected financial data as of and for the years ended December 31, 2006, 2007 and 2008 have been derived from our audited U.S. GAAP financial statements
and are included elsewhere in this annual report. The selected financial data presented for all other periods have been derived from our audited U.S. GAAP financial statements not included herein.



|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|--------------------------------------------------------- |  | -------------------------------------------- | - |  | -------- | - |  | -------- | - |  | -------- | - |  | -------- | -
|                                                          |  | At and for the year ended December 31,       |  
|                                                          |  | 2008                                         |   |  | 2007     |   |  | 2006     |   |  | 2005     |   |  | 2004     |  
|                                                          |  | (in US$ millions, except per share/ADS data) |  
|Statement of Income Data                                  |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Net sales                                                 |  | 6,335.2                                      |   |  | 5,245.2  |   |  | 3,759.5  |   |  | 3,789.5  |   |  | 3,352.1  |  
|Cost of sales and services                                |  | (4,991.7                                     | ) |  | (4,093.5 | ) |  | (2,806.8 | ) |  | (2,738.9 | ) |  | (2,336.7 | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Gross profit                                              |  | 1,343.5                                      |   |  | 1,151.7  |   |  | 952.7    |   |  | 1,050.6  |   |  | 1,015.4  |  
|Operating expenses                                        |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Selling expenses                                          |  | (393.1                                       | ) |  | (361.3   | ) |  | (220.6   | ) |  | (159.8   | ) |  | (185.1   | )
|Research and development                                  |  | (197.0                                       | ) |  | (259.7   | ) |  | (112.7   | ) |  | (93.2    | ) |  | (44.5    | )
|General and administrative                                |  | (232.4                                       | ) |  | (234.8   | ) |  | (235.5   | ) |  | (205.2   | ) |  | (139.4   | )
|Employee profit sharing                                   |  |                                             |   |  |         |   |  | (42.7    | ) |  | (56.1    | ) |  | (61.2    | )
|Other operating income (expenses), net                    |  | 16.0                                         |   |  | 78.3     |   |  | 1.6      |   |  | (26.1    | ) |  | (41.3    | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Total operating expenses                                  |  | (806.5                                       | ) |  | (777.5   | ) |  | (609.9   | ) |  | (540.4   | ) |  | (471.5   | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Income from operations                                    |  | 537.0                                        |   |  | 374.2    |   |  | 342.8    |   |  | 510.2    |   |  | 543.9    |  
|Non-operating income (expense)                            |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Interest income (expenses), net                           |  | (171.4                                       | ) |  | 163.4    |   |  | 105.4    |   |  | (4.1     | ) |  | (38.0    | )
|Foreign exchange gain (loss), net                         |  | 71.7                                         |   |  | (37.7    | ) |  | (4.0     | ) |  | (15.2    | ) |  | (12.2    | )
|Other non-operating income (expenses), net                |  |                                             |   |  |         |   |  |         |   |  | 9.1      |   |  | (0.1     | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Total non-operating income (expense)                      |  | (99.7                                        | ) |  | 125.7    |   |  | 101.4    |   |  | (10.2    | ) |  | (50.3    | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Income before income taxes                                |  | 437.3                                        |   |  | 499.9    |   |  | 444.2    |   |  | 500.0    |   |  | 493.6    |  
|Income tax expenses                                       |  | (41.1                                        | ) |  | (2.7     | ) |  | (44.4    | ) |  | (41.6    | ) |  | (112.1   | )
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Income before minority interest and results of affiliates |  | 396.2                                        |   |  | 497.2    |   |  | 399.8    |   |  | 458.4    |   |  | 381.5    |  
|Minority interest                                         |  | (7.5                                         | ) |  | (8.2     | ) |  | (9.6     | ) |  | (9.6     | ) |  | (1.3     | )
|Equity in results of affiliates                           |  |                                             |   |  | 0.3      |   |  | (0.1     | ) |  | (3.1     | ) |  |         |  
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  
|Net income                                                |  | 388.7                                        |   |  | 489.3    |   |  | 390.1    |   |  | 445.7    |   |  | 380.2    |  
|                                                          |  |                                              |   |  |          |   |  |          |   |  |          |   |  |          |  



5



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##### Table of Contents

|                             |  |                                              |  |         |  |          |  |          |  |         
|---------------------------- |  | -------------------------------------------- |  | ------- |  | -------- |  | -------- |  | --------
|                             |  | At and for the year ended December 31,      
|                             |  | 2008                                         |  | 2007    |  | 2006     |  | 2005     |  | 2004    
|                             |  | (in US$ millions, except per share/ADS data)
|Earnings per share           |  |                                              |  |         |  |          |  |          |  |         
|Common share  basic(3)      |  | 0.54                                         |  | 0.66    |  | 0.53     |  | 0.58     |  | 0.50    
|Preferred share  basic(3)   |  |                                             |  |        |  |         |  | 0.64     |  | 0.55    
|ADS  basic(3)               |  | 2.16                                         |  | 2.64    |  | 2.11     |  | 2.55     |  | 2.18    
|Common share  diluted(3)    |  | 0.54                                         |  | 0.66    |  | 0.53     |  | 0.58     |  | 0.49    
|Preferred share  diluted(3) |  |                                             |  |        |  |         |  | 0.63     |  | 0.54    
|ADS  diluted(3)             |  | 2.16                                         |  | 2.64    |  | 2.10     |  | 2.54     |  | 2.17    
|Dividends per share          |  |                                              |  |         |  |          |  |          |  |         
|Common share(1)(2)(3)        |  | 0.32837                                      |  | 0.17361 |  | 0.212420 |  | 0.260803 |  | 0.239678
|Preferred share(1)(2)(3)     |  |                                             |  |        |  |         |  | 0.286880 |  | 0.263645
|ADS(1)(2)(3)                 |  | 1.31348                                      |  | 0.69443 |  | 0.849680 |  | 1.147520 |  | 1.054580



|                                                              |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|------------------------------------------------------------- |  | -------------------------------------------- | - |  | ------- | - |  | ------- | - |  | ------- | - |  | ------- | -
|                                                              |  | At and for the year ended December 31,       |  
|                                                              |  | 2008                                         |   |  | 2007    |   |  | 2006    |   |  | 2005    |   |  | 2004    |  
|                                                              |  | (in US$ millions, except per share/ADS data) |  
|Weighted averaged number of shares outstanding (in thousands) |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Common share  basic(3)                                       |  | 726,084                                      |   |  | 740,142 |   |  | 739,904 |   |  | 242,544 |   |  | 242,544 |  
|Preferred share  basic(3)                                    |  |                                             |   |  |        |   |  |        |   |  | 479,288 |   |  | 474,994 |  
|Common share  diluted(3)                                     |  | 726,084                                      |   |  | 741,047 |   |  | 742,903 |   |  | 242,544 |   |  | 242,544 |  
|Preferred share  diluted(3)                                  |  |                                             |   |  |        |   |  |        |   |  | 482,739 |   |  | 479,217 |  
|                                                              |  |                                              |   |  |        
|Balance Sheet Data                                            |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Cash and cash equivalents                                     |  | 1,391.4                                      |   |  | 1,307.4 |   |  | 1,209.4 |   |  | 1,339.2 |   |  | 963.8   |  
|Temporary cash investments                                    |  | 810.1                                        |   |  | 1,185.7 |   |  | 555.8   |   |  | 574.4   |   |  | 397.0   |  
|Other current assets                                          |  | 3,715.0                                      |   |  | 3,156.6 |   |  | 3,026.3 |   |  | 2,702.0 |   |  | 2,514.7 |  
|Property, plant and equipment, net                            |  | 737.9                                        |   |  | 566.0   |   |  | 412.2   |   |  | 388.4   |   |  | 381.3   |  
|Other long-term assets                                        |  | 1,989.5                                      |   |  | 1,850.2 |   |  | 1,894.0 |   |  | 1,928.4 |   |  | 1,825.6 |  
|                                                              |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Total assets                                                  |  | 8,643.9                                      |   |  | 8,065.9 |   |  | 7,097.7 |   |  | 6,932.4 |   |  | 6,082.4 |  
|                                                              |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Short-term loans and financing(4)                             |  | 529.3                                        |   |  | 932.7   |   |  | 503.0   |   |  | 475.3   |   |  | 513.3   |  
|Other current liabilities                                     |  | 3,016.0                                      |   |  | 2,406.7 |   |  | 2,492.1 |   |  | 2,179.1 |   |  | 1,802.8 |  
|Long-term loans and financing(5)                              |  | 1,296.1                                      |   |  | 820.3   |   |  | 846.1   |   |  | 1,078.1 |   |  | 825.4   |  
|Other long-term liabilities                                   |  | 1,523.2                                      |   |  | 1,588.0 |   |  | 1,318.3 |   |  | 1,532.8 |   |  | 1,565.6 |  
|Minority interest                                             |  | 70.0                                         |   |  | 68.7    |   |  | 63.9    |   |  | 46.8    |   |  | 21.4    |  
|Shareholders equity                                          |  | 2,209.3                                      |   |  | 2,249.5 |   |  | 1,874.3 |   |  | 1,620.3 |   |  | 1,353.9 |  
|                                                              |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Total liabilities and shareholders equity                    |  | 8,643.9                                      |   |  | 8,065.9 |   |  | 7,097.7 |   |  | 6,932.4 |   |  | 6,082.4 |  
|                                                              |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Other Financial Data                                          |  |                                              |   |  |         |   |  |         |   |  |         |   |  |         |  
|Net cash provided by (used in) operating activities           |  | 321.8                                        |   |  | 580.4   |   |  | 386.9   |   |  | 346.9   |   |  | (398.8  | )
|Net cash used in investing activities                         |  | 168.9                                        |   |  | (784.3  | ) |  | (179.5  | ) |  | (50.5   | ) |  | (59.1   | )
|Net cash provided by (used in) financing activities           |  | (314.5                                       | ) |  | 137.0   |   |  | (395.1  | ) |  | 24.9    |   |  | 105.2   |  
|Depreciation and amortization                                 |  | 70.5                                         |   |  | 58.8    |   |  | 63.9    |   |  | 61.5    |   |  | 59.7    |  



|(1) | Includes interest on shareholders equity.
|--- | ------------------------------------------

|(2) | Translated from nominal reais into U.S. dollars at the commercial selling rates in effect on the last date of the month in which distributions were approved. As of
April 1, 2006, each ADS represents four common shares and before such date each ADS represented four preferred shares. The dividends per ADSs reflect the underlying dividends per share multiplied by four.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As a result of the merger of former Embraer with and into Embraer approved on March 31, 2006, each common share and preferred share of former Embraer was exchanged for one
common share of Embraer and each ADS of former Embraer was exchanged for one ADS of Embraer.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Excludes non-recourse and recourse debt. Includes current portion of long-term debt.
|--- | ------------------------------------------------------------------------------------

|(5) | Excludes non-recourse and recourse debt.
|--- | ----------------------------------------



6



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|                                                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|---------------------------------------------------------------------- |  | -------------------------------------- | -------- | ---- | --- | -------- |  | ---- | -------- | ---- | --- | -------- |  | --- | --------
|                                                                       |  | At and for the year ended December 31,
|                                                                       |  | 2008                                   |          | 2007 |     | 2006     |  | 2005 |          | 2004
|Other Data:                                                            |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Aircraft delivered during period(1):                                   |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|To the Commercial Aviation Market                                      |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|ERJ 145                                                                |  |                                        | 6        |      |     | 7        |  |      | 12       |      |     | 46       |  |     | 87 / 5  
|ERJ 135                                                                |  |                                        |         |      |     |         |  |      |         |      |     | 2        |  |     | 1 / 1   
|ERJ 140                                                                |  |                                        |         |      |     |         |  |      |         |      |     |         |  |     |        
|EMBRAER 170                                                            |  |                                        | 9        |      |     | 11       |  |      | 32 / 2   |      |     | 46 / 1   |  |     | 46      
|EMBRAER 175                                                            |  |                                        | 55       |      |     | 34       |  |      | 11 / 1   |      |     | 14       |  |     |        
|EMBRAER 190                                                            |  |                                        | 78 / 2   |      |     | 68       |  |      | 40       |      |     | 12       |  |     |        
|EMBRAER 195                                                            |  |                                        | 14       |      |     | 10       |  |      | 3        |      |     |         |  |     |        
|To the Defense and Government Market                                   |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|EMB 120 Brasília                                                       |  |                                        |         |      |     | 1        |  |      |         |      |     |         |  |     |        
|Legacy 600                                                             |  |                                        | 3        |      |     | 1        |  |      |         |      |     | 6        |  |     |        
|EMB 145                                                                |  |                                        | 1        |      |     | 1        |  |      |         |      |     | 1        |  |     | 1       
|EMB 135                                                                |  |                                        | 2        |      |     |         |  |      |         |      |     |         |  |     |        
|EMBRAER 170                                                            |  |                                        |         |      |     |         |  |      | 4 / 1    |      |     |         |  |     |        
|EMBRAER 190                                                            |  |                                        |         |      |     | 2        |  |      | 1        |      |     |         |  |     |        
|EMB 145 AEW&C/RS/MP                                                    |  |                                        |         |      |     |         |  |      |         |      |     | 1        |  |     | 6       
|EMB 312 Tucano / AL-X/ Super Tucano                                    |  |                                        |         |      |     | 28       |  |      | 14       |      |     | 24       |  |     | 7       
|To the Executive Aviation Market                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Legacy 600                                                             |  |                                        | 33       |      |     | 35       |  |      | 27       |      |     | 14       |  |     | 13      
|EMBRAER 175 Shuttle                                                    |  |                                        | 1        |      |     |         |  |      |         |      |     |         |  |     |        
|Phenom 100                                                             |  |                                        | 2        |      |     |         |  |      |         |      |     |         |  |     |        
|To the General Aviation Market                                         |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Light Propeller Aircraft                                               |  |                                        | 26       |      |     | 20       |  |      | 10       |      |     | 31       |  |     | 70      
|                                                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Total delivered                                                        |  |                                        | 230      |      |     | 218      |  |      | 154      |      |     | 197      |  |     | 231     
|                                                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|                                                                       |  |                                        |          |      |    
|Aircraft in backlog at the end of period:                              |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|In the Commercial Aviation Market                                      |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|EMB 120 Brasília                                                       |  |                                        |         |      |     |         |  |      | 1        |      |     |         |  |     |        
|ERJ 145                                                                |  |                                        | 40       |      |     | 46       |  |      | 53       |      |     | 10       |  |     | 66      
|ERJ 135                                                                |  |                                        |         |      |     |         |  |      | 1        |      |     | 15       |  |     | 17      
|ERJ 140                                                                |  |                                        |         |      |     |         |  |      |         |      |     | 20       |  |     | 20      
|EMBRAER 170                                                            |  |                                        | 45       |      |     | 31       |  |      | 29       |      |     | 104      |  |     | 112     
|EMBRAER 175                                                            |  |                                        | 20       |      |     | 70       |  |      | 74       |      |     | 8        |  |     | 15      
|EMBRAER 190                                                            |  |                                        | 237      |      |     | 282      |  |      | 264      |      |     | 178      |  |     | 155     
|EMBRAER 195                                                            |  |                                        | 84       |      |     | 47       |  |      | 43       |      |     | 29       |  |     | 15      
|In the Defense and Government Market                                   |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|EMB 145 AEW&C/RS/MP                                                    |  |                                        | 3        |      |     |         |  |      |         |      |     |         |  |     | 1       
|EMB 312 Tucano/EMB 314/EP Super Tucano                                 |  |                                        | 123      |      |     | 104      |  |      | 80       |      |     | 93       |  |     | 69      
|EMB 145                                                                |  |                                        |         |      |     | 1        |  |      |         |      |     |         |  |     |        
|EMB 135                                                                |  |                                        | 1        |      |     | 2        |  |      |         |      |     |         |  |     |        
|Legacy 600 / Phenom 100                                                |  |                                        | 4        |      |     | 3        |  |      | 1        |      |     |         |  |     | 5       
|EMBRAER 170/ EMBRAER 190                                               |  |                                        | 2        |      |     |         |  |      |         |      |     | 3        |  |     |        
|In the Executive Aviation Market                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Legacy 450/500/600/Phenom 100/300/Lineage 1000/EMBRAER 170/190 Shuttle |  |                                        | 978      |      |     | 766      |  |      | 384      |      |     | 15       |  |     | 4       
|In the General Aviation Market                                         |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Light Propeller Aircraft                                               |  |                                        |         |      |     |         |  |      |         |      |     | 6        |  |     | 25      
|                                                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Total backlog (in aircraft)                                            |  |                                        | 1,537    |      |     | 1,352    |  |      | 930      |      |     | 481      |  |     | 504     
|                                                                       |  |                                        |          |      |     |          |  |      |          |      |     |          |  |     |         
|Total backlog (in millions)                                            |  | US$                                    | 20,935.0 |      | US$ | 18,827.0 |  | US$  | 14,806.0 |      | US$ | 10,383.0 |  | US$ | 10,097.0



|(1) | Figures appearing after a forward slash (/) refer to aircraft delivered under operating leases.
|--- | -----------------------------------------------------------------------------------------------



7



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##### Table of Contents

Exchange Rates

Prior to March 4, 2005, there were two principal legal foreign exchange markets in Brazil:



| |  |  | the commercial rate exchange market, and
| | - |  | ----------------------------------------



| |  |  | the floating rate exchange market.
| | - |  | ----------------------------------

Most trade and financial foreign exchange transactions were carried out on the commercial rate exchange market. These included the purchase or sale of shares or payment of dividends or interest with respect to shares. Foreign currencies
could only be purchased in the commercial exchange market through a Brazilian bank authorized to buy and sell currency in these markets. In both markets, rates were freely negotiated.

Resolution No. 3,265 by the Conselho Monetário Nacional (National Monetary Council), or CMN, dated March 4, 2005, consolidated
the foreign exchange markets into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out through institutions authorized to operate in the consolidated market and are subject to
registration with the electronic registration system of the Central Bank of Brazil, or Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and during that period, the real/U.S. dollar
exchange rate has fluctuated considerably. At April 20, 2009, the commercial selling rate for U.S. dollars was R$2.2350 per US$1.00. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange
rates. We cannot predict whether the Central Bank or the Brazilian government will continue to let the real float freely or will intervene in the exchange rate market through a currency band system or otherwise. The real may depreciate
or appreciate against the U.S. dollar substantially in the future. See Item 3D. Risk FactorsRisks Relating to Brazil.

The following table sets forth the commercial selling rate, expressed in reais per U.S. dollar, for the periods indicated.



|                        |  |                                   |  |        |  |             |  |           
|----------------------- |  | --------------------------------- |  | ------ |  | ----------- |  | ----------
|                        |  | Exchange Rate of Reais to US$1.00
|                        |  | Low                               |  | High   |  | Average (1) |  | Period-end
|Year ended December 31, |  |                                   |  |        |  |             |  |           
|2004                    |  | 2.6544                            |  | 3.2051 |  | 2.9171      |  | 2.6544    
|2005                    |  | 2.1633                            |  | 2.7621 |  | 2.4125      |  | 2.3407    
|2006                    |  | 2.0586                            |  | 2.3711 |  | 2.1771      |  | 2.1380    
|2007                    |  | 1.7325                            |  | 2.1556 |  | 1.9500      |  | 1.7713    
|2008                    |  | 1.5593                            |  | 2.5004 |  | 1.8346      |  | 2.3370    



|                              |  |                                   |  |        |  |            |  |           
|----------------------------- |  | --------------------------------- |  | ------ |  | ---------- |  | ----------
|                              |  | Exchange Rate of Reais to US$1.00
|                              |  | Low                               |  | High   |  | Average(2) |  | Period-end
|Month/period ended            |  |                                   |  |        |  |            |  |           
|November 30, 2008             |  | 2.1210                            |  | 2.4277 |  | 2.2663     |  | 2.3331    
|December 31, 2008             |  | 2.3370                            |  | 2.5004 |  | 2.3944     |  | 2.3370    
|January 31, 2009              |  | 2.1889                            |  | 2.3803 |  | 2.3074     |  | 2.3162    
|February 28, 2009             |  | 2.2446                            |  | 2.3916 |  | 2.3127     |  | 2.3784    
|March 31, 2009                |  | 2.2375                            |  | 2.4218 |  | 2.3138     |  | 2.3152    
|April 2009 (through April 20) |  | 2.1699                            |  | 2.2899 |  | 2.2090     |  | 2.2350    



Source: Central Bank.

|(1) | Represents the average of the exchange rates on the last day of each month during the relevant periods.
|--- | -------------------------------------------------------------------------------------------------------

|(2) | Represents the average of the exchange rates during the relevant periods.
|--- | -------------------------------------------------------------------------

We will pay any cash dividends and make any other cash distributions with respect to the common shares in reais. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the
holders of American Depositary Shares, or ADSs, upon the conversion into U.S. dollars by the depositary of our ADS program of such distributions for payment to holders of ADSs. Fluctuations in the exchange rate between the real and the U.S.
dollar may also affect the U.S. dollar equivalent of the real price of our common shares on the São Paulo Stock Exchange.



8



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##### Table of Contents

|3B. | Capitalization and Indebtedness
|--- | -------------------------------

Not applicable.



|3C. | Reasons for the Offer and Use of Proceeds
|--- | -----------------------------------------

Not
applicable.



|3D. | Risk Factors
|--- | ------------

Risks Relating to Embraer

A downturn in commercial aviation may reduce our sales and revenue, and, consequently, our profitability, in any given year.

We expect that a substantial portion of our sales in the near future will be derived from sales of commercial aircraft, particularly the EMBRAER 170/190
jet family. Historically, the market for commercial aircraft has been cyclical due to a variety of factors that are both external and internal to the air travel industry, including general economic conditions.

The commercial airline industry has been negatively impacted by a number of factors since 2001. First, the U.S. and world economies experienced an
economic downturn that began in 2001 and was characterized by rapid declines in securities markets, a decline in productivity and an increase in unemployment. Second, the terrorist attacks of September 11, 2001 caused an immediate decline in
airline travel and a high level of financial uncertainty among the worldwide commercial airline industry.

In addition, airline travel
decreased significantly in 2003 as a result of both the commencement of military action by the United States and other countries in Iraq and the concerns over outbreaks of severe acute respiratory syndrome (SARS) in Asia and Canada. In response to
these events, beginning in the fourth quarter of 2001, many airlines, including our largest customers, reduced their flight schedules for the long-term and announced significant lay-offs, and a number of airlines filed for bankruptcy protection. As
a result, we agreed to modify, between 2001 and 2004, certain delivery schedules to adjust to the changes in our customers businesses and reduced scheduled commercial aircraft, executive jet and government transportation aircraft deliveries.
In 2004, we reduced scheduled deliveries from 160 to 145 aircraft following US Airways second Chapter 11 filing in September 2004. In 2003 and 2004, we also re-evaluated our risk exposure related to aircraft valuations and customer credit
risk, which resulted in charges to income of US$40.6 million and US$16.0 million, respectively.

Although the U.S. and world economies
showed some signs of recovery starting in 2004, many airlines continued to face increased competition, escalating insurance costs, increased security costs, credit downgrades, liquidity concerns and bankruptcy, and later sharply higher fuel costs.

In the second half of 2007, the economies of the U.S. and many other countries began to experience downturns which were characterized by,
among other factors, instability in securities value and capital markets, instability of currencies, a widespread reduction in demand, sharp reductions in the availability of credit, inflationary pressure.

By the second half of 2008, the additional effects of the severe economic downturns in our markets included significant reductions in air travel and
contractions in corporate and personal spending which, as a result, have negatively impacted our product lines. Additional impacts of such downturns on the air transport industry have been a dramatic decrease in orders of executive jets and the lack
of financing available to our customers for aircraft purchases, particularly in the commercial and executive aviation segments (see Item 4B Business OverviewAircraft Financing Arrangements). A continuation of a downturn in general
economic conditions could result in further reductions in air travel and decreased orders from our customers for our aircraft. Our customers could also defer or cancel their purchases of our aircraft. We cannot, at this time, predict the magnitude
or duration of the impact that the above events will have on the air transport industry as a whole and on our business in particular.



9



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##### Table of Contents

During the three-month period ended March 31, 2009, we reduced our personnel by 20% to reflect the
new demand for commercial and executive jets in the current economic crisis. In addition, we also experienced some cancellations of aircraft orders by our customers, including the HNA Group, a Chinese airline, that reduced its firm orders for 50 ERJ
145 regional aircraft, of which 11 had already been delivered, to 25. Although these cancellations have occurred only in our executive aviation business, we cannot guarantee that material cancellations will not occur in the future or that our other
businesses will not be affected. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our sales and revenue, and, consequently, our profitability for that year.

We depend on key customers and key suppliers, the loss of any of which could harm our business.

Commercial aircraft. As of March 31, 2009, all of our firm orders in backlog for the ERJ 145 regional jet family were attributable to a
Chinese company, the HNA Group. The aircraft will be assembled by our joint venture Harbin Embraer Aircraft Industry Company Ltd., formed with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., subsidiaries of China
Aviation Industry Corp. II, or AVIC II.

In addition, at March 31, 2009, 57.8% of our firm orders in backlog for the EMBRAER 170/190
jet family were for JetBlue Airways and US Airways from North America, HNA Group from China, Lufthansa from Germany, JAL from Japan, LOT Polish from Poland and Azul, the new Brazilian airline founded by David Neeleman. Furthermore, in 2008 we signed
firm orders with the following new clients: Air Moldova from Moldavia, the aircraft leasing company Jetscape, Inc., from the U.S., Regional, a subsidiary of Air France, EgyptAir Holding Company from Egypt, Finnair from Finland, M1 Travel Ltd. from
Lebanon, ETA Star Group from Dubai, TRIP Linhas Aéreas from Brazil, Kun Peng Airlines from China, Aeroméxico from Mexico, Nasair Aviation from Saudi Arabia, and NIKI from Austria. We believe that we will continue to depend on a number
of key customers, and the loss of any one of which could reduce our sales and reduce our market share. Fewer sales could reduce our profitability.

Increasingly, the commercial airline industry is experiencing consolidation and alliances through mergers and acquisitions and code-sharing arrangements. Although it is expected that such consolidations and alliances may result in the
creation of more stable and competitive airlines, they may also have the effect of reducing the number of our customers and, possibly, the number of purchases of our aircraft through cost reduction programs or otherwise.

Defense aircraft. The Força Aérea Brasileira, or Brazilian Air Force, is our largest customer of defense aircraft products.
Sales to the Brazilian government accounted for approximately 42% of our defense and government sales for the year ended December 31, 2008. A decrease in defense spending by the Brazilian government due to defense spending cuts, general
budgetary constraints or other factors that are out of our control could decrease our defense and government sales and defense research and development funding. We cannot assure you that the Brazilian government will continue to purchase aircraft or
services from us in the future at the same rate or at all.

Key suppliers. Our risk-sharing partners develop and manufacture
significant portions of our aircraft, including the engines, hydraulic components, avionics, interior and parts of the fuselage and tail. Once risk-sharing partners have been selected and program development and aircraft production have begun, it is
difficult to substitute these partners. In some cases, the aircraft are designed specifically to accommodate a particular component, such as the engines, which cannot be substituted by another manufacturer without significant delays and expenses.
This dependence makes us susceptible to the risks of performance, product quality and financial condition of these risk-sharing partners.

We cannot assure you that we will not experience significant delays in obtaining key equipment in our manufacturing process in the future. A large number of the equipment employed by the aircraft industry is subject to export control
regulations and, as such, deliveries are dependent on suppliers having secured the applicable export licenses. In 2007, deliveries of equipment for one of our defense products were temporarily suspended due to export control requirements. Although
we work closely with and monitor the production process of our risk-sharing partners and suppliers, the failure of our risk-sharing partners and other major suppliers to meet our performance specifications, quality standards or delivery schedules or
to comply with regulatory requirements (including export control requirements) could affect our ability to deliver new aircraft to customers in a timely manner.



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Our aircraft sales are subject to cancellation provisions that may reduce our cash flows.

A portion of our aircraft firm orders is subject to significant contingencies, both before and after delivery. Prior to delivery, some of our purchase
contracts may be terminated, or all or a portion of a particular firm order may be canceled, for different reasons, including:



| |  |  | extended delays in delivering aircraft or failure to obtain certification of the aircraft or otherwise meet performance milestones and other requirements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure of a customer to receive financing, when required, with respect to any aircraft at the scheduled delivery date, in which case the customer can cancel the
order for the particular aircraft to be delivered or terminate the contract with respect to all undelivered aircraft; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | production rate shortfalls.
| | - |  | ---------------------------

Our
customers may also reschedule deliveries, particularly during an economic downturn. During the three-month period ended March 31, 2009, we experienced some cancellations of aircraft orders by our customers, including the HNA Group, a Chinese
airline, that reduced its firm orders for 50 ERJ 145 regional aircraft, of which 11 had already been delivered, to 25. Although these cancellations have occurred only in our executive aviation business, we cannot guarantee that material
cancellations will not occur in the future or that our other businesses will not be affected. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our sales and revenue, and,
consequently, our profitability, for that year. A substantial number of cancellations or extensions of delivery schedules could reduce our sales and revenue for a given year, which in turn would reduce our cash flow.

Our aircraft sales are subject to trade-in options and financial and residual value guarantees that may require us to make significant cash disbursements in the
future.

In connection with the signing of a purchase agreement for new aircraft, we may provide trade-in options to our customers.
These options provide a customer with the right to trade-in existing aircraft upon the purchase of a new aircraft. In 2008, we were required to accept four aircraft for trade-in and at December 31, 2008, eight additional commercial aircraft
were subject to trade-in options to be exercised until 2010. Other aircraft may become subject to trade-in due to new sales agreements. The trade-in price is determined in the manner discussed under Item 5A. Operating ResultsCritical
Accounting EstimatesGuarantees and Trade-In Rights for commercial aircraft. We may be required to accept trade-ins at prices that are above the market price of the aircraft, which would result in financial loss for us when we remarket
the aircraft.

We have in the past guaranteed, and may in the future guarantee, the financial performance of a portion of the financing
for, and the residual value of, some of our aircraft that have already been delivered. Financial guarantees are provided to financing parties to support a portion of the payment obligations of purchasers of our aircraft under their financing
arrangements to mitigate default-related losses. These guarantees are collateralized by the financed aircraft.

Residual value guarantees
typically ensure that, in the 15th year after delivery, the relevant aircraft will have a residual market value of the original sale price. Most of our residual value guarantees are subject to a limitation (a cap) and, therefore, on
average, our residual value guarantee exposure is limited to 18% of the original sale price. In the event of an exercise by a purchaser of its residual value guarantee, we will bear the difference between the guaranteed residual value and the market
value of the aircraft at the time of exercise.

Assuming all customers that are supported by off-balance sheet financial guarantees
defaulted on their aircraft financing arrangements, and also assuming we were required to pay the full aggregate amount of outstanding financial and residual value guarantees and were unable to remarket any of the aircraft to offset our obligations,
our maximum exposure under these guarantees (less provisions and liabilities) would have been US$1,870.1 million as of December 31, 2008. For further discussion of these off-balance sheet arrangements, see Note 35 to our audited consolidated
financial statements. We have deposited US$299.7 million in escrow accounts to secure a portion of our financial guarantees. Based on current estimates, we believe that the proceeds from the sale



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or lease of the covered aircraft (based on resale value as of December 31, 2008) and from other offsetting collections, such as cash deposits, would be
US$2,013.5 million as of December 31, 2008. As a result, we would be obligated to make substantial payments that are not recoverable through proceeds from aircraft sales or leases, particularly if in the future, we were not able to remarket any
of the aircraft to offset our obligations or financing defaults occur with respect to a significant portion of our aircraft. The value of the underlying aircraft is more likely to decrease and third parties are more likely to default during economic
downturns.

We continually re-evaluate our risk for the financial guarantees and trade-in obligations based on a number of factors,
including the estimated future market value of our aircraft based on third party appraisals, including information developed from similar aircraft remarketing in the secondary market, and the credit rating for the customers. For example, the last
time we recorded a charge against income in connection with financial guarantees was in 2004, when we recorded an amount of US$16.0 million based on our risk assessment, on an individual aircraft basis, for the corresponding issued guarantees. Any
future decrease in the market value of the aircraft covered by trade-in rights or financial guarantees would decrease our ability to recoup the amounts payable to satisfy our obligations and cause us to incur additional charges to income. If we are
required to pay amounts related to such guarantees, we may not have sufficient cash or other financial resources available to do so and may need to seek financing to fund these payments. We cannot assure you that the then-prevailing market
conditions would allow us to resell or lease the underlying aircraft at its anticipated fair value or in a timely manner. Consequently, honoring our trade-in or financial guarantee obligations could require us to make significant cash disbursements
in a given year, which, in turn, would reduce our cash flow in that year.

Any decrease in Brazilian government-sponsored customer financing, or
increase in government-sponsored financing that benefits our competitors, may decrease the cost-competitiveness of our aircraft.

Historically, when purchasing our aircraft, our customers have benefited from export financing incentives provided by Brazilian government-sponsored export programs. The most important of these government programs is a system of interest
rate adjustments called the Programa de Financiamento às Exportações (the Export Financing Program), or ProEx program.

As a result of past disputes between the Canadian and Brazilian governments at the World Trade Organization, or WTO, regarding the granting of export subsidies relating to sales of aircraft, the Brazilian government ultimately amended the
ProEx program so that any ProEx payments would not decrease the effective interest rate below the interest rate permitted by the WTO and the Canadian government has also made changes to their financing arrangements for sales of aircraft by
Bombardier, a Canadian aircraft manufacturer.

Although the ProEx program is currently in compliance with WTO rules, other export financing
programs available to our customers may be subject to challenge in the future. If the ProEx program or another similar program is not available in the future, or if its terms are substantially reduced, our customers financing costs could be
higher and our cost-competitiveness in the regional jet market could decrease.

Any future government subsidies supporting any of our major
competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

In July 2007, Brazil and the
Organization for Economic Co-operation and Development, or OECD, countries entered into an agreement to establish a level -playing field for official export financing support of aircraft. Export Credit Agencies, or ECAs, from signatory
countries are required to offer the same financial terms and conditions when financing sales of competing aircraft. The effect of the agreement is to focus on the price and quality of aircraft products offered by aircraft manufacturers rather than
on the financial packages offered by their respective governments. As a result of the agreement financing support by the Brazilian government to the potential purchasers of our aircraft will contain similar terms and conditions offered by Boeing,
Airbus and Bombardier to such purchasers. By the end of 2007, the Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Social and Economic Development Bank), or BNDES, started to offer financing to our customers under terms
and conditions required by the agreement. To the extent we do not continue to maintain the pricing advantage and quality of our aircraft, our future sales may be negatively affected. In addition, aircraft manufacturers from countries which are not
signatories to the agreement may be able to offer financing packages which will negatively affect the cost competitiveness of our products.



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Brazilian government budgetary constraints could reduce amounts available to our customers under
government-sponsored financing programs.

From 1996 through 2008, approximately 28% of the total value of our exports sales was
subject to financing by BNDES. As a government agency BNDES relies on funds allocated by the Brazilian national budget. We can not assure you that the Brazilian government will continue to provide sufficient funding in the national budget for the
financing of our aircraft or that other sources of funding will be available to our customers in the market. The loss or significant reduction of funds available to our customers, without an adequate substitute, could lead to fewer sales and result
in lower profitability for us.

We may face a number of challenges resulting from the development of new products and the possible pursuit of
strategic growth opportunities.

As we continue to develop new products, we may need to reallocate existing resources and
coordinate with new suppliers and risk-sharing partners. From time to time, there is significant competition within the aviation industry for skilled personnel in general and engineers in particular. To the extent such competition reoccurs, we may
be unable to recruit the necessary number of highly skilled engineers and other personnel we require. Failure to coordinate our resources in a timely manner or to attract and retain skilled personnel could impede our development efforts and cause
delays in production and deliveries of our aircraft, which would delay recognition of revenue.

We may pursue strategic growth
opportunities, including joint ventures, acquisitions or other transactions, to expand our business or enhance our products and technology. We may face a number of challenges, including difficulties in identifying appropriate candidates,
assimilating their operations and personnel and maintaining internal standards and controls, as well as the diversion of our managements focus from our ongoing business. We cannot assure you that we will be able to meet these challenges or
that our business will not face disruptions.

We may have to refund cash contributions in connection with the production or development of the
EMBRAER 170/190 jet family, the Phenom 100/300 family and the Legacy 450/500 family if certain milestones for each of these aircraft are not reached.

We have arrangements with our risk-sharing partners, pursuant to which they have contributed to us, in cash, a total of US$397.9 million in 2008 and we expect to receive an additional US$303.7 million in future years
for the development of the Phenom 300 and Legacy 450/500 family. Cash contributions do not have to be returned by us to the risk-sharing partners if we fulfill certain milestones agreed with our risk-sharing partners. In 2008, US$353.6 million of
these cash contributions had become nonrefundable. If we cancel the production of any aircraft in the EMBRAER 170/190 jet family or of the Phenom 100, or the development of the Phenom 300 or of the Legacy 450/500 family because we are unable to
obtain certification or for other nonmarket related reasons, we may be required to refund US$44.3 million of the total cash contributions already received. We expect the certification of the Phenom 300 to be granted in the second half of 2009. The
Legacy 450/500 executive jets are expected to enter into service in 2013 and 2012, respectively.

If we require additional financing and we
are unable to obtain it, we will not be able to continue to develop and market our Phenom 300 and Legacy 450/500 aircraft family.

We face
significant international competition, which may adversely affect our market share.

The worldwide commercial aircraft
manufacturing industry is highly competitive. We are one of the leading manufacturers of commercial aircraft in the world, along with The Boeing Company, Airbus S.A.S. and Bombardier Inc., all of which are large international companies. Certain of
these competitors have greater financial, marketing and other resources than we do. Although we have attained a significant share of the market for our commercial aircraft products, we cannot assure you that we will be able to maintain this market
share. Our ability to maintain market share and remain competitive in the commercial aircraft manufacturing market over the long term requires continued technological and performance enhancement to our products. Our primary competitor in the
regional and mid-capacity jet markets is Bombardier Inc., a Canadian company, which has significant technological capabilities and financial and marketing resources and benefits from government-sponsored export subsidies. In addition, other
international aircraft manufacturers, including The Boeing Company and Airbus S.A.S., produce or are developing aircraft at the high end of the 70-120 seat category, in which our EMBRAER 170/190 jet family competes thereby increasing the competitive
pressures in that



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category. These companies also have significant technological capabilities and greater financial and marketing resources. Additionally, Chinese, Russian and
Japanese companies are developing mid-capacity jets and already have firm orders in backlog.

As a relatively new entrant to the business
jet market, we also face significant competition from companies with longer operating histories and established reputations in this industry. Some of our competitors in the business jet market may also reach the market before we do, allowing them to
establish a customer base and making our efforts to gain greater market share more difficult. We cannot assure you that we will be able to compete successfully in the business jet markets in the future.

We may have to make significant payments as a result of unfavorable outcomes of pending challenges to various taxes and payroll charges.

We have challenged the constitutionality of certain Brazilian taxes and payroll charges, as well as modifications and increases in the rates and basis of
calculation of such taxes and charges. Interest on the total amount of these unpaid taxes and payroll charges accrues monthly based on the Selic rate, the principal lending rate of the Central Bank, and we make an accrual as part of the interest
income (expenses), net item in our statements of income. As of December 31, 2008, we had obtained preliminary injunctions permitting us not to pay certain taxes, in the total amount, including interest, of US$332.1 million, which is included as
a liability (taxes and payroll charges) on our balance sheet. We are awaiting a final decision in these proceedings. We cannot assure you that we will prevail in these proceedings or that we will not have to pay significant amounts, including
interest, to the Brazilian government in the future as payment for these liabilities. For an additional discussion of these liabilities, see Note 17 to our audited consolidated financial statements.

Risks Relating to the Commercial Airline Industry

Scope clause
restrictions in airline pilot contracts may limit demand for regional and mid-capacity jets in the U.S. market.

A key limiting
factor in demand for regional and mid-capacity jets is the existence of scope clauses contained in airline pilot contracts. These scope clauses are union-negotiated restrictions on the number and/or size of regional and mid-capacity jets that a
particular carrier may operate. Current scope clause restrictions, which are more prevalent in the United States, include restrictions on the number of seats, weight of aircraft and number of 50-70 seat commercial aircraft in an airlines
fleet. As a result, our opportunities for near-term growth in the U.S. regional jet market in the 30-60 and 60-90 seat categories may be limited. The continuation or further tightening of scope clauses could also lead some of our customers who have
purchased options to acquire our regional and mid-capacity jets not to exercise those options. We cannot assure you that current restrictions will be lessened, or will not be expanded, including by amending these scope clauses to cover larger-sized
commercial aircraft. Furthermore, although scope clauses are less prevalent outside the United States, we cannot assure you that scope clauses will not become more prevalent or restrictive, or that some other form of restriction will not take
effect, in Europe or in other markets.

We are subject to stringent certification requirements and regulation, which may prevent or delay our
obtaining certification in a timely manner.

Our products are subject to regulation in Brazil and in each jurisdiction where our
customers are located. The aviation authorities in Brazil and in other countries, in which our customers are located, including the Agência Nacional de Aviação Civil,or Brazilian aviation authority, the U.S. Federal
Aviation Authority, or FAA, the Joint Aviation Authority of Europe, or JAA, and the European Aviation Safety Agency, or EASA, must certify our aircraft before we can deliver them. We cannot assure you that we will be able to obtain certification of
our aircraft on a timely basis or at all. If we fail to obtain a required certification from an aviation authority for any of our aircraft, that aviation authority can prohibit the use of that aircraft within its jurisdiction until certification has
been obtained. In addition, complying with the requirements of the certification authorities can be both expensive and time-consuming.

Changes in government regulations and certification procedures could also delay our start of production as well as entry into the market with a new product. We cannot predict how future laws or changes in the interpretation, administration
or enforcement of laws will affect us. We may be required to spend significantly more money to comply with these laws or to respond to these changes.



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Any catastrophic events involving our aircraft could adversely affect our reputation and future sales of our
aircraft, as well as the market price of the common shares and the ADSs.

We believe that our reputation and the safety record of
our aircraft are important selling points for our products. We design our aircraft with backup systems for major functions and appropriate safety margins for structural components. However, the safe operation of our aircraft depends to a significant
degree on a number of factors largely outside our control, including our customers proper maintenance and repair of our aircraft and pilot skill. The occurrence of one or more catastrophic events involving one of our aircraft could adversely
affect our reputation and future sales, as well as the market price of our common shares and the ADSs.

Risks Relating to Brazil

Brazilian political and economic conditions have a direct impact on our business and the trading price of our common shares and ADSs.

The Brazilian government has frequently intervened in the Brazilian economy and occasionally has made drastic changes in policy and regulations. The
Brazilian governments actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital
controls and limits on imports. Our business, financial condition, results of operations and the trading price of the common shares and the ADSs may be adversely affected by changes in policy or regulations at the federal, state or municipal level
involving or affecting factors such as:



| |  |  | interest rates;
| | - |  | ---------------



| |  |  | monetary policies;
| | - |  | ------------------



| |  |  | exchange controls and restrictions on remittances abroad (such as those that were imposed in 1989 and early 1990);
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | currency fluctuations;
| | - |  | ----------------------



| |  |  | inflation;
| | - |  | ----------



| |  |  | liquidity of domestic capital and lending markets;
| | - |  | --------------------------------------------------



| |  |  | tax policies; and
| | - |  | -----------------



| |  |  | other political, diplomatic, social and economic developments in or affecting Brazil.
| | - |  | -------------------------------------------------------------------------------------

Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors in the future may
contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian companies.

In addition, in October 2006 elections were held in all states of Brazil and at the federal level to elect state governors and the president. The re-elected president has, to date, largely continued the policies of
his previous administration; however, it is impossible to predict how new policies that may be adopted by the president or by the state governors would affect the Brazilian economy or our business.

Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy in the past; in particular, political crises have
affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil.

These and
other future developments in the Brazilian economy and governmental policies may adversely affect us and our business and results of operations and may adversely affect the trading price of our common shares and ADSs.



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Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in Brazil
and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of the common shares and ADSs.

Brazil experienced extremely high rates of inflation in the past. More recently, Brazils annual rate of inflation was 1.2% in 2005, 3.8% in 2006, 7.7% in 2007 and 9.8% in 2008 as measured by the Índice
Geral de Preços  Mercado (General Market Price Index), or IGP-M. Inflation, and certain government actions taken to combat inflation, have in the past had significant negative effects on the Brazilian economy. Actions taken to
combat inflation, coupled with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets.

Future Brazilian government actions, including interest rate decreases, intervention in the foreign exchange market and actions to adjust or fix the
value of the real may trigger increases in inflation. If Brazil experiences high inflation again in the future, our operating expenses and borrowing costs may increase, our operating and net margins may decrease and, if investor confidence
decreases, the price of our common shares and ADSs may fall.

Exchange rate instability may adversely affect our financial condition and results of
operations and the market price of the common shares and ADSs.

Although most of our net sales and debt are U.S.
dollar-denominated, the relationship of the real to the value of the U.S. dollar, and the rate of depreciation of the real relative to the prevailing rate of inflation, may adversely affect us.

As a result of inflationary pressures, among other factors, the Brazilian currency has devalued periodically during the last four decades. Throughout
this period, the Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily
to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, devaluation over shorter
periods has resulted in significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies.

The exchange rate (R$/US$) increased by 9.3% in 2000 and 18.7% in 2001. In 2002, the exchange rate (R$/US$) also increased 52.3%, due in part to political uncertainty surrounding the Brazilian presidential elections and the global economic
slowdown. Although the exchange rate (R$/US$) decreased 18.2%, 8.1%, 11.8%, 8.7% and 17.2% in 2003, 2004, 2005, 2006 and 2007, respectively, in 2008 it increased 31.9%. No assurance can be given that the real will not appreciate or depreciate
significantly against the U.S. dollar in the future.

Historically, depreciations in the real relative to the U.S. dollar have also
created additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary government policies to curb aggregate demand. On the other hand, appreciation of the real against the U.S.
dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth. Depreciations generally curtail access to foreign financial markets and may prompt government intervention, including
recessionary governmental policies. Depreciations of the real relative to the U.S. dollar would also reduce the U.S. dollar value of distributions and dividends on our ADSs and may also reduce the market value of our common shares and ADSs.

Appreciation of the real against the U.S. dollar may also have an adverse impact on the competitiveness of our products as
approximately 13% of our production inputs, including labor costs, are incurred and denominated in reais. Therefore, appreciations of the real against the U.S. dollar or other currencies increases the costs of our products when
measured in U.S dollars, and may result in a decrease in our margins.

Economic developments and investor perceptions of risk in other countries,
including emerging market countries, may adversely affect the trading price of Brazilian securities, including our common shares and ADSs.

The market value of securities of Brazilian issuers is affected to varying degrees by economic and market conditions in other countries, including other Latin American and emerging market countries. Although economic conditions in such
countries may differ significantly from economic conditions in Brazil, the reaction of investors to developments in these other countries may have an



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adverse effect on the market value of securities of Brazilian issuers. For example, the occurrence in 2008 of the global economic crisis has had a global
impact on the world economy and capital markets. Such crisis is evidenced by instability in securities value and capital markets, instability of most currencies, a widespread reduction in demand, a credit crunch, inflationary pressure, and
other factors that could adversely affect our financial condition and diminish investors interest in securities of Brazilian issuers, including ours. Future crises in other countries could adversely affect the trading price of our common
shares and ADSs, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all.

Risks Relating to our Common Shares and ADSs

If holders of ADSs exchange the ADSs for common shares, they risk losing the ability to
remit foreign currency abroad and Brazilian tax advantages.

The Brazilian custodian for the common shares has obtained an
electronic certificate of registration from the Central Bank permitting it to remit foreign currency abroad for payments of dividends and other distributions relating to the common shares or upon the disposition of the common shares. If holders of
ADSs decide to exchange their ADSs for the underlying common shares, they will be entitled to continue to rely on the custodians electronic certificate of registration for five business days from the date of exchange. Thereafter, such holders
of ADSs may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, the common shares unless they obtain their own electronic certificate of registration or register their investment in the
common shares pursuant to Resolution No. 2,689, which entitles certain foreign investors to buy and sell securities on the São Paulo Stock Exchange. Holders who do not qualify under Resolution No. 2,689 will generally be subject to
less favorable tax treatment on gains with respect to the common shares. If holders of ADSs attempt to obtain their own electronic certificate of registration, they may incur expenses or suffer delays in the application process, which could delay
their ability to receive dividends or distributions relating to the common shares or delay the return of their capital in a timely manner. In addition, we cannot assure you that the custodians electronic certificate of registration or any
certificate of foreign capital registration obtained by a holder of ADSs will not be affected by future legislative or other regulatory changes, or that additional restrictions applicable to such holder, to the disposition of the underlying common
shares or to the repatriation of the proceeds from such disposition will not be imposed in the future.

The Brazilian government has veto power over
change of control, change of name, trademark or corporate purpose and over the creation or alteration of our defense programs, and its interests could conflict with the interests of the holders of our common shares or ADSs.

The Brazilian government holds one share of a special class of our common stock called a golden share, which carries veto power over change
of control, change of our name, trademark or corporate purpose and over the creation or alteration of our defense programs (whether or not the Brazilian government participates in such programs). The Brazilian government may have an interest in
vetoing transactions that may be in the interests of the holders of our common shares or ADSs.

Our bylaws contain provisions that could discourage
our acquisition or prevent or delay transactions that you may favor.

Our bylaws contain provisions that have the effect of
avoiding the concentration of our common shares in the hands of a small group of investors so as to promote the dispersed ownership of such shares. These provisions require any shareholder or group of shareholders that acquires or becomes the holder
of (1) 35% or more of the total shares issued by us or (2) other rights over shares issued by us that represent more than 35% of our capital, to make a public tender offer to purchase all of our shares on the terms specified in our bylaws,
or to sell all of such shareholders shares that exceed the 35% limit, in either case, as required by the Brazilian government. If the request is approved, such shareholder or group of shareholders must commence the public tender offer within
60 days of the date of approval. If the request is refused, such shareholder or group of shareholders must sell such number of common shares within 30 days so that the holding of such shareholder or group of shareholders is less than 35% of our
capital stock. These provisions may have anti-takeover effects and may discourage, delay or prevent a merger or acquisition, including transactions in which our shareholders might otherwise receive a premium for their common shares and ADSs. These
provisions can only be altered or overridden with the approval of our Board of Directors and our shareholders in a shareholders meeting convened for this purpose, and with the consent of the Brazilian government, as holder of the golden share.



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The absence of a single, controlling shareholder or group of controlling shareholders may render us susceptible to
shareholder disputes or other unanticipated developments.

The absence of a single, controlling shareholder or group of controlling
shareholders may create difficulties for our shareholders to approve certain transactions, because the minimum quorum required by law for the approval of certain matters may not be reached. We and our shareholders may not be afforded the same
protections provided by the Brazilian Corporate Law against abusive measures taken by other shareholders and, as a result, may not be compensated for any losses incurred. Any sudden and unexpected changes in our management team, changes in our
corporate policies or strategic direction, takeover attempts or any disputes among shareholders regarding their respective rights may adversely affect our business and results of operations.

Our bylaws contain provisions that limit the voting rights of certain shareholders including non-Brazilian shareholders.

Our bylaws contain provisions that limit the right of a shareholder or group of shareholders, including brokers acting on behalf of one or more holders
of ADSs, to exercise voting rights in respect of more than 5% of the outstanding shares of our capital stock at any general meeting of shareholders. See Item 10B. Memorandum and Articles of AssociationDescription of Capital
StockVoting Rights of SharesLimitations on the Voting Rights of Certain Holders of Common Shares.

Our bylaws also
contain provisions that limit the right of non-Brazilian shareholders to exercise voting rights in respect of more than two-thirds of the voting rights that may be exercised by Brazilian shareholders present at any general meeting of shareholders.
This limitation will effectively prevent our takeover by non-Brazilian shareholders and limit the ability of non-Brazilian shareholders to effect control over us. See Item 10B. Memorandum and Articles of AssociationDescription of Capital
StockVoting Rights of SharesLimitations on the Voting Rights of Non-Brazilian Shareholders.

Holders of ADSs may not be able to
exercise their voting rights.

Holder of ADSs may only exercise their voting rights with respect to the underlying common shares in
accordance with the provisions of the deposit agreement. Under the deposit agreement, ADS holders must vote by giving voting instructions to the depositary. Upon receipt of the voting instructions of the ADS holder, the depositary will vote the
underlying common shares in accordance with these instructions. Otherwise, ADS holders will not be able to exercise their right to vote unless they surrender the ADS for cancellation in exchange for the common shares. Pursuant to our bylaws, the
first call for a shareholders meeting must be published at least 30 days in advance of the meeting, the second call must be published at least 15 days in advance of the meeting, and the third call, if necessary, must be published at least
eight days in advance of the meeting. When a shareholders meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender the ADS in exchange for the underlying common shares to allow them to vote with respect to
any specific matter. If we ask for voting instructions, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver the proxy card. We cannot assure that ADS holders will receive the proxy card in time to ensure that they
can instruct the depositary to vote the shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. As a result, holders of ADSs may not
be able to exercise their voting rights.

The relative volatility and illiquidity of the Brazilian securities markets may substantially limit the
ability of holders of our common shares or the ADSs to sell the common shares underlying ADSs at the price and time they desire.

Investing in securities, such as the common shares or the ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investing in securities of issuers from more developed countries.



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The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more
volatile than major securities markets in the United States and other jurisdictions, and are not as highly regulated or supervised as some of these other markets. The relatively small market capitalization and illiquidity of the Brazilian equity
markets may substantially limit the ability of holders of our common shares or ADSs to sell the common shares or the ADSs at the price and time desired.

There is also significantly greater concentration in the Brazilian securities markets than in major securities markets in the United States. See Item 9C. MarketsTrading on the São Paulo Stock
Exchange.

The sale of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of the common
shares and the ADSs; holders of our common shares and/or ADSs may not be able to sell their securities at or above the price they paid for them.

Sales of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of our common shares and ADSs. As a consequence of sales by existing shareholders, the market price
of the common shares and, by extension, the ADSs may decrease significantly. As a result, the holders of the ADSs and/or common shares may not be able to sell their securities at or above the price they paid for them.

Holders of our ADSs might be unable to exercise preemptive rights with respect to the common shares.

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement
under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other
securities relating to these preemptive rights and we cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may
receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

Judgments of Brazilian courts with respect to our common shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other than reais.Under Brazilian exchange
control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is
obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or
related to our obligations under the common shares or the ADSs.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|4A. | History and Development of the Company
|--- | --------------------------------------

General

Embraer-Empresa Brasileira de Aeronáutica S.A. is a joint stock company duly incorporated under the laws of Brazil with an indefinite term of
duration. Originally formed in 1969 by the Brazilian government, we were privatized in 1994. In connection with our privatization, we were transformed into a publicly-held corporation and we operate under the Brazilian Corporate Law. As a result of
the merger of former Embraer with and into Embraer approved on March 31, 2006, we succeeded to all rights and obligations of former Embraer. See Corporate Reorganization for more information on the merger. Our principal
executive offices are located at Avenida Brigadeiro Faria Lima, 2170, 12227-901 São José dos Campos, São Paulo State, Brazil. Our telephone number is 55-12-3927-4404. Our agent for service of process in the United States is
National Registered Agents, Inc., with offices at 875 Avenue of the Americas, Suite 501, New York, New York, 10001.

We have grown from a
government-controlled company established to develop and produce aircraft for the Brazilian Air Force into a publicly-held company that produces aircraft for commercial aviation, executive jet and defense and government purposes.



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Through our evolution, we have obtained, developed and enhanced our engineering and technological capabilities through our own development of products for
the Brazilian Air Force and through joint product development with foreign companies on specific projects. We have applied these capabilities that we gained from our defense and government business to develop our commercial aviation business.

Our first regional aircraft was the Bandeirante, a 19-passenger twin-engine non-pressurized turboprop aircraft initially designed to
service the transport needs of the Brazilian Air Force. This aircraft was certified in 1973. The Bandeirante was followed by the development of the EMB 120 Brasília, which was certified in 1985 and is a high performance, pressurized turboprop
commercial aircraft seating up to 30 passengers that was designed to serve the longer routes and higher passenger traffic of the growing regional aircraft market. Drawing upon the design of the EMB 120 Brasília and the jet technology acquired
in our development of the AM-X, a jet strike bomber for the Brazilian Air Force, we developed the ERJ 145 regional jet family, our first jet product for commercial use. This family is comprised of three aircraft, which seat up to 37, 44 and 50
passengers. The first member of the ERJ 145 family, the ERJ 145, was certified in 1996. We have expanded our jet product line with the development of the EMBRAER 170/190 jet family, which has the capacity to seat between 70 and 118 passengers and
was designed to serve the aircraft markets trend towards larger, higher volume and longer range jets. The first member of this family, the EMBRAER 170, was certified in February 2004 and its derivatives, the EMBRAER 175, and the EMBRAER 190
were certified in December 2004 and August 2005, respectively. The certification of the EMBRAER 195 was granted in June 2006. We are also marketing and selling the Legacy 450, Legacy 500 and Legacy 600, a line of executive jets in the mid-light,
mid-size and super midsize categories, and the Phenom 100, Phenom 300 and Lineage 1000, which are products in the entry-level, light and ultra-large categories, respectively. For the defense market, we also offer a line of intelligence, surveillance
and reconnaissance aircraft based on the ERJ 145 regional jet platform.

Corporate Reorganization

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other
things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of
new products and expansion programs. As a result of the reorganization and merger, former Embraer, ceased to exist and:



| |  |  | Embraer (formerly known as Rio Han Empreendimentos e Participações S.A. and renamed Embraer-Empresa Brasileira de Aeronáutica S.A.) succeeded
to all rights and obligations of former Embraer,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | each common share of former Embraer was exchanged for one common share of Embraer,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | each preferred share of former Embraer was exchanged for one common share of Embraer,
| | - |  | -------------------------------------------------------------------------------------



| |  |  | each American Depositary Share, or ADS, of former Embraer, each of which represented four preferred shares of former Embraer, was exchanged for one ADS of Embraer,
each of which represents four common shares of Embraer, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the golden share, a special class of common shares of former Embraer held by the Federative Republic of Brazil, was exchanged for a special class of common shares
of Embraer.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strategic Alliance and Growth Opportunities

Strategic Alliance with European Aerospace and Defense Group

On November 5, 1999, a group consisting of Aerospatiale Matra, currently known as European Aeronautic, Defense and Space Company N.V., or EADS, Dassault Aviation, Thomson-CSF, currently referred to by its trade
name ThalesTM, and Société Nationale dÉtude et de Construction de Moteurs dAviation, or Safran, which we refer to
collectively as the European Aerospace and Defense Group, purchased 20% of our outstanding common stock from our existing common shareholders at that time. Most of the common stock purchased was owned by our former controlling shareholders.



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Because the members of the European Aerospace and
Defense Group were, at the time, considered by our former controlling shareholders to be strategic partners of Embraer, they were granted the right, as a group, to appoint two members to our Board of Directors. However, as a result of the
termination of the shareholders agreement among our former controlling shareholders in connection with our corporate reorganization, the European Aerospace and Defense Group no longer has the right to appoint members to our Board of Directors,
other than pursuant to the general right provided for in the Brazilian Corporate Law. In addition, under Brazilian law the European Aerospace and Defense Group is no longer recognized as a group for voting purposes nor considered to be strategic
shareholders of Embraer. As of March 31, 2009, each of Dassault and Safran, individually, held shares representing 0.9% and 1.1% of our total capital stock, respectively. ThalesTMsold all of its shares in October 2006 and EADS sold all of its shares in a secondary offering in February 2007.

The relationship that developed as a result of our alliance between the European Aerospace and
Defense Group allowed us to develop several business opportunities. For example, our alliance with the European Aerospace and Defense Group led us with EADS to acquire a 65% interest in OGMA- Indústria Aeronáutica de Portugal S.A., or
OGMA, and also resulted in the integration by us of ThalesTMmission systems and electronic equipment in some of our EMB 145 AEW&C aircraft, as
well as in commercial transactions for the purchase by us of certain equipment and services from the members of the European Aerospace and Defense Group in the ordinary course of our business.

We intend to review strategic growth opportunities, which may include joint ventures and acquisitions, and other strategic transactions and enhance our
existing relationship with significant world players in the aerospace industry, including any of the members of the European Aerospace and Defense Group.

Joint Ventures and Acquisitions

In July, 2008, we acquired for US$20.0 million a 40% interest owned by Liebherr
Aerospace SAS, or Liebherr , in ELEBEquipamentos Ltda., or ELEB, a 60%/40% joint venture that we formed with Liebherr in 1999. ELEB is an aerospace system and component manufacturer and its main products include: landing gear systems,
hydraulics and electro-mechanical sub-assemblies, such as actuators, valves, accumulators and pylons.

In December 2002, we formed a joint
venture company with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., subsidiaries of China Aviation Industry Corp. II, or AVIC II, to provide for the assembly, sale and after-sale support of the ERJ 145 regional jet
family in China. We own 51% of the equity of the joint venture company, Harbin Embraer Aircraft Industry Company Ltd.

In March 2005, a
consortium formed by us and EADS acquired 65% of OGMAs shares through a newly created holding company, AIRHOLDING, SGPS, S.A. At that time we held 99% of the equity in the holding company and EADS held the remaining 1%. Further, in March 2006,
EADS exercised its option to increase its interest and currently holds 30% of the equity in the holding company. OGMA is a major representative of the aviation industry in Europe, offering services that include the maintenance repair and overhaul of
civil and military aircraft, engines and parts, assembly of structural components and engineering support.

In October 2006, we entered
into an agreement with the Canadian company CAE Inc., or CAE to form a global training joint venture, which will provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft.
The initial training program has started to be offered at CAE SimuFlite, Dallas, Texas, as the Phenom 100 started to operate in 2008. The joint venture is expected to provide entitlement training and post-entitlement training for pilots, maintenance
technicians and dispatch personnel.

Capital Expenditures: Research and Development

We include as part of our capital expenditures our investments in both research and development and property, plant and equipment.

Capital expenditures relating only to research and development, which includes the development of products for the commercial airline, executive aviation
and defense and government segments, were US$112.7 million in 2006, US$259.7 million in 2007 and US$197.0 million in 2008, net of cash contributions provided by risk-sharing partners. Research and development costs as a



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percentage of net sales were 3.0% in 2006, 5.0% in 2007 and 3.1% in 2008. In 2006, 2007 and 2008, we recorded US$36.0 million, US$23.7 million and US$134.8
million, respectively, as reductions to our research and development costs in connection with payments previously received by us from our risk-sharing partners, as our EMBRAER 170/190 aircraft family and Phenom 100 received their certifications and
we fulfilled other contractual milestones under our risk-sharing arrangements. See Item 5C. Research and Development.

In 2007,
the real appreciated by 17.2% against the dollar, which, together with increased research and development investments in connection with the testing stages of the Lineage 1000 and Phenom 100 following their first flights in the second half of
2007, also impacted our research and development costs in that year. Our research and development costs for 2008 decreased mainly because of US$134.8 million received from risk-sharing partners in connection with the certification of the Phenom 100
and the fulfillment of other contractual milestones under our risk-sharing arrangements. We do not incur research and development expenses for defense programs as those are funded by the Brazilian government and other government customers. Most of
our research and development expenses are associated with particular programs either in the commercial or executive aviation segments.

Our
two main ongoing projects are the development of the Phenom 300 and the Legacy 450/500 executive jets. As the Phenom 300 uses many of the same parts and components, as well as the basic technology, of the Phenom 100, which was certified in 2008, the
main milestones for the Phenom aircraft program have been fulfilled. As a result, and because the Phenom 300 is expected to be certified in the second half of 2009, the majority of the expected research and developments costs for the Phenom aircraft
family have already been invested. On the other hand, an estimated US$750 million is expected to be invested overall in fixed assets, research and development for the Legacy 450/500 programs, which were launched by us in April 2008 and are expected
to have their respective aircraft enter into service in 2013 and 2012, respectively.

In 2009, we expect to invest approximately US$350
million in capital expenditures for research and development and property, plant and equipment. Of this amount approximately US$200 million is expected to be invested in our research and development activities. This US$200 million amount is
exclusive of contributions from risk-sharing partners, but includes estimated costs of approximately US$150 million related to the development of our new products, and approximately US$50 million related to the development of technology. We also
expect to receive an additional US$303.7 million from our risk-sharing partners in future years for the development of the Phenom 300 and Legacy 450/500 family.

We expect to invest in Brazil approximately 82% of our budgeted US$350 million of total capital expenditure, which includes our investments in both research and development and property, plant and equipment.

Our capital expenditures are generally financed by funds provided by operations, borrowings under our credit arrangements, cash
contributions from risk-sharing partners, advance payments from customers and, to a lesser extent, capital increases to meet these needs. See Item 5B. Liquidity and Capital ResourcesOverview.

For a discussion of our capital expenditures relating to property, plant and equipment, see Item 4D. Property, Plant and Equipment.



|4B. | Business Overview
|--- | -----------------

We are one of the leading
manufacturers of commercial aircraft in the world, based on 2008 net sales of commercial aircraft, with a global customer base. Our focus is achieving customer satisfaction with a range of products and services addressing the commercial airline,
executive jet and defense markets and aviation services. Our commercial aviation business accounted for 66.9% of our net sales in 2008. We are the leading supplier of defense aircraft for the Brazilian Air Force based on number of aircraft sold, and
we have sold aircraft to military forces in Europe, Asia and Latin America. Our defense and government business accounted for 8.0% of our net sales in 2008. We have developed a line of executive jets based on one of our regional jet platforms and
launched new executive jets in the entry-level, light, ultra-large and mid-light/mid-size categories: the Phenom 100/300 family, the Lineage 1000 and the Legacy 450/500 family, respectively. Our executive jet business accounted for 13.8% of our net
sales in 2008. Providing high quality customer support is a key element of our customer focus and is critical to our ability to maintain long-term relationships with our customers. Our aviation services business accounted for 9.5% of our net sales
in 2008. Other related businesses, accounted for 1.8% of our net sales in 2008. For the year ended December 31, 2008, we generated net sales of US$6,335.2 million, of which more than 90% was U.S. dollar-denominated. On March 31, 2009, we
had a total firm order backlog of US$19.7 billion, including 393 aircraft sold by the commercial aviation segment.



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Our Strengths

We believe that our primary strengths are:

Leading Commercial Aircraft Manufacturer with a Global Customer Base. We are a
leading manufacturer of 30-120 seat jets, based on the number of aircraft sold, with a strong global customer base. We have sold our regional and mid-capacity jets to more than 70 customers in the five continents of the world. Our customers include
some of the largest and most significant regional, low-cost airlines and commercial carriers in the world.

Aircraft Design; Cost and
Operating Efficiency.We conceive, develop and manufacture aircraft to provide our customers with reduced operating, maintenance and training costs due to the similarity and efficiency in design and the commonality of parts among jets within a
family. These similarities enable us to significantly reduce our design, development and production costs and pass these savings along to our customers in our sales price. These similarities also reduce the development time of our aircraft.

Strategic Risk-Sharing Partners.With respect to our commercial and executive aircraft, we developed strategic relationships with
key risk-sharing partners. These risk-sharing partners develop and manufacture significant portions of the systems and components of our aircraft and contribute their own funds to research and develop these systems and components, thereby reducing
our development costs. These risk-sharing partners also fund a portion of our development costs through direct contributions of cash or materials. We believe that these strategic relationships enable us to lower our development costs and risks,
improve our operating efficiency, enhance the quality of our products and reduce the number of our suppliers, thereby providing us with flexibility of our production process.

Benefits of Funded Development of Defense Products.Historically, research and development costs related to defense aircraft have been funded in
large part by certain of our customers, which in this business segment includes the governments of different countries. These customers have had an important role in our engineering and industrial development. In addition, we use well-proven
platforms developed for the commercial aviation segment as a solution for certain defense products. We also sell to other military forces the proven defense products developed for the air forces of certain countries.

Flexibility of Production to Meet Market Demands. We believe the flexibility of our production processes and our operating structure, including
our risk-sharing partnerships, which allow us to increase or decrease our production in response to market demand.

Experienced and
Highly Skilled Workforce. Our employees are experienced and highly skilled. As of March 31, 2009, approximately 23% of our workforce is comprised of engineers. Due to the high level of knowledge and skill of our employees, and our
continuous training programs, we are able to efficiently pursue new programs and provide our customers with differentiated technical expertise and guidance.

Business Strategies

Looking to continue to grow our business and to increase our profitability, we intend to continue to
offer our customers cost-effective, high quality, and reliable aircraft and services. The key elements of our strategy are the following:

Continuing to Market our Commercial Aircraft. We are fully committed to continuing to market our ERJ 145 regional jet family and to aggressively market our mid-capacity aircraft, the EMBRAER 170/190 jet family. As of March 31,
2009, we had more than 870 units of the ERJ 145 jet in commercial operation. We are currently evidencing increased demand for the ERJ 145 jet family in the secondary market due to its reliability and strong operating benefits. We believe that
airlines can continue to benefit from this regional jet family, which we believe has helped our customers over the last ten years to pursue their goal of achieving profitable operations. We believe a significant market opportunity exists for the
EMBRAER 170/190 jet family with regional airlines that are



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expanding their fleet, increasing their penetration into higher density markets and adding longer routes, as well as with major and low-cost airlines that
are right-sizing their fleet in order to adjust capacity to meet demand in less dense routes. As of March 31, 2009, we were leaders in the 70-120 seat category in terms of number of aircraft sold. Additionally, we believe that our commercial
aircraft will provide us with significant opportunities to increase our competitiveness by offering our customers a full range of jets in the 30-120 seat category.

Strengthening our Position in the Executive Jet Market.We believe that the executive jet market provides us with significant growth opportunities. We expect to offer products in all categories of the executive
jet market, from the entry-level to the ultra large categories. We have developed the Legacy 600, a super midsize, the Phenom 100, an entry-level jet, and the Lineage 1000, an ultra large jet, and are developing the Phenom 300, the Legacy 450 and
the Legacy 500, executive jets in the light, mid-light and mid-size categories, respectively. We have endeavored to understand and respond to market and customer needs, continually improving the product and customer support for our executive jets.

Continue to Pursue Market Niche Opportunities in the Defense and Government Market.We currently offer products for transportation,
training, light-attack, intelligence, surveillance and reconnaissance. Since our products offer multi-mission capabilities at a competitive price and are designed to be operated in any environment at low operating costs, we believe our products meet
the needs of governments in countering present threats which are a global concern, such as terrorism, drug dealing and weapon smuggling.

Continuing Focus on Customer Satisfaction and Support.We believe that our focus on customer satisfaction is fundamental to our entrepreneurial success and our business strategy. Providing high quality customer support is a key
element of our customer focus and is critical to our ability to maintain long-term relationships with our customers. As the number of our aircraft in operation continues to grow, and our executive aviation business expands, we have further increased
our commitment to providing our customers with an appropriate level of after-sale support, including technical assistance, pilot and maintenance training and spare parts, as demonstrated by the expansion of our Nashville, Tennessee, maintenance,
repair and overhaul, or MRO, facility, and the acquisition of OGMA, an MRO facility in Portugal, which we began operating in March 2005. We intend to continue to focus on providing our customers with high quality customer support by expanding our
presence worldwide, both through our own operations and agreements with authorized service centers. In 2007 we created a new business area called Aviation Services. We also started the construction of a service center at Williams Gateway Airport in
Mesa, Arizona.

Continue to motivate our employees and improve our production processes and managerial practices. We are constantly
seeking to exceed our customers expectations. In order to achieve that, we must, on a daily basis, continuously try to implement the most efficient production processes and best managerial practices. Because the success of our products and
services are ultimately a combination of the contribution of our employees and the production processes we have developed over the years, we recognize that we must continue to motivate our employees and refine our production processes. To that
effect, we have implemented, and intend to further develop, corporate programs based on a lean manufacturing philosophy, such as the Embraer Entrepreneurial Excellence Program (P3E), that are designed to strengthen our internal culture
of excellence and improve the efficiency of our operations.

Commercial Aviation Business

We design, develop and manufacture a variety of commercial aircraft. Our commercial aviation business is our primary business, accounting for 66.9% of our
net sales for the year ended December 31, 2008.

Products

We developed the ERJ 145, a 50-passenger twin jet-powered regional aircraft, introduced in 1996, to address the growing demand among regional airlines for medium-range, jet-powered aircraft. After less than two years
of development, the ERJ 135, a 37-seat regional jet based on the ERJ 145, was introduced in July 1999. In addition, we developed the 44-seat ERJ 140 as part of the ERJ 145 regional jet family, which we began delivering in the second half of 2001. We
believe that the ERJ 145 regional jet family provides the comfort, range and speed of a jet at costs comparable to turboprop aircraft. We are continuing to develop the EMBRAER 170/190 jet family, our 70-122 seat platform, to serve the trend in the
commercial airline market toward larger, faster and longer range jets and to further diversify our strength in the jet market. We continue to analyze new aircraft demand in the jet market to determine potentially successful modifications to aircraft
we already produce.



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ERJ 145 Regional Jet Family

The ERJ 145 is a twin jet-powered regional aircraft accommodating up to 50 passengers. This jet was developed in response to the increasing demand from the regional airline industry for an aircraft that offered more
speed, comfort and capacity than a turboprop. The ERJ 145 was certified by the Brazilian aviation authority in November 1996, the FAA in December 1996, the European aviation authority in May 1997, the Australian aviation authority in June 1998 and
the Chinese aviation authority in December 2000. We began delivering the ERJ 145 in December 1996. In October 2007, we delivered our 1,000th ERJ 145 aircraft, manufactured at Harbin Embraer Aircraft Industry Co. Ltd. to the HNA Group.

The development of the ERJ 145 aircraft was partially based on the EMB 120 Brasília and has approximately 30% commonality in terms of parts and
components with that aircraft, including the nose section and cabin. The ERJ 145 has a maximum cruising speed of Mach.78, or 450 knots, and a maximum fully loaded range of 1,060 nautical miles in its standard version. The ERJ 145 is equipped with
engines built by Rolls-Royce Allison. These engines are designed to operate 10,000 flight hours between major overhauls and operate at a low fuel cost. In addition, the ERJ 145 is equipped with sophisticated flight instruments, such as
engine-indication instruments, crew-alert systems and digital flight control systems, produced by Honeywell.

The ERJ 145 is also available
in a long-range, or LR, version, and, in response to customer requests, we have developed an extra-long-range, or XR, version of the aircraft. The ERJ 145 LR features a larger fuel tank, more powerful engines and greater range than the standard
version. The ERJ 145 LR, which was certified by the Brazilian aviation authority, the FAA and the European aviation authority in 1998, and by the Chinese aviation authority in November 2000, uses engines that deliver 15% more thrust, allowing the
fully loaded aircraft to operate on routes of up to 1,550 nautical miles. The ERJ 145 XR features a new and updated turbofan engine, increased capacity fuel tanks and winglets. The ERJ 145 XR, which was certified by the Brazilian aviation authority
in August 2002 and by the FAA in October 2002, offers reduced fuel consumption, a maximum, fully loaded range of 2,000 nautical miles and enhanced operational capabilities for hot weather and high altitudes. Deliveries of the ERJ 145 LR began in
February 1998, and deliveries of the ERJ 145 XR began in October 2002.

The ERJ 135 is a 37-seat regional jet based on the same design as
the ERJ 145 and is manufactured on the same production line. The ERJ 135 has approximately 96% commonality in terms of parts and components with the ERJ 145, resulting in reduced spare-parts requirements and permitting the utilization of the same
ground support equipment for customers that use both aircraft. The ERJ 135 was certified by the Brazilian aviation authority in June 1999, by the FAA in July 1999 and by the European aviation authority in October 1999. Deliveries of the ERJ 135
began in July 1999.

The ERJ 135 has a maximum operating speed of Mach.78, or 450 knots, and a maximum fully loaded range of 1,330 nautical
miles in its standard version. The ERJ 135 uses the same engines, sophisticated flight instruments, digital flight control systems and body design as the ERJ 145. The ERJ 135s fuselage is 11.6 feet shorter than the ERJ 145s. The ERJ 135
is also available in a LR version, with maximum fully loaded range of l,700 nautical miles. The LR version received certification simultaneously with the standard version and began deliveries in August 1999.

We developed the ERJ 140 in response to customer requests. The ERJ 140 is a 44-seat regional jet based on the same design as the ERJ 135 and is
manufactured on the same production line as the ERJ 145 and ERJ 135. The ERJ 140 has approximately 96% commonality with the ERJ 145 and ERJ 135, providing our customers with significant maintenance and operational benefits. The ERJ 140 was certified
by the Brazilian aviation authority in June 2001 and by the FAA in July 2001. The ERJ 140 has a maximum fully loaded range of 1,230 nautical miles in its standard version. The ERJ 140 is available in LR version, with maximum fully loaded range of
1,630 nautical miles. We began delivering the ERJ 140 in July 2001.

The ERJ 145 regional jet family allows for standardized pilot
certification and maintenance procedures.



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EMBRAER 170/ 190 Jet Family

The EMBRAER 170/190 jet family provides our customers with a choice of four aircraft in the mid-capacity passenger range. The EMBRAER 170 is a 70-80 seat jet and the EMBRAER 175 is a 78-88 seat jet, while the EMBRAER
190 is a 98-114 seat jet and the EMBRAER 195 is a 108-122 seat jet.

The EMBRAER 170 was certified by the Brazilian aviation authority, the
FAA, the JAA, EASA and the authority of Poland in February 2004, and deliveries of the EMBRAER 170 began in March 2004. The EMBRAER 175 was certified by the Brazilian aviation authority in December 2004, by EASA in January 2005, by TCCA, the
Canadian certification authority, in July 2005 and by the FAA in August 2006. The EMBRAER 190 was certified by the Brazilian aviation authority in August 2005, by the FAA in September 2005 and by EASA in June 2006. The EMBRAER 195 was certified by
the Brazilian aviation authority in June 2006, by EASA in July 2006 and by the FAA in August 2007.

We designed the EMBRAER 170/190 jet
family to maximize the benefits of commonality. Aircraft in the family share approximately 89% of the same components. The high level of commonality in this new jet family lowered our development costs and shortened our development period. We
anticipate that this commonality will lead to significant savings to our customers in the form of easier training, less expensive parts and maintenance and lower operational costs. Due to differences in size and weight, the EMBRAER 170/190 jet
family will not share the same wing design. This new mid-capacity jet family has engines fixed under its main wingsa design intended to enhance power, improve fuel economy and minimize turnaround times. All of the aircraft models of this
family are powered by engines manufactured by General Electric and contain state-of-the-art avionics manufactured by Honeywell.

The
EMBRAER 170/190 jet familys principal features are:



| |  |  | Performance.All four jets in the EMBRAER 170/190 jet family have a maximum cruising speed of Mach.82. The EMBRAER 170 and the EMBRAER 175 have maximum fully
loaded ranges of 1,700 and 1,600 nautical miles, respectively, and each is available in LR versions, with maximum fully loaded ranges of 2,000 and 1,800 nautical miles, respectively. The EMBRAER 190 and EMBRAER 195 have maximum fully loaded ranges
of 1,700 and 1,500 nautical miles, respectively, and will be available in LR versions with maximum fully loaded ranges of 2,300 and 2,100 nautical miles, respectively.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ground servicing.The underwing engine design and the existence of four doors, two in the front and two in the back, provide for enhanced accessibility and
efficiency of ground services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cabin and cargo space.We have enhanced passenger safety and comfort in the EMBRAER 170/190 jet family. The aircrafts double-bubble design
enables a four-abreast cabin, a wide aisle, greater interior space and headroom and a larger baggage compartment than the existing mid-capacity jets of our competitors, including those mid-capacity jets that are in the development stage.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EMB 120 Brasília

The EMB 120 Brasília is a pressurized twin wing-mounted turboprop aircraft that accommodates up to 30 passengers. The EMB 120 Brasília was developed in response to the commercial airline industrys demand for a
high-speed and fuel-efficient 30-seat regional aircraft. The EMB 120 Brasília was certified by the FAA in May 1985 and by the Brazilian aviation authority in July 1985. Since its introduction in 1985 and through December 31, 2008, we
have delivered 352 EMB 120 Brasília for the regional market and six EMB 120 Brasília for the defense market. We currently manufacture the EMB 120 Brasília only upon customer request.

Customers

We believe we have a diverse,
global customer base, principally in the commercial airline market in Europe, the Middle East, Africa, Asia and the Americas. Our major customers for commercial aircraft include some of the largest regional, low-cost and mainline airlines in the
world. As of December 31, 2008, our largest customers, by firm orders, were JetBlue Airways, US Airways, HNA Group, Regional, a subsidiary of Air France, Lufthansa, and Azul, the new Brazilian airline founded by David Neeleman.



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For a discussion of these significant customer relationships, see Item 3D. Risk FactorsRisks Relating to EmbraerWe depend on key customers
and key suppliers, the loss of any of which could harm our business. See also Note 7 to our audited consolidated financial statements for additional information on our largest customers.

We generally sell our commercial aircraft pursuant to contracts with our customers on a fixed-price basis, adjusted by an escalation formula that
reflects, in part, inflation in the United States. These contracts generally include an option for our customers to purchase additional aircraft for a fixed option price, subject to adjustment based on the same escalation formula. In addition, our
contracts provide for after-sales spare parts and services, as well as warranties of our aircraft and spare parts. Other provisions for specific aircraft performance and design requirements are negotiated with our customers. Finally, some of our
contracts contain cancellation provisions and trade-in options and financial and residual value guarantees. See Item 3D. Risk FactorsRisks Relating to EmbraerOur aircraft sales are subject to trade-in options and financial and
residual value guarantees that may require us to make significant cash disbursements in the future for a more detailed discussion of these provisions.

Sales and Marketing

Our current marketing strategy is based upon our assessment of the worldwide commercial airline
market and our assessment of the current and future needs of our customers. We actively market our aircraft to airlines and regional affiliates of major airlines through our regional offices in the United States, Europe and Asia. Our success
depends, to a significant extent, on our ability to discern our customers needs, including needs for customer service and product support, and to fill those needs in a timely and efficient manner while maintaining the high quality of our
products. Our market and airline analysts focus on the long-term trends of the market, competitive analysis, product-enhancement planning and airline analysis. In terms of direct marketing to our customers, we rely heavily on the media, as well as
participating in air shows and other cost-effective events that enhance customer awareness and brand recognition. We have regional sales offices in Le Bourget, France; Ft. Lauderdale, Florida; Beijing, China and Singapore. We sell our ERJ 145
regional jet family in the Chinese market exclusively through our joint venture in China, which had 66 firm orders from Chinese airlines since the beginning of 2004, 22 of which had been delivered as of March 31, 2009.

Production, New Orders and Options

Prior to
starting production or development of a new project, we secure letters of intent representing future orders for a significant number of aircraft. We typically begin taking orders and building a backlog two years before we begin producing a new
aircraft model, aiming to receive a significant number of orders before we deliver the initial aircraft. Once an order is taken, we reserve a place for that order on the production line, ensuring that we will maintain production sufficient to meet
demand. Once a place is reserved on the production line, we are able to give customers delivery dates for their orders.

We include an
order in backlog once we have received a firm commitment, represented by a signed contract. Our backlog excludes options and letters of intent for which definitive contracts have not been executed. For the sales of our commercial aircraft, we
customarily receive a deposit upon signing of the purchase agreement and progress payments in the amount of 5% of the sales price of the aircraft 18 months before scheduled delivery, another 5% twelve months before scheduled delivery and another 5%
six months before scheduled delivery. For the EMBRAER 170/190 jet family, we receive an additional 5% progress payment 24 months before scheduled delivery. We typically receive the remaining amount of the sales price upon delivery of the aircraft.
The deposits and the progress payments are nonrefundable for the most part if orders are cancelled.

Our options generally provide our
customers the right to purchase an aircraft in the future at a fixed price and on a specified delivery date, subject to escalation provisions, under a purchase agreement. Once a customer decides to exercise an option, we account for it as a firm
order. Occasionally, we have extended the exercise date for our options and renegotiated the delivery schedule of firm orders, as well as allowed customers to convert their firm orders or options for one aircraft into firm orders or options for
another aircraft within the same commercial aircraft family.



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Competition

We generally face competition from major manufacturers in the international aircraft market. Each category of our products faces competition of a different nature and generally from different companies. Some of our
competitors have greater financial, marketing and other resources than we do.

30-60seat category

The main competitors of the ERJ 145 regional jet family are:



| |  |  | the DHC-8-200 and the DHC-8-300, manufactured by De Havilland, Bombardier;
| | - |  | --------------------------------------------------------------------------



| |  |  | the CRJ-100/200/440 (in October 2005, Bombardier announced its plans to stop manufacturing the CRJ-100/200/440 aircraft);
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | the ATR-42, a 50-seat turboprop manufactured by ATR, a joint project of Italys Alenia Aeronautica and EADS; and
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the Q-200 and Q-300, 37-seat and 50-seat turboprops manufactured by Bombardier, respectively, which Bombardier plans to discontinue production starting in May 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Given the success of our regional jet family and the significant barriers to entry into the market, due mainly to the
high development costs of a new model and the extensive and time-consuming development cycle of a new jet, we believe that we are well-positioned to maintain our market share for the ERJ 145 regional jet family.

61-90seat and 91-120seat categories

We
currently face our strongest competition in the 61-90 and 91-120seat categories. We currently compete against the following aircraft in these categories:



| |  |  | ATR-72, a 72-seat turboprop produced by ATR;
| | - |  | --------------------------------------------



| |  |  | Q-400, a 72-seat turboprop produced by Bombardier;
| | - |  | --------------------------------------------------



| |  |  | CRJ-700 and CRJ-900, 70-seat and 85-seat regional jets produced by Bombardier, respectively;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | A318, a 100-plus-seat jet produced by Airbus; and
| | - |  | -------------------------------------------------



| |  |  | 737-600, a 100-plusseat jet produced by Boeing.
| | - |  | ------------------------------------------------

We expect new developments in this market segment from current and new competitors, including:



| |  |  | Bombardiers CRJ-1000, a 100-seat regional jet launched in February 2007, with first deliveries scheduled to take place in the first quarter of 2010;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Bombardiers CSeries jet launched in 2008, which seats 110 to 130 passengers, and is expected to enter into service by 2013;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Sukhois SSJ100, a 75- to 95-seat regional jet, with the 95-seat version officially scheduled to enter into service in the second half of 2009;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | COMACs ARJ21, a 90- to 105-seat regional jet, with the 90-seat version officially scheduled to enter into service in the first half of 2010; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Mitsubishi Heavy Industries MRJ, a 75- to 96-seat regional jet launched in March 2008, which is expected to enter into service by 2013.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

The key competitive factors in the markets in which we participate include design and technological strength, aircraft
operational costs, price of aircraft, including financing costs, customer service and manufacturing efficiency. We believe that we will be able to compete favorably on the basis of our aircraft performance, low operating costs, product development
experience, global customer base, market acceptance, cabin design and aircraft price.

Defense and Government Business

We conceive, design, develop, manufacture and support a wide range of integrated solutions for the defense and government market. Our products include
training/light attack aircraft, C4ISR (Command and Control, Intelligence, Surveillance and Reconnaissance) systems, aerial surveillance platforms and transport airplanes. We offer a complete portfolio of customer services, ranging from maintenance
and material solutions to complete Contractor Logistic Support programs. As of December 31, 2008, we had sold more than 680 defense aircraft to 20 armed forces and operators worldwide. We are also the leading supplier of defense aircraft to the
Brazilian Air Force based on the total number of aircraft in its fleet. At December 31, 2008, we had orders for more than 255 defense aircraft for the Brazilian government. Our defense and government business accounted for approximately 8.0% of
our net sales for the year ended December 31, 2008.

Products

C4ISR Systems

Embraer has developed three cost-effective, reliable and flexible special-mission
aircraft based on the ERJ 145 regional aircraft platform: the EMB 145 Airborne Early Warning and Control (AEW&C), the EMB 145 Multi Intel and the EMB 145 MP (Maritime Patrol). Since its first delivery, a total of 14 such aircraft have been
manufactured for the Brazilian Air Force, the Mexican Air Force and the Hellenic Air Force.

We believe EMB 145 AEW&C is the most
advanced and affordable Airborne Early Warning and Control aircraft available in the market. It combines Embraers reliable and cost-effective ERJ 145 regional airplane platform with a unique, high-performance, multi-mode active phased-array
AEW radar, a powerful command and control system and a comprehensive set of support systems such as self-protection and communications, including data-links. The EMB 145 AEW&C is operational in the Brazilian, Mexican and Hellenic Air Forces. In
addition, in 2008 we signed a contract with the Indian Air Force to sell them four units of our AEW&C aircraft.

The EMB 145 Multi
Intel, also known as the EMB 145 RS/AGS (Remote Sensing/Airborne Ground Surveillance) aircraft, is designed to accomplish the electronic and reconnaissance missions. It features state of the art sensors for IMINT (Image Intelligence), SIGINT (Signal
Intelligence) and MASINT (Measurement and Signature Intelligence), and is capable of providing real-time imagery and signals intelligence over ground objectives. It is equipped with extensive sensor suites ranging from high-performance synthetic
aperture radar to electro-optical sensors, and includes communications and electronic exploitation systems capable of gathering complete intelligence information. The EMB 145 Multi Intel is currently operational in the Brazilian Air Force.

The EMB 145 MP aircraft is designed to address coastal and blue-water threats. The EMB 145 MP is designed to carry out maritime patrol and
anti-submarine warfare missions using maritime and ground surveillance radar, electro-optical sensors, as well as dedicated communications and surveillance equipment. The EMB 145 MP is operational in the Mexican Air Force.

Embraer also develops and integrates state-of-the-art Command and Control, Intelligence, Surveillance and Reconnaissance (C4ISR) systems for defense and
government customers that require accurate information on a real-time basis. Our C4ISR systems operate in all three of our EMB aircraft. The information provided by C4ISR systems seeks to give top defense organizations the capability to collect,
process and disseminate an uninterrupted flow of accurate and timely data that enables them to make better decisions and act faster and more effectively. We believe that the entry of Embraer in the C4ISR systems sector is made possible by
Embraers technical understanding of several key topics such as knowledge management, visualization technologies, decision-making tools and concept-development methodologies. One recent practical example of Embraers participation in the
C4ISR field is the definition and development of a new datalink protocol, the Link BR2, for the Brazilian Air Force.



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Tucano Family; Super Tucano

The Tucano is a single engine turboprop aircraft used for pilot training and armed reconnaissance missions. Although no longer manufactured, over 317 EMB 312 Tucanos were manufactured to ten air forces worldwide,
including those of Brazil, the United Kingdom, France, Argentina, Egypt, Colombia, Paraguay, Peru and Venezuela.

We have also developed
the Super Tucano. The Super Tucano, designated as A-29 by the Brazilian Air Force, is a single-engine, multipurpose, military turboprop that combines effective training and operational capabilities with low acquisition and operating costs. It offers
solutions for basic to advanced weapons training, such as in-flight virtual training. It also offers operational capabilities required for successful internal security, operation support and counterinsurgency (COIN) missions. It offers an engine
with twice the power of the Tucanos standard engine, fighter standard avionics, ejection seats, an onboard oxygen-generating system and enhanced range and external load capability. The Super Tucano was originally developed under an agreement
with the Brazilian Air Force and with the Financiadora de Estudos e Projetos (the Brazilian Financier for Studies and Projects), or FINEP, which provided the initial research and development funding in 2005. The Super Tucano has
sophisticated navigation and attack systems, night-operations capability and the ability to operate under severe weather conditions. These aircraft are also used for advanced pilot training and for defense operations in the Amazon region of Brazil
in connection with the Brazilian governments Sistema de Vigilância da Amazônia  SIVAM (System for the Surveillance of the Amazon) program. Since its first delivery until December 31, 2008, 63 Super Tucano aircraft
were manufactured to the Brazilian Air Force. As of March 31, 2009, we had a backlog of 32 firm orders for Super Tucano aircraft from the Brazilian Air Force. In December 2005, we received firm orders for 25 Super Tucano aircraft from the
Colombian government and by the end of 2008 all aircraft had been delivered to that customer.

The Super Tucano has so far been
manufactured for the Brazilian and Colombian Air Forces, and has been recently ordered by the Chilean, Ecuadorian and Dominican Air Forces.

KC 390

In April 2009, Embraer began the development of the KC 390, a new military cargo aircraft based on the EMB 190 platform. The KC 390 is
being designed to transport a wide variety of cargo, including small armored cars. This aircraft will be designed so that it can be built in different configurations, including versions that will allow it to conduct medical evacuation (MEDEVAC)
missions. The KC 390 will be equipped with some of the most modern technology available, including systems for handling and launching cargos, and a fly-by-wire technology that reduces pilots workload and allows the aircraft to operate on short
and unpaved runways.

Government Transport Aircraft

We are marketing our aircraft modified to meet added security needs to the Brazilian and other governments. In 2007, we delivered one Legacy 600 to the Angolan government, and one ERJ 145 to the Nigerian government.
In 2008, we signed a contract with the Brazilian Air Force to develop and deliver a modified version of the EMBRAER 190 commercial aircraft for presidential air transportation. In 2008, we delivered one Legacy 600 to the Ecuadorian government. In
addition, our EMB aircraft family has in the past been sold to the air forces of Belgium, Greece and Colombia. Our Legacy 600 aircraft has been sold in the past to the governments of Nigeria and India.

Brazilian Navy Aircraft Modernization Program

In April 2009, Embraer entered into an agreement with the Brazilian navy to modernize 12 of its A-4 Skyhawk aircraft. This upgrade will incorporate new technology to those aircraft, including new avionics, radar, power production and
autonomous oxygen generating systems.



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Other Projects and Activities

We offer military aircraft modernization services and we currently have two ongoing programs contracted with the Brazilian Air Force. The first one, known as F-5BR, is focused on performing structural and electronics
upgrades on 46 F-5 fighter jets. As the prime contractor we are responsible for integrating the multi-mode radar, the advanced navigation and attack systems, and the enhanced self-protection systems into the existing aircraft platform. The second
ongoing contract, known as the A-1M modernization program, focuses on modernizing the AMX. The goal of the modernization project for the AMX jets is to keep the fleet of 43 on active duty for another 20 years.

Competition

Our defense systems aircraft face
stiff competition from various manufacturers, from different countries in each market segment, many of which have greater resources than we do.

The Super Tucano competes in the basic/advanced training market with the Pilatus PC-9M (basic) and PC-21 (advanced) aircraft from Switzerland, the Beechcraft T-6A/B (basic/advanced) from the U.S., and the Korea Aerospace Industries KT-1
(basic). In the Light Attack market, the Super Tucano competes with Beechcraft AT-6 and Korea Aerospace Industries KO-1.

In the special
mission aircraft market, which includes Airborne Early Warning & Control, Remote Sensing, Airborne Ground Surveillance, Maritime Patrol, Anti-Surface Warfare and Multi-mission Aircraft, there are several platforms with a wide range of
sensor combinations that compete with our products, namely, the Bombardier Global Express, Boeing 737, Northrop Grumman E-2C/D Hawkeye, Gulfstream G550, SAAB 2000, Alenia ATR 42 and 72, EADS CASA CN-235 and C-295, and the Bombardier Dash 8, among
others.

Executive Aviation Business

We have developed a line of executive jets, the Legacy 600, and are developing additional executive jets in the entry-level, light and ultra-large categories: the Phenom 100, Phenom 300 and Lineage 1000, respectively. We are marketing our
executive jets to companies, including fractional ownership companies, charter companies and air-taxi companies, and high-net-worth individuals. Our executive aviation segment accounted for 13.8% of our net sales for the year ended December 31,
2008, resulting from the delivery of 35 Legacy 600 jets. On March 31, 2009, our firm orders in backlog for our executive jets totaled US$6.8 billion from more than 210 customers.

We developed the Legacy 600 by building upon our regional jet design and manufacturing experience. For example, with the exception of the interior of the
aircraft, the fuel tank, controller and indication system and the winglets, the Legacy 600 has the same components as the ERJ 135 and is capable of being manufactured on the same production line. The executive version of the Legacy 600 was certified
by the Brazilian aviation authority in December 2001, by the JAA in July 2002 and by the FAA in August 2002.

In May 2005, we launched the
Phenom 100 and Phenom 300, which are executive jets in the entry-level and light jet categories, respectively. The Phenom 300 will carry up to nine people and have a larger fuselage and wingspan and longer range than the Phenom 100. It will be
powered by Pratt & Whitney Canadas PW535E engine and is expected to enter into service in the second half of 2009. Pratt & Whitney Canada, Garmin and Eaton are our risk-sharing partners for this program. The Phenom 100 jet
carries from six to eight people and is powered by Pratt & Whitney Canadas PW617F engine. In the second half of 2008, the Phenom 100 entered into service.

In May 2006, we launched the Lineage 1000, an ultra-large executive jet based on the EMBRAER 190 commercial jet platform. The Lineage 1000 will be configured to accommodate up to 19 people in a total cabin volume of
4,085 cubic feet (115.7 cubic meters), and will be powered by GE CF34-10E7 engines. The Lineage 1000 is expected to enter into service in mid-2009.

In April 2008, we formally launched two new programs in the medium jet categories, namely the mid-light Legacy 450 jet, with a 2,300 nautical miles range, and the mid-size Legacy 500 jet, with a 3,000 nautical miles range. Both programs
were approved by our Board of Directors in March 2008. The Legacy 450/500 jets are expected to enter into service in 2013 and 2012, respectively, and will be positioned in our executive jets portfolio between the Legacy 600 and the Phenom 300. We
believe that these two aircraft programs will help strengthen our position in the market and establish our portfolio as one of the most comprehensive of the executive aviation industry.



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We face significant competition from companies with longer operating histories and established
reputations in the mature executive jet industry. Many of these manufacturers have greater financial, marketing and other resources than we do. Legacy 600 competitors include aircraft produced by Dassault Aviation, Bombardier Inc., General Dynamics
and Raytheon. Phenom 100 and Phenom 300 competitors in the entry-level and light jet categories include Cessna Aircraft Co. and Raytheon. Boeing and Airbus are the main competitors of the Lineage 1000 ultra-large jet.

We include an executive jet order in backlog once we have received a firm commitment, represented by a signed contract. We customarily receive a deposit
at the time of order, progress payments totaling 15% to 30% of the aircraft price, and the full payment of the balance is due upon delivery. We generally receive between US$10,000 and US$200,000 for each option to purchase an executive jet.

Aviation Services

We provide
after-sales customer support services and manufacture and market spare parts for the fleets of our commercial, executive and defense and government customers. Activities in this segment include the sale of spare parts, maintenance and repair,
training and other product support services. Revenues for the aviation services segment accounted for 9.5% of our net sales for the year ended December 31, 2008. Our after-sales customer support and spare parts business falls into several
categories:



| |  |  | field support;
| | - |  | --------------



| |  |  | material support, which includes spare parts sales and distribution;
| | - |  | --------------------------------------------------------------------



| |  |  | product warranty and repair administration;
| | - |  | -------------------------------------------



| |  |  | technical support, which includes engineering support, maintenance engineering and technical publications; and
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | training.
| | - |  | ---------

This business is expected
to continue to grow as the number of our aircraft in service increases. Our customers require aircraft manufacturers and their suppliers to maintain adequate spare parts and ground support equipment inventories for a period of ten years after the
production of the last aircraft of the same type, or until fewer than five aircraft are operated in scheduled commercial air transport service. We established a pooling program that allows customers to exchange used parts for new or refurbished
parts.

We expect to enhance customer support and services offered to the executive aviation segment. We intend to add four wholly owned
service centers in the next three years, and are revamping the authorized service center network for executive jets. By the end of 2009, we estimate that we will have 35 service centers to support our executive jet fleet. In October 2006, we entered
into an agreement with CAE to form a global training joint venture, which will provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft. The initial training program has
started to be offered at CAE SimuFlite, Dallas, Texas, as the Phenom 100 started to operate in 2008. Plans for the joint venture will provide entitlement training and post-entitlement training for pilots, maintenance technicians and dispatch
personnel. We entered into an agreement with CAE to for a global training joint venture, which will provide comprehensive training to customers of the Phenom jets. We also plan to invest in parts inventory and logistics, as well as in the
improvement of our special maintenance programs.

Other Related Businesses

We recognize revenues related to the selling or leasing of used aircraft to customers primarily through our leasing subsidiary, ECC Leasing Co. Ltd. In
addition, we provide structural parts and mechanical and hydraulic systems to Sikorsky Corporation for its production of helicopters. We also manufacture, on a limited basis and upon customer request, general aviation propeller aircraft, such as
executive planes and crop dusters, also known as light aircraft. Our other related businesses accounted for 1.8% of our net sales for the year ended December 31, 2008.



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Subcontracting

We provide subcontracting services to Sikorsky Corporation in connection with the development and manufacture of the landing gear, fuel system and fuel tanks for the S-92 Helibus helicopter. We also act as a
risk-sharing partner to Sikorsky. These contracts expire in 2015.

General Aviation Aircraft

We build general aviation propeller aircraft. These aircraft include a six-passenger aircraft that is produced only on demand for use by corporations and
by air-taxi companies. At December 31, 2008, we had delivered a total of 2,326 of these aircraft. The last delivery of this type of aircraft was in 2000. We also developed a crop duster aircraft pursuant to specifications of the Brazilian
Ministry of Agriculture. These aircraft are produced only on demand. Through December 31, 2008, we had delivered a total of 1,042 of these aircraft, including 23 in 2008. We had no crop duster aircraft in backlog at December 31, 2008.

Aircraft Operating Lease Activities

In order to provide better financial support to our commercial activities, as well as to manage and reduce financial risks related to the marketing of aircraft, we created, in September 2002, two wholly owned subsidiaries: ECC Leasing Co.
Ltd. and ECC-Insurance & Financial Co. Ltd.

The mission of ECC Leasing Co. Ltd is to manage and remarket Embraers aircraft
portfolio, which as a result of contractual obligations, may be acquired by us as trade-in and/or repurchase transactions. We also provide re-marketing services to third parties looking to sell their Embraer manufactured aircraft.

The consolidated pre-owned aircraft business, through ECC Leasing Co. Ltd. in Ireland, has contributed accumulated net income of US$43.4 million since
its inception through December 31, 2008. Sales campaigns of new aircraft, where the acceptance of trade-in aircraft as part of payment were accepted, have been successfully completed. Additional revenues have also been generated through the
sale and lease of aircraft received as trade-in. Furthermore, leasing operations, involving EMBRAER170, EMBRAER175 and EMBRAER 190 pre-series aircraft, contributed to the current results. During this period, ECC Leasing and two other Embraer wholly
owned subsidiaries managed a portfolio comprised of 71 aircraft, of which 24 are under operating leases, seven are available or under lease/sale negotiations, nine are performing flight tests at Embraer, and 31 were sold to airlines, corporations
and government entities in North America, South America, Asia and Europe.

All sale and leasing transactions were executed based on market
rates, thereby helping to sustain the present and future values of our products. In addition, we continue to actively work with third parties to facilitate the placement of their aircraft.

The continued improvement in financial performance is directly related to ECC Leasings ability to re-market aircraft in its existing portfolio with
similar conditions as those currently in place, as well as to sell aircraft to operators, leasing companies and/or financial institutions, at values close to market rates and without any guarantee from Embraer.

Furthermore, we believe the results of ECC Leasing Co. Ltd and ECC-Insurance & Financial Co. Ltd will be largely dependent on market conditions,
aircraft availability levels and the demand for regional jets in the 37- to 50-seat category. Although new markets such as Eastern Europe and Latin America are important, the risks related to operators credit and asset repossession require an
adequate evaluation by Embraer.

As more pre-owned aircraft begin to trade in the market, Embraer and ECC Leasing Co. Ltd. have created the
Embraer Lifetime Program to better support our customers. The program will allow customers to select from a wide array of services, including training, spare parts, technical support, engine programs, technical representation,
maintenance and overhaul coverage, among others. Customers who opt into this program will pay us periodic fees, so that we can provide them with scheduled and unscheduled maintenance, support and repair services, among others. The program will allow
us to improve continuously the level of



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support we offer to our pre-owned aircraft customers. We believe this program represents an innovative approach, which offers our customers an attractive
combination of pre-owned aircraft backed by Embraers comprehensive support package.

Markets

The following table sets forth our net sales by line of business and geographic region of the end users of our aircraft for the periods indicated.



|                            |  |                         |     |  |         |  |        
|--------------------------- |  | ----------------------- | --- |  | ------- |  | -------
|                            |  | Year ended December 31,
|                            |  | 2008                    |     |  | 2007    |  | 2006   
|                            |  | (in US$ millions)      
|Commercial Aviation         |  |                         |     |  |         |  |        
|Americas (excluding Brazil) |  | 2,401.9                 | (1) |  | 2,277.9 |  | 1,407.0
|Europe                      |  | 645.2                   |     |  | 485.8   |  | 430.1  
|Other                       |  | 1,190.4                 |     |  | 612.9   |  | 516.1  
|                            |  |                         |     |  |         |  |        
|Total                       |  | 4,237.5                 |     |  | 3,376.6 |  | 2,353.2
|                            |  |                         |     |  |         |  |        
|Executive Aviation          |  |                         |     |  |         |  |        
|Americas (excluding Brazil) |  | 446.6                   |     |  | 302.2   |  | 304.8  
|Europe                      |  | 225.1                   |     |  | 484.2   |  | 161.3  
|Brazil                      |  |                        |     |  | 27.7    |  |       
|Other                       |  | 202.3                   |     |  | 23.9    |  | 116.0  
|                            |  |                         |     |  |         |  |        
|Total                       |  | 874.0                   |     |  | 838.0   |  | 582.1  
|                            |  |                         |     |  |         |  |        
|Defense and Government      |  |                         |     |  |         |  |        
|Americas (excluding Brazil) |  | 214.5                   |     |  | 156.7   |  | 142.1  
|Europe                      |  | 16.2                    |     |  | 29.2    |  | 13.4   
|Brazil                      |  | 214.1                   |     |  | 96.9    |  | 71.2   
|Other                       |  | 59.7                    |     |  | 63.6    |  |       
|                            |  |                         |     |  |         |  |        
|Total                       |  | 504.5                   |     |  | 346.4   |  | 226.7  
|                            |  |                         |     |  |         |  |        
|Aviation Services           |  |                         |     |  |         |  |        
|Americas (excluding Brazil) |  | 241.8                   |     |  | 213.9   |  | 180.2  
|Europe                      |  | 252.1                   |     |  | 227.6   |  | 237.0  
|Brazil                      |  | 14.6                    |     |  | 46.4    |  | 50.2   
|Other                       |  | 93.9                    |     |  | 40.4    |  | 12.4   
|                            |  |                         |     |  |         |  |        
|Total                       |  | 602.4                   |     |  | 528.3   |  | 479.8  
|                            |  |                         |     |  |         |  |        
|Other Related Businesses    |  |                         |     |  |         |  |        
|Americas (excluding Brazil) |  | 51.8                    |     |  | 69.3    |  | 92.7   
|Europe                      |  | 7.6                     |     |  | 6.4     |  |       
|Brazil                      |  | 53.4                    |     |  | 78.0    |  | 25.0   
|Other                       |  | 4.0                     |     |  | 2.2     |  |       
|                            |  |                         |     |  |         |  |        
|Total                       |  | 116.8                   |     |  | 155.9   |  | 117.7  
|                            |  |                         |     |  |         |  |        



|(1) | Includes deliveries to Azul.
|--- | ----------------------------

Joint Ventures

We formed a joint venture company in December 2002 with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., subsidiaries of
China Aviation Industry Corp. II, or AVIC II, to provide for the manufacture, sale and after-sale support of the ERJ 145 regional jet family. We own 51% of the equity of the joint venture company Harbin Embraer Aircraft Industry Company Ltd. We have
granted the joint venture a license for the exclusive rights to produce, sell and provide support for the ERJ 145 regional jet family in the Chinese markets, and we contributed US$12.4 million in cash, tooling and inventory to the joint venture. Our
joint venture partners have contributed the land use rights in Harbin, China and contributed US$10.8 million in cash and facilities to the joint venture. The roll-out of the first ERJ 145 manufactured by the joint venture occurred in December 2003,
and the joint venture entered into its first sales contract for six aircraft with China Southern Airlines in February 2004. As of March 31, 2009, Harbin Embraer Aircraft Industry Company Ltd. had secured contracts with five Chinese airlines for
a total of 71 ERJ 145 aircraft, 32 of which were delivered as of March 31, 2009. In October 2007, the 1,000th jet of the ERJ 145 family was delivered at Harbin Embraer Aircraft Industry Co. Ltd.



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In October 2006, we entered into an agreement with CAE to form a global training joint venture, which
will provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft. The initial training program has started to be offered at CAE SimuFlite, Dallas, Texas. The joint venture is
expected to provide entitlement training and post-entitlement training for pilots, maintenance technicians and dispatch personnel.

Suppliers and
Components; Risk-Sharing Arrangements

We do not manufacture all of the parts and components used in the production of our aircraft.
More than 80% of the production costs of our ERJ 145 regional jet family, EMBRAER 170/190 family and Legacy 600 executive jet, depending on aircraft model, consist of materials and equipment purchased from our risk-sharing partners and other major
suppliers. Risk-sharing arrangements with suppliers of key components enable us to focus on our core business: design and production of commercial aircraft. Risk-sharing arrangements are those in which suppliers are responsible for the design,
development and manufacture of major components or systems of our aircraft, such as wings, tail or fuselage. Our risk-sharing partners, therefore, must invest their own money in research and development and share the risk and success of our products
with us.

In our commercial and executive aviation businesses, we rely on risk-sharing partners to supply vital components of our aircraft,
such as the engines, hydraulic components, avionics, interior and parts of the fuselage and portions of the tail. We select suppliers on the basis of, among other factors, technical performance and quality of their products, production capacity,
prior relationship and financial condition. We have had continuing relationships with most of our major suppliers since production of the Bandeirante aircraft began in 1975.

In addition, we have entered into purchase agreements with our major suppliers, which cover our requirements for five to ten years of production. These
contracts contain pricing formulas that take into consideration the various factors that affect the business of our suppliers, and help us mitigate the effects of price volatility, which in some cases can be significant, of the materials, parts and
components that are required for our operating activities. We are not obligated to purchase a minimum amount of materials annually under any of these supply contracts. Our ongoing supplier relationships depend on cooperation, performance and the
maintenance of competitive pricing. Once we select our risk-sharing partners, and program development and aircraft production begins, it is difficult to substitute these partners. In some cases, our aircraft are designed specifically to accommodate
a particular component, such as the engines, which cannot be substituted by another manufacturer without significant delay and expense. This dependence makes us susceptible to the performance, quality and financial condition of these risk-sharing
partners. See Item 3D. Risk FactorsRisks Relating to EmbraerWe depend on key customers and key suppliers, the loss of any of which could harm our business.

ERJ 145 Regional Jet Family

Risk-sharing partners.We entered into risk-sharing
arrangements with the following four suppliers in connection with the development and production of the ERJ 145 regional jet family:



| |  |  | Grupo Auxiliar Metalúrgico S.A., or Gamesa, a Spanish company owned by Iberdrola S.A., a European power utility, and Banco Bilbao Vizcaya, a large Spanish
financial institution, supplies the wings, engine nacelles and main landing-gear doors;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sonaca S.A.Société Nationale de Constructions Aerospatiales, a Belgian company, supplies portions of the central and rear fuselages, the
service, main and baggage doors and engine pylons;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ENAEREmpresa Nacional de Aeronáutica, a Chilean company, supplies the vertical fin, horizontal stabilizers and elevators; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | C&D Aerospace, Inc., a U.S. company, supplies the cabin and cargo compartment interiors.
| | - |  | ----------------------------------------------------------------------------------------



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Our risk-sharing partners generally receive payment for supplied components within three to five months
after delivery of the components to us. The partnering relationship with these suppliers results in lower production costs and higher product quality for the ERJ 145 regional jet family. In addition, our line of executive jets benefits from the
risk-sharing arrangements with Gamesa, Sonaca and ENAER. The interior of the Legacy 600 executive jet is provided by The Nordam Group, Inc., Duncan Aviation Inc. and us.

Other major suppliers.We have also entered into other agreements with numerous European, American, Canadian and Brazilian suppliers to provide key components for a number of our products, including the ERJ 145
regional jet family. These supply arrangements cover systems and components such as engines, avionics, landing gear and flight control systems. Our major suppliers include, among other companies, Rolls-Royce Allison, Parker Hannifin Corp., BF
Goodrich Co., United Technologies Corp.  Hamilton Sundstrand Division, Honeywell, Rosemount Aerospace and Alcoa Inc.

EMBRAER 170/190 Jet
Family

We are continuing to improve the EMBRAER 170/190 jet family together with risk-sharing partners that supply key systems for
the aircraft. Our supplier arrangements for the EMBRAER 170/190 jet family differ from the ERJ 145 regional jet family in that we use fewer suppliers. In the EMBRAER 170/190 jet family, each risk-sharing partner is responsible for the development
and production of aircraft systems, such as the landing gear, the hydraulic system and the flight control system, rather than individual components, and fewer components are supplied by companies that are not risk-sharing partners. The assumption of
responsibility for systems by our risk-sharing partners lowers our capital expenditures, which thereby decreases our development risks and increases our operating efficiency by reducing the number of suppliers per product and cutting production
costs. It also shortens development and production time. The primary risk-sharing partners for the EMBRAER 170/190 jet family are the following:



| |  |  | General Electric, which supplies CF34-8E/l0E turbofan engines, and designs, develops and manufactures the engine nacelles;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Honeywell, which supplies the avionics systems;
| | - |  | -----------------------------------------------



| |  |  | Liebherr, which is responsible for designing, developing and manufacturing the landing gear assemblies;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Hamilton Sundstrand, a U.S. company and a wholly owned subsidiary of United Technologies Corp., which develops and produces the aircrafts tail core, auxiliary
power unit, electrical systems and the air management system;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sonaca, which is responsible for the aircrafts wing slats;
| | - |  | -----------------------------------------------------------



| |  |  | Gamesa, which is responsible for the rear fuselage and the vertical and horizontal tail surfaces;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Latecoere, a French company, which manufactures two of the three fuselage sections;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | C&D Aerospace, which designs, develops and manufactures the aircraft interior; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | Grimes Aerospace Company, a U.S. company and a wholly owned subsidiary of AlliedSignal Inc., which develops and manufactures the exterior and cockpit lighting.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, some of the risk-sharing partners for the EMBRAER 170/190 jet family have assumed a broader role in other
aspects of the program by providing sales financing and residual guarantees, rather than simply supplying us with aircraft components.

To
prepare for the expected production increase for the EMBRAER 190 and EMBRAER 195 aircraft, on June 1, 2006 we entered into an agreement with KHI and KAB, under which they transferred to us assets required for the final assembly of the wings of
the EMBRAER 190 and EMBRAER 195 aircraft and paid us compensation of US$57 million. As a result, we began assembling the wings of the EMBRAER 190 and EMBRAER 195 aircraft. KHI will continue producing the wing control surfaces and the main landing
gear doors for these aircraft. However, the referred agreement referred to above does not cover the production of parts for the EMBRAER 170 and EMBRAER 175 aircraft.



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Executive Jets

The risk-sharing partners for our Legacy 600 and the Lineage 1000 are the same as those for our ERJ 145 jet family and EMBRAER 170/190 jet family, respectively. The risk-sharing partners for the Phenom 100 and Phenom
300 jets are Pratt & Whitney Canada, the supplier of the engines, Garmin, the supplier of the avionic systems, and Eaton Corporation, the supplier of hydraulic systems.

Cash contributions for the development of the EMBRAER 170/190 jet family and our Phenom 100 and Phenom 300 aircraft

We have arrangements with our risk-sharing partners pursuant to which they have contributed to us, in cash, a total of US$397.9 million in 2008 and we expect to receive an additional US$303.7 million in future years
for the development of the Phenom 300 and Legacy 450/500 family. Cash contributions become nonrefundable upon the fulfillment of certain developmental milestones. In 2008, US$353.6 million of these cash contributions had become nonrefundable. If we
cancel the production of the Phenom 100 or any aircraft in the EMBRAER 170/190 jet family or the development of the Phenom 300 or the Legacy 450/500 jet family because we are unable to obtain certification or for other nonmarket related reasons, we
may be obligated to refund US$44.3 million of the total cash contributions already received. We expect the certification of the Phenom 300 to be granted in the second half of 2009. The Phenom 100 was certified in 2008. The Legacy 450/500 jets are
expected to enter into service in 2013 and 2012, respectively. We generally do not need to refund these contributions as a result of insufficient market demand. We believe that these financial commitments are a strong endorsement of our aircraft
design and our ability to execute our business plan.

Customer Service and Product Support

Customer satisfaction and service is critical to our success. Through our customer focus, we aim to enhance customer loyalty and, ultimately, increase
sales. We will continue to focus on the development of closer, long-term relationships with our customers by meeting their aircraft requirements, providing after-sale support and spare parts and meeting maintenance requirements. We identify at the
time of purchase the appropriate level of after-sale regional or on-site customer support and coordinate regional inventory levels to address expected spare parts and maintenance requirements. To maintain and increase our responsiveness, we have
established five support centers worldwide. We provide technical assistance, support and distribution to our Brazilian and other Latin American customers through our facility in São José dos Campos and Gavião Peixoto. In March
2002, we established a distribution center in Beijing, China, together with China Aviation Supplies Import and Export Corporation, or CASC. We also intend to provide support services through our joint venture in China for aircraft sold by the joint
venture. In addition, we operate an MRO facility in Nashville, Tennessee, and an MRO facility in Alverca, Portugal. We provide full-service maintenance and repair services for our commercial and executive aircraft at these service centers, enhancing
our level of service to our customers in the United States and Europe. In addition, we have concluded the construction of a service center at Williams Gateway Airport in Mesa, Arizona.

We have dedicated teams in the United States, Europe and Brazil to focus exclusively on enhancing customer support. In addition, for each of our key
customers, we have assigned senior relationship managers that are responsible for enhancing our relationships with these customers. We also provide direct field support with on-site technical representatives at several of our major customers
facilities. These on-site representatives are assigned to major customers prior to the first delivery of their aircraft and provide advice on maintenance and operation. They also monitor our customers spare part needs and maintain
customers inventories.

We operate support centers that are available 24 hours a day, seven days per week, in our São
José dos Campos facility, as well as in Ft. Lauderdale, Florida, and Le Bourget, France. We train pilots, copilots, flight attendants and mechanics at these locations. We operate advanced flight simulators for our ERJ 145 regional jet family
and for the Legacy 600 at our Florida facility under an agreement with FlightSafety International, Inc., which specializes in flight simulation. We have entered into an agreement with GE Capital Aviation Training Limited, or GECAT, a joint venture
between General Electric Company and Thales, whereby GECAT provides training for the EMBRAER 170/190 jet family on a non-exclusive basis. We also provide field service and on-the-job



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training for airline personnel. For example, we routinely dispatch one of our pilots to fly with an operators crew during the introduction of an
aircraft into a customers regular routes. We also provide technical publications with up-to-date technical information on our aircraft.

Aircraft
Financing Arrangements

In the past, we generally did not provide long-term financing directly to our customers. Instead, we assisted
our customers in obtaining financing arrangements from different sources, including capital providers such as leasing companies, commercial banks, capital markets and the BNDES. In that regard, until 2008 customers could generally obtain financing
for their aircraft purchases. However, the current economic downturn is requiring a higher level of involvement from manufacturers, since most of the financing sources have dried up. As a response to the current credit shortage due to the global
economic crisis, we are working together with customers to develop new sources of funds, especially from nontraditional financiers. We are also looking for long-term relationships and expect to broaden the alternatives available to support our
clients financing needs, therefore contributing to reduce the funding gap caused by the current tight credit markets.

Airlines
sometimes require short-term bridge financing prior to arranging long-term debt financing because, for the airlines, the quickest delivery of the aircraft may be crucial to access the markets and long-term funding may not be available for them at
the time of delivery. On a case-by-case basis, we have provided interim financing, at market rates, to customers who have completed or are negotiating other financing arrangements and have not received funding at the time of the aircraft delivery.

In July 2007, Brazil and the OECD countries entered into an agreement to establish a level playing field for official export
financing support of aircraft. ECAs from signatory countries are required to offer the same financial terms and conditions when financing sales of competing aircraft. The effect of the agreement is to focus customers on the price and quality of
aircraft products offered by aircraft manufacturers rather than on the financial packages offered by their respective governments. As a result of the agreement, financing support by the Brazilian government to the potential purchasers of our
aircraft contain similar terms and conditions offered by Boeing, Airbus and Bombardier to such purchasers.

The BNDES-exim sponsored
Program, a Brazilian government program, provides our customers with direct financing. From 1996 through 2008, approximately 28% of the total value of our export sales was financed by the BNDES-exim Program. In 2008 approximately 11% of
commercial aviation revenues were supported by the BNDES, which also provided support to the EMBRAER 170/190 jet family for the first time.

Because of the high acceptance of the EMBRAER 170/190 family by the aircraft finance community and the value of these assets as collateral (including in terms of residual values), as of December 31, 2008, we had been able to deliver,
for the commercial aviation segment, 95% of the jets of the EMBRAER 170/190 family with no government or official financing. The market used to offer many different structures to finance those jets, although the most common ones were debt and lease
financing. Debt financing represented approximately 40% of the total aircraft delivered between 1995 and 2008 with funds provided to our customers by commercial banks, capital markets and the BNDES. Since the recent global crisis began, commercial
banks have reduced new financing offers, and fewer financial institutions remain active in the market. Banks were responsible for financing approximately 50% of our commercial aircraft deliveries in 2008 and we believe they may reduce new funding
for our commercial aircraft in 2009 by approximately another 50%.

Leasing arrangements generally involve the purchase of our aircraft by a
leasing company under a customers purchase contract and the lease of that aircraft to that customer. Leasing companies are also facing liquidity issues and the sector is undergoing a consolidation. In 2008, approximately 40% of our commercial
aircraft were delivered through leasing arrangements. However, due to the effects of the global economic crisis, a reduction of deliveries financed by this type of structure is also expected.

We believe the decline in funding from traditional sources will be partially offset by financing from BNDES to the airlines.



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See Item 3D. Risk FactorsRisks Relating to EmbraerA downturn in commercial aviation may
reduce our sales and revenue, and, consequently, our profitability, in any given year and Item 3D. Risk FactorsRisks Relating to EmbraerBrazilian government budgetary constraints could reduce amounts available to our
customers under government-sponsored financing programs.

Intellectual Property

Our intellectual property, which includes designs, trade secrets, know-how and trademarks, is important to our business. We hold trademarks over our name
and symbol and the names of our aircraft, some of which are registered and some of which are in the process of registration in a number of countries, including Brazil, the United States, Canada, Singapore, Hong Kong, China, European Union and Japan.
At December 31, 2008, we had 387 trademarks. Our registered trademarks are generally renewed at the end of their validity period, which usually runs from ten years from the date of application for registration. We do not believe that the loss
of any of our trademarks would have a material impact on our business or results of operations.

We develop our intellectual property in
our research, development and production process. Under the agreements we have with some of our suppliers and risk-sharing partners, they grant us access to information and technology necessary to better develop, manufacture and market our products.

We aim to protect our intellectual property rights resulting from investments in technical research and development and in the form of
invention, industrial design, brands or computer programs.

We hold patents relating to our manufacturing technology. Currently, we hold
registered patents from the appropriate registries in Brazil, the United States, the European Union, Russia, Japan and China in connection with aircraft interior design, including the patent for the seat leaning system used in the Legacy 450/500 jet
family. We require that our suppliers and risk-sharing partners respect the intellectual property rights of third parties, and we believe that we have the intellectual property rights necessary for our business and operations.

Government Regulation and Aircraft Certification

We
are subject to regulation by regulatory aviation agencies, both in Brazil and abroad. These agencies principally regulate the certification of aircraft and aircraft manufacturers. Besides certification in Brazil, we must obtain certification in each
jurisdiction in which our aircraft operate commercially. The competent authority for the certification of our aircraft in Brazil is the Departamento de Aviação Civil(Civil Aviation Department), through the Centro
Técnico Aeroespacial(Aerospace Technical Center), under the Ministry of Defense. In 2005, a new regulatory agency was created, the Brazilian aviation authority, becoming the main Brazilian authority for the regulation, supervision and
certification of aircraft, aircraft parts, manufacturers and operations. The aviation authorities in other countries include the FAA in the United States, the recently created EASA for the European Union, or EU, and the JAA for the other European
countries. Some countries simply validate and complement the Brazilian aviation authoritys original certification, in accordance with their own rules. The Brazilian aviation authority has a bilateral certification agreement with the FAA under
which the FAA certification requirements are covered by the Brazilian certification process. This cooperation among regulatory authorities leads to faster certification.

Once an aircraft is certified by the Brazilian aviation authority and FAA, some authorities, such as those in Australia and Mexico, ratify the certification. Other countries, such as Canada, require compliance with
their own specific national requirements before certification. In Europe, since September 2003, EASA has become the regulatory authority for EU countries, including Germany, Italy, France, the United Kingdom, Spain and The Netherlands. Most of the
remaining non-EU countries, such as Switzerland, still operate under the rules of the JAA. The JAA is not a certification authority, but rather an advisory organization that makes recommendations to the non-EU national authorities. A recommendation
by the JAA is a requirement for certification of an aircraft by most of these authorities. Before the creation of EASA, 27 national authorities were JAA members. As EASA is a new organization, it is currently using the JAA technical structure and
following the JAAs recommendations for issuance of EASA certificates for aircraft.

Aircraft certification is an ongoing process. Any
change in the design of any of our aircraft must be approved by the Brazilian aviation authority. Significant changes may require a separate certification by other authorities. Changes in the aircraft certification requirements do not require
recertification of an aircraft already certified, but significant safety improvements may be imposed by the authorities through operational rules or airworthiness directives.



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The certification history of our aircraft is as follows:



| |  |  | The ERJ 145 was certified to operate in the United States and Brazil in the last quarter of 1996, Europe in the second quarter of 1997, Australia in June 1998 and,
for the LR version, China in November 2000.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ERJ 145 XR version was certified by the Brazilian aviation authority in August 2002 and the FAA in October 2002.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | The ERJ 135 was certified by the Brazilian aviation authority in June 1999, the FAA in July 1999 and the European aviation authority in October 1999.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The ERJ 140 was certified by the Brazilian aviation authority in June 2001 and the FAA in July 2001.
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | The Legacy 600 executive jet was certified by the Brazilian aviation authority in December 2001, the JAA in July 2002 and the FAA in August 2002.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The EMBRAER 170 was certified by the Brazilian aviation authority, the FAA, the JAA, EASA and the authority of Poland in February 2004, and deliveries of the
EMBRAER 170 began in March 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The EMBRAER 175 was certified by the Brazilian aviation authority in December 2004, EASA in January 2005, TCCA, the Canadian certification authority, in July 2005
and the FAA in August 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The EMBRAER 190 was certified by the Brazilian aviation authority in August 2005, the FAA in September 2005 and EASA in June 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | The EMBRAER 195 was certified by the Brazilian aviation authority in June 2006, EASA in July 2006 and the FAA in August 2007.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | The Phenom 100 executive jet was certified by the Brazilian aviation authority and the FAA in December 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | The Lineage 1000 executive jet was certified by the Brazilian aviation authority and the FAA in December 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------

The certification of the Phenom 300 is expected to occur in the second half of 2009.

Seasonality

No material portion of our business is considered to be seasonal in any material
respect.



|4C. | Organizational Structure
|--- | ------------------------

Our operations are
conducted by Embraer-Empresa Brasileira de Aeronáutica S.A. as the controlling and principal operating company. We have a number of direct and indirect subsidiaries, none of which are considered significant. A complete list of our
subsidiaries is filed as Exhibit 8.1 to this annual report.



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|4D. | Property, Plant and Equipment
|--- | -----------------------------

We own our
headquarters and plant, located in São José dos Campos. Significant portions of our facilities in São José dos Campos are subject to mortgages held by the IFC  International Finance Corporation. We lease, own or
have the right to use the following properties:



|                                                   |  |                                                                   |  |                           |  |              |     |  |                
|-------------------------------------------------- |  | ----------------------------------------------------------------- |  | ------------------------- |  | ------------ | --- |  | ---------------
|Location                                           |  | Purpose                                                           |  | Approximatesquare footage |  | Owned/Leased |     |  | LeaseExpiration
|São José dos Campos, SP, Brazil                    |  | Headquarters, principal manufacturing facility and support center |  | 5,902,102                 |  | Owned        |     |  |               
|                                                   |  |                                                                   |  |                          
|São José dos Campos, SP, Brazil (Eugênio de Mello) |  | Manufacturing facility                                            |  | 3,658,884                 |  | Owned        |     |  |               
|                                                   |  |                                                                   |  |                          
|Botucatu, SP, Brazil                               |  | Manufacturing Facility                                            |  | 222,000                   |  | Owned        |     |  |               
|                                                   |  |                                                                   |  |                          
|Harbin, China                                      |  | Manufacturing facility                                            |  | 258,067                   |  | Owned        | (1) |  |               
|                                                   |  |                                                                   |  |                          
|Gavião Peixoto, SP, Brazil                         |  | Testing and manufacturing facilities                              |  | 191,648,512               |  | N/A          | (2) |  |               
|                                                   |  |                                                                   |  |                          
|Alverca, Portugal                                  |  | Aircraft maintenance and support center                           |  | 417,000                   |  | Leased       |     |  | 2035           
|                                                   |  |                                                                   |  |                          
|São Paulo, SP, Brazil                              |  | Administrative offices                                            |  | 5,245                     |  | Leased       |     |  | 2010           
|                                                   |  |                                                                   |  |                          
|Ft. Lauderdale, Florida, U.S.                      |  | Support center                                                    |  | 91,500                    |  | Leased       |     |  | 2020           
|                                                   |  |                                                                   |  |                          
|Nashville, Tennessee, U.S.                         |  | Aircraft maintenance and support center                           |  | 316,128                   |  | Leased       |     |  | 20182028       
|                                                   |  |                                                                   |  |                          
|Le Bourget, France                                 |  | Aircraft maintenance and support center                           |  | 33,500                    |  | Leased       |     |  | 2010           
|                                                   |  |                                                                   |  |                          
|Villepinte, France                                 |  | Representative offices                                            |  | 70,202                    |  | Leased       |     |  | 2014           
|                                                   |  |                                                                   |  |                          
|Beijing, China                                     |  | Representative offices                                            |  | 3,444                     |  | Leased       |     |  | 2010           
|                                                   |  |                                                                   |  |                          
|Singapore                                          |  | Representative offices                                            |  | 2,303                     |  | Leased       |     |  | 2010           



|(1) | The land is owned pursuant to a land use rights certificate.
|--- | ------------------------------------------------------------

|(2) | We currently have a temporary authorization from the State of São Paulo to use the land and expect to receive a concession for the land as soon as legal formalities are
satisfied. The facilities are owned by Embraer.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our total disbursements in capital expenditures related to property, plant
and equipment were equal to US$90.8 million in 2006, US$208.9 million in 2007 and US$235.0 million in 2008. These investments are related mainly to construction of facilities, improvements to our plant and production facilities and modifications for
the production of new aircraft models. In 2009, we expect disbursements in capital expenditures related to property, plant and equipment to total approximately US$150 million, which will be primarily related to (1) improvements for our existing
facilities, including to the Phenom 100 and Phenom 300 assembly lines, (2) the construction of the Melbourne, Florida plant, which was started in May 2008 and (3) the construction of two plants in Alverca, Portugal, which was started in
July 2008. Due to the recent start dates of the construction of these plants, no material disbursements have yet been made in connection with them.



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In the first quarter of 2009, we reduced our expected investments in property, plant and equipment which
we had originally estimated at US$240.0, in light of the impact of the current global economic downturn.

Under U.S. GAAP, our capital
expenditures related to property, plant and equipment are recorded as a non-current asset in our balance sheet.

Production

The actual manufacture of an aircraft consists of three principal stages: fabrication of primary parts, assembly of major components and final assembly.
Primary parts include metal sheets and plates (produced from die-cast molds, stretch forming or various chemical treatments), parts produced using computerized and non-computerized machines, and prefabricated parts. The primary parts are then
joined, or mated, with one another to produce the aircrafts major components, which are in turn joined to create the aircrafts basic structure. In the final assembly stage, the aircrafts various operating systems (such as wiring
and electronics) are installed into the structure and tested.

Production facilities for our commercial, executive and defense aircraft are
located in São José dos Campos in the State of São Paulo, Brazil. We reduced the aircraft production time of aircraft in the ERJ 145 family from eight months in 1996 to 3.1 months in 2004. From December 31, 1999 to
December 31, 2000, we increased our production from 12 to 16 ERJ 145 family aircraft per month. At March 31, 2001, our production rate was 16 aircraft per month. In response to decreased market demand after the September 11, 2001
terrorist attacks and the related global economic slowdown, we decreased our production to 11 aircraft per month and, in 2005, decreased it further to nine aircraft per month.

Production time for our EMBRAER 170 aircraft has been reduced from approximately seven months at the beginning of its production in March 2004 to
approximately four months at the end of 2008. We have the flexibility to increase production in the future in response to increased demand. We achieved the production rate of 14 aircraft per month at the end of 2008 for the EMBRAER 170/190 jet
family, due to the reorganization of some industrial processes, and the implementation of a third shift in our workforce. In addition, in June 2006, we entered into an agreement with KHI and KAB, pursuant to which we began assembling the wings of
the EMBRAER 190 and EMBRAER 195 aircraft in order to meet demand for these types of aircraft. See Commercial Aviation BusinessProductsEMBRAER 170/190 Jet Family.

To accommodate our production of the ERJ 145 regional jet family and our EMBRAER 170/190 jet family, as well as any production of our executive jets, we
have expanded our production facilities and acquired new facilities and will continue to coordinate with our risk-sharing partners to accommodate any future production needs. We built a new facility in Gavião Peixoto, in the State of
São Paulo, Brazil, to enhance our flight-testing capabilities and provide a final assembly line for our defense aircraft and of our executive jets. This facility has been operational since November 2002 and consists of a test runway and other
features to handle the assembly of our defense and government programs, an MRO facility, and the Phenoms production hangar in Gavião Peixoto. We are also conducting our flight tests for the EMBRAER 170/190 jet family and have a fully
operational executive jet interior factory at Gavião Peixoto. In September 2000, we purchased a new facility in São José dos Campos in the State of São Paulo, Brazil, where we currently manufacture small parts and
components for our aircraft. Our China joint venture has constructed a production facility for the ERJ 145 jet family in Harbin, China.

Environmental
Matters

Most environmental regulation in Brazil is established at the state rather than at the federal or municipal level, with
environmental authorities in most states granting operating permits to individual facilities rather than through general regulations. We have all material permits required to operate our business. The terms of these operating permits are reviewed
every year and, as of March 31, 2009, we were in compliance with our permits. In addition, we adhere internally to international ISO 14000 environmental standards. In 2006, 2007 and 2008, we invested US$4.6 million, US$5.1 million and US$5.6
million, respectively, in environmental matters and we expect to spend approximately US$5.3 million on environmental matters in 2009 for the construction of new facilities and modification of existing facilities relating to environmental compliance
and improvements.



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OGMA

During the process of due diligence prior to the acquisition of OGMA, we identified some industrial processes that did not meet environmental and occupational safety standards. As part of the negotiations, it was agreed with Empresa
Portuguesa de DefesaEMPORDEF (Portuguese Defense Company), the seller, that (1) Embraer would spend 1.9 million, the amount estimated by the parties to be the amount necessary to bring the industrial processes into
environmental and occupational safety compliance over a three-year period, (2) the seller would indemnify OGMA for any losses due to environmental claims over the same three-year period, (3) Embraers liability for pre-acquisition
environmental claims would be limited to 4.1 million, and (4) any liability for other pre-acquisition environmental and occupational safety claims in excess of 4.1 million would be paid by the seller.

Insurance

We insure all of our plants and equipment
for loss and replacement. We also carry insurance to cover all potential damages to our own fleet of aircraft, including those occurring during commercial and demonstration flights. In addition, we maintain a comprehensive aviation products
liability policy, which covers damages arising out of the manufacture, distribution, sale and servicing of our aircraft and parts. We also carry natural disaster and business interruption insurance covering property damage and the related loss of
gross income, as defined in the policy, and additional expenses, such as those incurred by us to offset the loss of production and delivery of aircraft due to partial or total interruption of our business because of material losses caused by an
accident. We consider the amounts of our insurance coverage to be typical for a company of our size and adequate to meet all foreseeable risks associated with our operations.

We also maintain officers and directors liability insurance in the total amount of US$100 million. This insurance covers our officers and
directors for liabilities resulting from wrongful acts, including any act or omission committed or attempted by any officer or director acting in his or her capacity as officer or director or any matter claimed against an officer or director solely
by reason of his or her serving in such capacity.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

We have no unresolved
staff comments.



|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------

This
discussion should be read in conjunction with our audited consolidated financial statements and notes thereto and other financial information included elsewhere in this annual report. This annual report contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in Item 3D. Risk Factors and
the matters set forth in this annual report generally.

Except as otherwise indicated, all financial information in this annual report has
been prepared in accordance with U.S. GAAP and presented in U.S. dollars. For certain purposes, such as providing reports to our shareholders located in Brazil, filing financial statements with the CVM, and determining dividend payments and other
distributions and tax liabilities in Brazil, we have prepared and will continue to be required to prepare financial statements in accordance with the Brazilian GAAP.



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|5A. | Operating Results
|--- | -----------------

Current Conditions and Future Trends in the
Commercial Airline Industry and Executive Jet Market

The following discussion is based largely upon our current expectations about future events,
and trends affecting our business, actual results for our industry and performance could differ substantially. See IntroductionSpecial Note Regarding Forward-Looking Statements. For factors which could affect our industry in the
future and our own future performance, see Item 3. Risk Factors.

Commercial Aircraft

The fundamental drivers of air travel growth are a combination of economic growth and the increasing propensity to travel due to increased trade,
globalization and improved airline services driven by liberalization of air traffic rights between countries. Despite the current market uncertainties, we believe that from 2009 to 2028 world air travel demand should grow an average of 5% per
year in terms of passengers flown. We believe that the air transportation industry will recover after the end of the current economic crisis, and that the long-term growth trend will be restored. However, the current global economic downturn may
cause a decrease in global demand for air travel in the short-term. This, in turn, may cause financial difficulties for some major commercial airlines, including certain of our customers in the commercial aviation business, causing a reduction in
the demand for commercial aircraft, including those manufactured by Embraer. In addition, the current global economic downturn resulted in a credit shortage that might impair the ability of commercial airlines, including certain of our customers in
the commercial aviation business, to finance their aircraft acquisition (see Item 4B. Business OverviewAircraft Financing Arrangements).

We expect China to lead growth in air travel in the next 20 years in terms of passengers flown, with an average annual rate of more than 7.5%, followed by Latin America, Russia and the Commonwealth of Independent
States. We expect that the rate of passengers flown in Asia and Africa will grow approximately 5%, and the European and North American markets approximately 4%.

In North America, it is expected that in 2009 a number of airlines will operate in an environment of tighter margins. Main strategies have been focused on cost reductions, increased productivity and improved
efficiency through better match of market demand with more adequate aircraft capacity. We believe that airlines are cautiously optimistic, even though industry revenue is expected to decline, mainly due to the reduction in demand. Regional airlines
continue to provide essential hub feeder and capacity adjustments to network carriers. Low-cost airlines are no longer increasing their share in the domestic market as fast as in the past, mainly because of weaker economic and market demand
scenarios.

In Europe, revenue environment will remain under pressure as a result of the economic scenario. Regional carriers are
supporting network airlines adjustment of capacity and frequency of services by replacing larger aircraft. Environment, noise and greenhouse gas emissions issues are expected to dominate the regulatory agenda and will shape the development of
new technologies in European air transportation. Aviation industry will be subject to the Emissions Trade System, or ETS, and to the imposition of potential green taxes which tend to be implemented under more stringent regulatory
measures. Airlines are expected to be replace aging aircraft to avoid green taxes.

Despite current uncertainties concerning the short-term
outlook of the commercial aviation industry, we believe that passenger demand in the Latin American air transport industry remains positive, led mainly by Brazil and Mexico. Airlines have introduced more fuel-efficient and right-sized aircraft in
order to expand the intra-regional aviation system. More regional integration is increasing the demand for smaller-capacity aircraft to operate on medium- and low-density markets.

In the Asia-Pacific region, airlines are suffering with the decrease in international passenger and cargo demand caused by the economic crisis. The
Asia-Pacific fleet is still comprised mainly of high-capacity narrow-body aircraft, which restricts adequate deployment to medium- and low-density markets. Liberalization initiatives in some sub-regions, combined with public policies, tend to
encourage the development of regional air transport and to generate major opportunities for regional aviation in the coming years.



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The reduction of Chinas economic growth is affecting the demand in the air transport industry. The
Chinese air transport industry is mainly concentrated in high-capacity aircraft, which do not have the adequate capacity to serve properly most of the medium- and low-density markets. Nevertheless, the Chinese government is implementing new policies
to promote regional aviation development.

In the Middle East increased air transport demand is mainly due to the expansion of long-haul
international services. The intra-regional aviation system is being developed in order to support regional integration and feed international flights.

Air transportation in Africa is characterized by a regulated environment, aging fleet, lack of infrastructure and financial resources, resulting in poor connectivity in the intra-regional system. Nonetheless, as a
result of liberalization in some countries, some airlines are introducing new aircraft and expanding their intra-regional system, which helps support the regional aviation development.

The Commonwealth of Independent States, or CIS, air transport industry is diverse. At CIS, there are several small, state-owned airlines searching for
narrow-body aircraft for fleet renewal. In Russia, import taxes higher than 40% represent a significant setback for airlines that intend to renew their fleet with western aircraft. Airline consolidation is in progress in the region, focusing on the
improvement of air transport system efficiency. Opportunities for regional aviation rely on the replacement of the huge, old and inefficient Soviet fleet.

We estimate a global demand for 6,750 jets in the 30- to 120-seat-capacity category over the next 20 years, which may generate global sales of new aircraft totaling US$220 billion. Of this total, we expect that 2,950
jets should be delivered between 2009 and 2018, and the remaining 3,800 jets should be delivered between 2019 and 2028, as detailed below:



|                      |  |                            |  |                            |  |                           
|--------------------- |  | -------------------------- |  | -------------------------- |  | --------------------------
|Jet Category By Seats |  | 2009-2018 (Number of Jets) |  | 2009-2028 (Number of Jets) |  | 2009-2028 (Number of Jets)
|30-60                 |  | 75                         |  | 575                        |  | 650                       
|61-90                 |  | 1,150                      |  | 1,300                      |  | 2,450                     
|91-120                |  | 1,725                      |  | 1,925                      |  | 3,650                     
|30-120                |  | 2,950                      |  | 3,800                      |  | 6,750                     

Estimates indicate that the 30- to 60-seat-capacity category has reached maturity, but will remain
the backbone of the U.S. and Europe hub-feeding system and will support the regional aviation development in some other world regions, such as Russia/CIS, Mexico, Africa and South America.

The 61- to 120-seat capacity category will continue to help airlines match aircraft capacity to market demand with improved service levels, through the
right-sizing of low load factor narrow-body flights. Furthermore, the jets in this category also tend to be used to substitute older fleets, expand into new markets and aid the natural growth of regional airlines on high-demand routes operated by
smaller jets.

We believe that emission is becoming one of the main drivers of airline fleet decisions and will influence future aircraft
developments. We estimate that more than 700 units of the 30- to 120-seat fleet currently operating are over 20 years old. Such aircraft should soon be replaced, which should result in significant environmental benefits. The Embraer executive jets
family provides a reduction of as much as 50% in carbon dioxide emissions and may be well positioned in this scenario.

Executive Aircraft

Market Overview

The global economic
crisis has rapidly and severely affected the executive aviation market, especially in the last quarter of 2008. As a result, we believe 2009 will mark a reversal of the growth cycle that began four years ago.

In the short-term, we believe issues such as the decreasing buying power of companies and individuals, the surging inventory of pre-owned jets for sale,
the shrinking number of financing sources and the restricted financing conditions will be key to determine the behavior of demand for executive jets. In addition, we believe that in the current economic downturn public opinion is beginning to view
executive jet travel as superfluous or excessive.



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Charters and fractional ownership providers, which have grown considerably in the last couple of years,
are now suffering the effects of the global economic crisis. In addition, corporations are reducing the travel costs associated with corporate jets. Data published by the FAA and Eurocontrol in December 2008 showed that in 2008 business aviation
traffic in the U.S. and Europe, measured in terms of number of executive jet flights, decreased 21.3% and 16%, respectively.

According to
the General Aviation Manufacturers Association, in 2008 the executive aviation market reported approximately 1,154 executive jet deliveries, and a 11% increase from 2007. However, we believe it will be difficult for the industry to sustain the same
level of deliveries in 2009. A high number of order cancellations may continue to occur, which should lead to a significant reduction of deliveries in 2010 and 2011. We believe a recovery in the executive jet segment will begin in 2011-2012, and, as
a result, executive jets manufacturers will have to adjust production capacity and product pricing throughout 2009 and 2010.

We estimate
that the global executive aviation market between 2009 and 2018 will be valued at approximately US$188 billion (an 8% decrease over Embraers 2008 projections).

According to our post-crisis market perspective, compound annual revenue growth for the executive jet segment from 2009 to 2018 is expected to be stagnant. In terms of units delivered, growth expectancy will narrow to
0.9%, which is lower than our last years 3.1% forecast.

Since 2005, the industry has witnessed an increase in the participation of
nontraditional markets (i.e., outside the U.S. and Western Europe) in overall sales levels. Recently, some manufacturers have registered 70% of orders coming from outside the U.S. market. However, due to impairment of the emerging economies
caused by the global economic crisis, we anticipate that the steep reduction in sales of executive aviation in the U.S. will not be offset by the growth of demand in nontraditional markets. Revenue from non-U.S. orders are believed to account for
55% of total industry revenue during the next ten years, representing an increase of ten percentage points from our last years estimate.

Despite overall forecast reduction, Latin America, Asia-Pacific and China are expected to show growth in revenues for this segment, mainly in the medium-to-long terms. Lighter jets categories have generally been well accepted,
particularly in Latin America, as they are more suitable to local needs. Thus, we believe that sales of light and entry-level jets will be key to sustaining the expected growth in Latin America. While the Latin American growth stems mainly from
substitution of the turboprop fleet, we believe that Asian growth rates will be sustained by the regions economic performance and by the prospect of diminishing regulatory and fiscal barriers, which, until now, have dampened demand. These
factors should favor demand for aircraft with larger cabins and longer ranges within the region.

Although China has experienced a recent
growth in demand based on overall strong economic performance in the region, the tight government control over air space and the lack of a sufficient civilian airport infrastructure are still major hurdles that we believe will continue to hamper the
Chinese executive aviation market in the short-and medium-terms.

Our Executive Aircraft

General

We continued to make solid
progress throughout 2008, achieving important milestones in each program of our product portfolio and advancing in the development of our integrated solutions for the executive aviation market.

Since launching the Phenom 100, Phenom 300 and Lineage 1000, we have continued to evaluate and explore opportunities in the executive aviation market.



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New sales of the Phenom executive jets family increased the number of firm contracts to over 800 aircraft
during 2008. In addition, over 20 Lineage 1000 jets have been sold around the world and Legacy 600 sales performed well throughout the three first quarters, registering a slowdown towards the last quarter of 2008.

We also had one Embraer 175 sold as a corporate shuttle and delivered to an executive aviation customer in North America, although it is not a typical
sales target.

Legacy 450 and Legacy 500

In April 2008, we formally launched two new programs in the medium jet categories: the mid-light Legacy 450 jet and the mid-size Legacy 500 jet. Both programs were approved by our Board of Directors in March 2008. The
Legacy 450/500 jets will be positioned in our executive jets portfolio between the Legacy 600 and the Phenom 300.

An estimated US$750
million is expected to be invested overall in fixed assets, research and development for the new Legacy 500 and Legacy 450 models, which are expected to enter into service in 2012 and 2013, respectively. We believe that these two aircraft programs
will help strengthen our position in the market and set our portfolio as one of the most comprehensive of the executive aviation industry. During 2008, we started the development of the Legacy 500 by conducting wind-tunnel tests, and by initiating
the programs joint definition phase and program design review with our suppliers.

Phenom 100

The Phenom 100 was awarded the type certification by the Brazilian aviation authority on December 9, 2008 and by the U.S. Federal Aviation
Administration two days later. Both certificates were issued without restrictions. EASA certification of Phenom 100 is expected for the second quarter of 2009. The first two Phenom 100 units were delivered in December 2008 to U.S. customers.

The take-off field length requirement, the hot and high capabilities, speed and landing distance targets of the Phenom 100 have been
improved, which leads us to believe that this product will be better positioned to meet our customers expectations.

In 2008, the
editors of Robb Report magazine, in the U.S., voted the Phenom 100 the Best of the Best Business Jet.

Lineage 1000

The Lineage 1000 executive jet has also been awarded type certification by the Brazilian aviation authority and by EASA. The interior
supplemental type certification was awarded in early 2009, completing the development cycle.

The Lineage 1000 has also exceeded
development targets. Tests conducted with the Lineage 100 demonstrated that its initially projected range has been surpassed by approximately 5%, which will result in lower operating costs and, as a consequence, will allow a better market
penetration for the Embraers ultra-large model.

Phenom 300

In the first half of 2008, Phenom 300 successfully made its maiden flight and started its flight test campaign. Several tests were performed throughout
2008 and the Phenom 300 is expected to enter into service in the second half of 2009, with European deliveries starting in 2010.

Legacy
600

The Legacy 600 has entered its seventh year of production and still has broad market acceptance, principally among customers in
Europe. The aircraft has also a good acceptance in the Middle East, with a fleet of 14 aircraft spread within the region. Legacy 600 deliveries declined from 35 units in 2007 to 33 units in 2008 for executive aviation customers only. With a fleet of
more than 150 jets in 24 countries, the Legacy 600 holds a 15.2% market share in the super midsize category.



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We have further refined the Legacy 600 design in 2008, with improvements in its capability, interior
acoustic and overall structure.

We believe that Embraers executive jet fleet may help expand our market share in this segment as a
result of the expansion of our product portfolio with the entry into service of these new executive jets in 2008 and 2009.

Customer
Support

From 2007 to 2009, we plan to have invested more than US$100 million in infrastructure and organization to support our business
jet customers throughout the world. We have opened two new company-owned service centers during 2008. The first is located in Mesa, Arizona, at PhoenixMesa Gateway Airport and the second is located in Fort Lauderdale, Florida, at Fort
LauderdaleHollywood International Airport. These new facilities are capable of providing our customers with full service for our executive jets.

In 2008, our new Executive Jets Center at Le Bourget Airport, in France, received the European Aviation Safety Agencys Part 145 Approval Certificate to operate in Europe. The facility is dedicated exclusively to
our executive jets fleet, and joins the existing service center network that includes OGMA in Portugal, and another four Embraer authorized service centers in the region. Embraer also named Falcon Aviation Services in Abu Dhabi, United Arab
Emirates, an authorized service center dedicated to support its Phenom, Legacy and Lineage customers in the Middle East. Field support representatives have also been assigned to both Abu Dhabi and Dubai, and an inventory of parts will be in place in
Dubai by the end of the first quarter of 2009.

In addition, we have entered into a contract with one of the worlds largest logistics
company, UPS Supply Chain Solutions, located in Louisville, KY, USA, to optimize the service cycles for parts, from the warehouse to the service centers and to customers.

During 2008, we have reinforced our sales force for the Latin American market by adding three new sales managers, all of them based in São Paulo, Brazil. The number of Authorized Sales Representatives, or ASRs,
in the region was also increased with the nomination of three new ASRs in Guatemala, Venezuela and Mexico. Our sales team in Asia-Pacific was also strengthened with a new Vice-President of Sales.

Brazilian Economic Environment

The current economic
crisis, including the events negatively affecting the commercial airline industry and the ensuing negative effects on the U.S. economy have adversely affected the global and Brazilian economies and securities markets, and have resulted in:



| |  |  | increased volatility in the market price of securities;
| | - |  | -------------------------------------------------------



| |  |  | significant decline in corporate earnings estimates;
| | - |  | ----------------------------------------------------



| |  |  | substantial losses in important industries, including the air transport and insurance industries; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | significant erosion of consumer confidence.
| | - |  | -------------------------------------------

As discussed below, any uncertainty surrounding the U.S., Brazilian and global economies could result in the Brazilian government changing existing laws or regulations or imposing new ones, and/or the Central Bank changing base interest
rates, which could adversely affect our operations.

The Brazilian government has frequently intervened in the Brazilian economy and
occasionally has made drastic changes in policy and regulations. The Brazilian governments actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes
in tax policies, price controls, currency devaluations, capital controls and limits on imports. For example, the Brazilian government has the authority, when a serious imbalance in Brazils balance of payments occurs, to impose restrictions on
the remittance to foreign investors of the proceeds of their investments in Brazil and on the conversion of Brazilian currency into foreign currencies. Changes in Brazils monetary, credit, tariff and other policies could adversely affect our
business, as could inflation, currency and interest-rate fluctuations, social instability and other political, economic or diplomatic developments in Brazil, as well as the Brazilian governments response to such developments.



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Rapid changes in Brazilian political and economic conditions that have occurred and may occur in the
future will require a continued assessment of the risks associated with our activities and the adjustment of our business and operating strategy accordingly. Future developments in Brazilian government policies, including changes in the current
policy and incentives adopted for financing the export of Brazilian goods, or in the Brazilian economy, over which we have no control, may materially adversely affect our business.

Brazilian economic conditions may also be negatively affected by economic and political conditions elsewhere, particularly in other Latin American and
emerging-market countries. Although economic conditions in such countries may differ significantly from economic conditions in Brazil, the reaction of investors to developments in such countries may have an adverse effect on the market value of
securities of Brazilian issuers. For example, the recent uncertainty in the economies of U.S. and other OECD countries has caused a retraction of credit on a worldwide basis, significant volatility in the international capital markets (including
Brazil) and diminished investor interest in securities of Brazilian issuers, including ours. Crises in other emerging-market countries also have at times significantly affected the availability of credit in the Brazilian economy and resulted in
considerable outflows of funds and declines in the amount of foreign currency invested in Brazil.

In 2004, Brazils GDP increased
5.2% to US$559.6 billion and the country achieved a trade surplus of US$33.7 billion. Inflation in 2004, as measured by the IGP-M, was 12.4%. Interest rates continued to be maintained at high levels, with the rates for Certificados de
Depósito Interbancário (Interbank Certificates of Deposit), or CDI, averaging 16.2% in 2004.

Given the positive 2004
results, investor confidence continued to be strong in 2005. The real appreciated by 8.1% and 11.8% against the U.S. dollar in 2004 and 2005, respectively, to R$2.3407 per US$1.00 at December 31, 2005. In 2005, Brazils GDP
increased 3.1% to US$734.4 billion and the country achieved a record trade surplus of US$44.8 billion. Inflation in 2005, as measured by the IGP-M, was 1.2%. Interest rates continued to be maintained at high levels, with the CDI averaging 19.1% in
2005.

According to the Central Bank, in 2006 the GDP grew only 2.7% primarily as a result of high interest rates. Also in 2006, the
real appreciated 8.7% against the U.S. dollar, reaching R$2.138 per US$1.00 at December 31, 2006.

In 2007, Brazils GDP
increased 5.4%, and the real appreciated 17.2% against the U.S. dollar, to R$1.7713 per US$1.00 at December 31, 2007. Inflation in 2007, as measured by the IGP-M, was 7.7%, and the CDI average was 11.9% in the same period.

In 2008, Brazils GDP increased 4.8% and the real depreciated 31.9% against the U.S. dollar, to R$2.3370 per US$1.00 at December 31,
2008. Inflation in 2008, as measured by the IGP-M, was 9.8% and the average CDI interest rate was 12.0% in the same period.

The global
economic crisis has reduced expectations for growth of the Brazilian economy for 2009. These reduced expectations triggered the depreciation of the real, particularly since October 2008, as well as tighter availability of credit to consumers
and companies, a sharp devaluation of securities of Brazilian companies and a reduction in industrial output.

According to the Focus
report published by the Brazilian Central Bank, or BACEN, in April 9, 2009, negative growth of 0.30% is estimated for Brazilian GDP in 2009 and an inflation rate of 4.25% for the same period.

According to the BACEN, Brazilian international reserves continue above R$200.0 billion (R$201.6 billion at April 20, 2009), slightly lower than
2008 year-end levels. In response to the global economic crisis, the Brazilian government has implemented macroeconomic measures, particularly reductions of the Brazilian base interest rate, tax reductions and social programs to foster investment
and consumption by both individuals and companies.



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Effects of Inflation and Currency Exchange Fluctuations

Until the adoption of the Real Plan in 1994, Brazil had for many years experienced very high, and generally unpredictable,
rates of inflation and steady devaluation of its currency relative to the U.S. dollar. The following table sets forth, for the periods shown, more recent rates of inflation in Brazil, as measured by the IGP-M and published annually by
Fundação Getulio Vargas , and the fluctuation of the real against the U.S. dollar as measured by comparing the daily exchange rates published by the Central Bank on the last day of each
period:



|                                       |  |       |    |  |      |   |  |      |   |  |      |   |  |      |  
|-------------------------------------- |  | ----- | -- |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|                                       |  | 2008  |    |  | 2007 |   |  | 2006 |   |  | 2005 |   |  | 2004 |  
|Inflation (General Market Price Index) |  | 9.8   | %  |  | 7.7  | % |  | 3.8  | % |  | 1.2  | % |  | 12.4 | %
|Exchange Rate Variation (R$/US$)       |  | (31.9 | )% |  | 17.2 | % |  | 8.7  | % |  | 11.8 | % |  | 8.1  | %

Inflation and exchange-rate variations have had, and may continue to have, substantial effects on
our financial condition and results of operations. Inflation and exchange-rate variations affect our monetary assets and liabilities denominated in reais. The value of such assets and liabilities as expressed in U.S. dollars declines when the
real devalues against the U.S. dollar and increases when the real appreciates. In periods of devaluation of the real, we report (a) a remeasurement loss on real-denominated monetary assets and (b) a
remeasurement gain on real-denominated monetary liabilities.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to use estimates and adopt assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses and accounting disclosures. Therefore, in connection with the preparation of the financial statements included in this annual report, we have relied on variables and assumptions derived from
historical experience and various other factors that we deemed reasonable and relevant. Although we review these estimates and assumptions in the ordinary course of business, the presentation of our financial condition and results of operation often
requires us to make judgments regarding the effects of matters that are inherently uncertain. Actual results may differ from those estimated under different variables, assumptions or conditions. Note 3 to our audited consolidated financial
statements includes a summary of the significant accounting policies applied in the preparation of these financial statements. In order to provide an understanding about how management forms its judgments about future events, including the variables
and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included below a brief discussion of our more significant accounting policies.

Sales and Other Operating Revenues

We
recognize revenues from sales by the commercial, executive aircraft and aviation services segments when title and risk of loss is transferred to customers, which, in the case of aircraft, occurs when delivery is made, and in the case of aviation
services, when the service is provided to the customer.

We also recognize rental revenue for lease aircraft as operating leases, ratably
over the lease term and recorded as net sales in the other segments.

In the defense and government segment, a significant portion of
revenues is derived from long-term development contracts with the Brazilian and foreign governments, for which we recognize revenues under the percentage of completion, or POC, method. Such contracts contain provisions for price escalation based on
a mix of indices related to raw material and labor cost. From time to time, we reassess the expected margins of certain long-term contracts, adjusting revenue recognition based upon projected costs to completion.

Revenues under exchange pool programs are recognized monthly over the contract term and consist partly of a fixed fee and partly of a variable fee
directly related to actual flight hours of the covered aircraft.

We enter into transactions that represent multiple-element arrangements,
such as training, technical assistance, spare parts and others concessions, which are included in the aircraft purchase price. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of
accounting if all of the following criteria are met:



| |  |  | the delivered item has value to the client on a stand-alone basis;
| | - |  | ------------------------------------------------------------------



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| |  |  | there is objective and reliable evidence of the fair value of the undelivered item; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered to be probable
and substantially under our control.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If these criteria are not met, the arrangement is accounted for as one unit of
accounting, which results in revenue being deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each element and there is objective and reliable evidence of fair
value for all units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on each units relative fair value.

Sales deductions comprise indirect sales taxes and contractual concessions.

We offer contractual concessions that provide its customers with a reduction in the amount paid for the aircraft. The concessions are recorded as sales
deductions in accordance with EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer, because the concessions represents a reduction of the sales price. In addition, the recovery of the concessions through the export
incentive program is recognized as revenue associated with the sale and exportation of the aircraft and recorded as net sales.

Product Warranties

Generally, aircraft sales are accompanied by a standard warranty for systems, accessories, equipment, parts and software
manufactured by us and/or by our risk-sharing partners. We recognize warranty expense, as cost of sales and services, at the time of sale based on the estimated amounts of warranty costs anticipated to be incurred. These estimates are based on a
number of factors, including our historical warranty claim and cost experience, the type and duration of the warranty coverage, volume and mix of aircraft sold and in service and warranty coverage available from the related suppliers. Actual product
warranty costs may have different patterns from our past experience, mainly when a new family of aircraft begins its revenue services, which could require us to increase the product warranty reserve. The warranty period ranges from two years for
spare parts to five years for components that are a part of the aircraft when sold.

Guarantees and Trade-In Rights

We have provided financial and residual value guarantees and trade-in rights related to our aircraft. We review the value of these commitments relative to
the aircrafts anticipated future fair value and, in the case of financial guarantees, the creditworthiness of the obligor. Provisions and losses are recorded when and if payments become probable and are reasonably estimable. We estimate future
fair value using third party appraisals of aircraft valuations, including information developed from the sale or lease of similar aircraft in the secondary market. We evaluate the creditworthiness of obligors for which we have provided credit
guarantees by analyzing a number of factors, including third party credit ratings and estimated obligors borrowing costs.

In
accordance with FASB Interpretation No. 45, or FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others, we record third-party guarantees on our
balance sheet at their fair value. FIN 45 has the general effect of delaying the recognition of the portion of our revenue sales that are accompanied by certain third-party guarantees. These estimates of fair value are based on certain assumptions,
including the probability of default by the ultimate obligor and the market value of the mortgaged assets. As a result, actual losses derived from financial guarantees may differ from the amounts recognized on our balance sheet, and, consequently,
could negatively affect future operating results. During 2007 and 2008, the fair value of guarantees recorded generated a sales income of US$2.5 million and a sales deduction of US$2.9 million, respectively.



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Sale of Residual Interests in Aircraft

In structured financings, an entity purchases an aircraft from us, pays us the full purchase price on delivery or at the conclusion of the sales financing
structure, and leases the related aircraft to the ultimate customer. A third-party financial institution facilitates the financing of an aircraft, and a portion of the credit risk remains with that third party. We may provide financial guarantees in
favor of the financial institution, and may also act as the equity participant in such financial structuring process. According to FIN 46-R Consolidation of Variable Interest Entities an interpretation of ARB 51, an enterprise shall
consolidate a variable interest entity if that enterprise has a variable interest that will absorb a majority of the entitys expected losses if they occur, receive a majority of the entitys expected residual returns if they occur, or
both. Therefore, we have been consolidating certain entitys transaction through the third parties where we are the primary beneficiary.

We also effect transactions with third parties through which we transfer the risks and rewards in leased aircraft. When we determine that we are no longer the primary beneficiary, based on managements evaluation of expected loss
variability, we deconsolidate the related collateralized accounts receivables and corresponding recourse and non-recourse debt.

Recoverability of
Long-lived Assets

We review our long-lived assets for possible impairment whenever events or changes in circumstances indicate that
the carrying value of an asset or group of assets may not be recoverable on the basis of undiscounted future cash flows, as required by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. These reviews are
carried out at the lowest level of groups of assets to which we are able to attribute identifiable future cash flows. Assets are grouped based on our various aircraft families. We use various assumptions when determining the expected undiscounted
cash flow including the forecasts of future cash flows, which are based on our best estimate of future sales and operating costs, based primarily on existing firm orders, expected future orders, contracts with suppliers and general market
conditions. Changes in these forecasts could significantly change the amount of impairment recorded, if any. We adjust the net book value of the underlying assets if the sum of the expected future cash flows is less than book value. These reviews to
date have not indicated the need to recognize any impairment.

Fair value of Financial Instruments and Hedge

For financial instruments, we make assumptions as to future foreign exchange and interest rates to recognize the fair value of each instrument. See Notes
32 and 34 to our audited consolidated financial statements. For further information related to the possible impact of fluctuations in the foreign exchange and interest rates on our principal financial instruments and positions, see Item 11.
Quantitative and Qualitative Disclosures About Market Risk.

Allowance for doubtful accounts

We have to periodically assess the amounts and probabilities of losses we may experience as a result of customer default. The balance represents an
estimate of probable but unconfirmed losses in the receivables portfolio. The estimate is based on various qualitative and quantitative factors, including results of individual credit and collectibility reviews. The allowance for doubtful accounts
is recorded in an amount we consider sufficient to cover any expected losses on realization of our accounts receivable from our customers and is included under selling expenses. No adjustment is made to net operating revenues.



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Principal Operating Data and Components of our Income Statement

Operating Data

The following chart sets forth
statistical data concerning our deliveries and backlog for our aircraft at the end of the respective periods. Deliveries consist of aircraft that have been delivered to customers and for which the corresponding revenue has been recognized. Our
backlog consists of all firm orders that have not yet been delivered. A firm order is a contractual commitment from a customer, customarily accompanied by a down payment, for which we have reserved a place on one of our production lines. See
Item 5D. Trend Information for certain information on our firm orders and options.



|                            |  |                                        |          |     |      |     |          |  |     |          |    
|--------------------------- |  | -------------------------------------- | -------- | --- | ---- | --- | -------- |  | --- | -------- | ---
|                            |  | At and for the year ended December 31, |         
|                            |  | 2008                                   |          |     | 2007 |     | 2006     | 
|Commercial Aviation         |  |                                        |          |     |      |     |          |  |     |          |    
|Deliveries(1)               |  |                                        |          |     |      |     |          |  |     |          |    
|ERJ 145                     |  |                                        | 6        |     |      |     | 7        |  |     | 12       |    
|EMBRAER 170                 |  |                                        | 9        |     |      |     | 11       |  |     | 32       | / 2
|EMBRAER 175                 |  |                                        | 55       |     |      |     | 34       |  |     | 11       | / 1
|EMBRAER 190                 |  |                                        | 78       | / 2 |      |     | 68       |  |     | 40       |    
|EMBRAER 195                 |  |                                        | 14       |     |      |     | 10       |  |     | 3        |    
|Defense and Government(2)   |  |                                        |          |     |      |     |          |  |     |          |    
|Deliveries(1)               |  |                                        | 6        |     |      |     | 4        |  |     | 5        | / 1
|Executive Aviation          |  |                                        |          |     |      |     |          |  |     |          |    
|Deliveries                  |  |                                        | 36       |     |      |     | 35       |  |     | 27       |    
|Other Operating Information |  |                                        |          |     |      |     |          |  |     |          |    
|                            |  |                                        |          |     |      |     |          |  |     |          |    
|Total Backlog (in millions) |  | US$                                    | 20,935.0 |     |      | US$ | 18,827.0 |  | US$ | 14,806.0 |    
|                            |  |                                        |          |     |      |     |          |  |     |          |    



|(1) | Figures appearing after a forward slash (/) refer to aircraft delivered under operating leases.
|--- | -----------------------------------------------------------------------------------------------

|(2) | Includes only aircraft delivered to state-owned airlines and for government transportation and, therefore, excludes deliveries of Tucano family aircraft, as such aircraft are not
for transportation purposes.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Sales

We generate revenue primarily from sales of commercial aircraft. We also generate revenue from the sale of defense aircraft, and from the sale of our Legacy 600 and Phenom 100 executive jets. Net sales of commercial
and executive aircraft are denominated in U.S. dollars. In 2008, total defense and government net sales included approximately 75.6% of net sales denominated in foreign currency, predominantly in U.S. dollars, and 24.4% denominated in Brazilian
reais but indexed to the U.S. dollar through price adjustment indices. In addition, we generate revenue from our aviation services which include after-sales support (including the sale of spare parts, maintenance and repair, training and
other product support services). In 2008, total aviation services net sales included approximately 97.6% of net sales denominated in U.S. dollars and other foreign currencies and 2.4% in Brazilian reais but indexed to the U.S. dollar through
price adjustment indices. Finally, we generate revenue from our other related businesses, which include operating leases and single-source supply of structural parts and mechanical and hydraulic systems to other aircraft manufacturers.

We generally recognize revenue for the sale of our commercial and executive aircraft when the aircraft is delivered to the customer. We customarily
receive a deposit upon signing of the purchase agreement for the sale of our commercial aircraft and progress payments in the amount of 5% of the sales price of the aircraft 18 months, 12 months and six months before scheduled delivery. We receive a
5% deposit upon signing of a purchase agreement for our executive aircraft and an additional deposit of 30% to 50% of the purchase price prior to delivery, depending on the specific terms of the purchase agreement and the aircraft sold. For the
EMBRAER 170/190 jet family, we receive an additional 5% progress payment 24 months before scheduled delivery. We typically receive the remaining amount of the sales price upon delivery. Payments in advance of delivery are recorded under advances
from customers as a liability on our balance sheet and, when we deliver the aircraft, these payments are recorded against trade account receivables of such aircraft. See Critical Accounting EstimatesSales and Other Operating
Revenues.



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Our sales contracts with our customers typically include adjustments to the purchase price of the
aircraft based on an escalation formula which is based on a mix of indices related to raw material and labor costs. The deposits, progress payments and option payments are nonrefundable for the most part. Once a customer decides to exercise an
option, we account for it as a firm order and we begin to receive progress payments and recognize revenue upon delivery as discussed above.

We recognize revenue from the sale of our defense aircraft, including the research and development for specific programs, in accordance with the percentage of completion method. Certain contracts contain provisions for the redetermination
of price based upon future economic conditions. Our defense and government customers continue to provide customer advances, which are converted into revenue as we fulfill pre-determined stages of completion of the project, such as conception,
development and design, and engineering, systems integration and customization. These installments are nonrefundable for the most part.

Cost of
Sales and Services

Cost of sales and services consist of the cost of the aircraft and of services rendered, comprising:



| |  |  | Raw Materials. Substantially all of our raw materials costs are covered by contracts with suppliers. Prices under these contracts are generally adjusted based on an
escalation formula which reflects, in part, inflation in the United States.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Labor. These costs are primarily real-denominated.
| | - |  | --------------------------------------------------



| |  |  | Depreciation. Property, plant and equipment is depreciated over useful lives, ranging from five to 48 years, on a straight-line basis. On average, property, plant
and equipment is depreciated over 16 years.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation of aircraft under operating leases is recorded in cost of sales
and services from the beginning of the lease term using the straight-line method over the estimated useful life and considering a residual value at the end of the lease term.

In accordance with SFAS 5, Accounting for Contingencies, we accrue a liability for the obligations associated with product warranties, which
is recorded on the aircraft delivery date and estimated based on historical experience which are recorded in the consolidated statement of income under cost of sales and services.

We enter into transactions that represent multiple-element arrangements, such as training, technical assistance, spare parts and other concessions. These
costs will be recognized when the product or service is provided to the customer.

Recent Developments

Backlog

Our firm order backlog for the
commercial aviation, executive aviation, and defense and government segments decreased by US$1.2 billion during the first quarter in 2009, totaling US$19.7 billion. During the first quarter of 2009, we delivered 40 aircraft in total, comprising 32
jets to the Airline Market and eight jets to the executive aviation segment. After delivering a record number of aircraft in 2008, we continue to implement improvements to our industrial processes, affirming the commitment assumed with our
shareholders, customers and suppliers. As our production rate has been maintained at the 14 E-jets per month level, we currently maintain our estimates to deliver 242 aircraft in 2009 within our commercial and executive aviation businesses.

New Brazilian Airline

In March
2008, we entered into an agreement with Azul, the new Brazilian airline formed by a group of investors led by David Neeleman, the founder of JetBlue, for the sale of 36 EMBRAER 195 jets. The agreement includes options for an additional 20
aircraft and purchase rights for an additional 20 aircraft. The total value of the order, at list price, is US$1.4 billion, and could reach US$3 billion, if all of options and purchase rights are confirmed. By March 31, 2009, we had already
delivered four aircraft to Azul.



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Legacy 450 and Legacy 500 Executive Jets

In April 2008, we formally introduced our new Legacy 450/500 executive jet programs. The mid-size Legacy 500, with a 3,000 nautical miles range, and the
mid-light Legacy 450, with a 2,300 nautical miles range, will be positioned between the Legacy 600 and the Phenom 300 in our executive jets portfolio. An estimated US$750 million is expected be invested in research and development for the new Legacy
450/500 models, which are expected to enter into service in 2013 and 2012, respectively.

KC 390

In April 2009, Embraer started to develop the KC 390, a new military cargo aircraft based on the EMB 190 platform. The KC 390 is being designed to
transport a wide variety of cargo, including small armored cars. This aircraft will be designed so that it can be built in different configurations, including versions that will allow it to conduct medical evacuation (MEDEVAC) missions. The KC 390
will be equipped with some of the most modern technology available, including systems for handling and launching cargos, and a fly-by-wire technology that reduces pilots workload and allows the aircraft to operate in short and unpaved runways.

Brazilian Navy Aircraft Modernization Program

In April 2009, Embraer entered into an agreement with the Brazilian navy to modernize 12 of its A-4 Skyhawk aircraft. The modernization will incorporate new technology in those aircraft, including new avionics, radar,
power production and autonomous oxygen-generating systems.

Results of Quarter ended March 31, 2009

On April 29, 2009, we announced our unaudited financial results for the first quarter of 2009. For further information, see our report on Form 6-K
filed with the SEC on April 30, 2009.

Cancellation of Orders for ERJ 145 Regional Aircraft

In April 2009, we entered into an agreement with the HNA Group, a Chinese airline, to reduce its firm orders for 50 ERJ 145 regional aircraft, of which 11
had already been delivered, to 25. See Item 3D. Risk FactorsRisks Relating to EmbraerA downturn in commercial aviation may reduce our sales and revenue, and, consequently, our profitability, in any given year.

Results of Operations

The following table presents
statement of income data by business segment for the periods indicated.



|                            |  |                         |   |  |          |   |  |          |  
|--------------------------- |  | ----------------------- | - |  | -------- | - |  | -------- | -
|                            |  | Year ended December 31, |  
|                            |  | 2008                    |   |  | 2007     |   |  | 2006     |  
|                            |  | (in US$ millions)       |  
|Net sales:                  |  |                         |   |  |          |   |  |          |  
|Commercial Aviation         |  | 4,237.5                 |   |  | 3,376.6  |   |  | 2,353.2  |  
|Executive Aviation          |  | 874.0                   |   |  | 838.0    |   |  | 582.1    |  
|Aviation Services           |  | 602.4                   |   |  | 528.3    |   |  | 479.8    |  
|Defense and Government      |  | 504.5                   |   |  | 346.4    |   |  | 226.7    |  
|Other related businesses    |  | 116.8                   |   |  | 155.9    |   |  | 117.7    |  
|                            |  | 6,335.2                 |   |  | 5,245.2  |   |  | 3,759.5  |  
|Cost of sales and services: |  |                         |   |  |          |   |  |          |  
|Commercial Aviation         |  | (3,534.0                | ) |  | (2,737.3 | ) |  | (1,780.5 | )
|Executive Aviation          |  | (616.3                  | ) |  | (602.5   | ) |  | (399.0   | )
|Aviation Services           |  | (387.5                  | ) |  | (393.1   | ) |  | (349.6   | )
|Defense and Government      |  | (365.6                  | ) |  | (236.8   | ) |  | (174.5   | )
|Other related businesses    |  | (88.3                   | ) |  | (123.8   | ) |  | (103.2   | )
|                            |  | (4,991.7                | ) |  | (4,093.5 | ) |  | (2,806.8 | )
|Gross profit:               |  |                         |   |  |          |   |  |          |  
|Commercial Aviation         |  | 703.5                   |   |  | 639.3    |   |  | 572.7    |  
|Executive Aviation          |  | 257.7                   |   |  | 235.5    |   |  | 183.1    |  
|Aviation Services           |  | 214.9                   |   |  | 135.2    |   |  | 130.2    |  
|Defense and Government      |  | 138.9                   |   |  | 109.6    |   |  | 52.2     |  
|Other related businesses    |  | 28.5                    |   |  | 32.1     |   |  | 14.5     |  
|                            |  | 1,343.5                 |   |  | 1,151.7  |   |  | 952.7    |  



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|                               |  |                         |   |  |        |   |  |        |  
|------------------------------ |  | ----------------------- | - |  | ------ | - |  | ------ | -
|                               |  | Year ended December 31, |  
|                               |  | 2008                    |   |  | 2007   |   |  | 2006   |  
|                               |  | (in US$ millions)       |  
|Operating expenses:            |  |                         |   |  |        |   |  |        |  
|Commercial Aviation            |  | (331.7                  | ) |  | (299.3 | ) |  | (303.4 | )
|Executive Aviation             |  | (176.8                  | ) |  | (237.6 | ) |  | (130.4 | )
|Aviation Services              |  | (88.5                   | ) |  | (80.1  | ) |  | (25.6  | )
|Defense and Government         |  | (66.0                   | ) |  | (60.5  | ) |  | (38.0  | )
|Other related businesses       |  | (3.0                    | ) |  | (6.0   | ) |  |       |  
|Unallocated corporate expenses |  | (140.5                  | ) |  | (94.0  | ) |  | (112.5 | )
|                               |  |                         |   |  |        |   |  |        |  
|                               |  | (806.5                  | ) |  | (777.5 | ) |  | (609.9 | )
|Income from operations         |  | 537.0                   |   |  | 374.2  |   |  | 342.8  |  
|                               |  |                         |   |  |        |   |  |        |  

The following table sets forth statement of income information, and such information as a
percentage of our net sales, for the periods indicated.



|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|--------------------------------------------------------- |  | ------------------------------------- | - |  | ----- | - |  | -------- | - |  | ----- | - |  | -------- | - |  | ----- | -
|                                                          |  | Year ended December 31,               |  
|                                                          |  | 2008                                  |   |  | 2007  |   |  | 2006     |  
|                                                          |  | (in US$ millions, except percentages) |  
|Net sales                                                 |  | 6,335.2                               |   |  | 100.0 | % |  | 5,245.2  |   |  | 100.0 | % |  | 3,759.5  |   |  | 100.0 | %
|Cost of sales and services                                |  | (4,991.7                              | ) |  | 78.8  |   |  | (4,093.5 | ) |  | 78.0  |   |  | (2,806.8 | ) |  | 74.7  |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Gross profit                                              |  | 1,343.5                               |   |  | 21.2  |   |  | 1,151.7  |   |  | 22.0  |   |  | 952.7    |   |  | 25.3  |  
|Operating expenses                                        |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Selling expenses                                          |  | (393.1                                | ) |  | 6.2   |   |  | (361.3   | ) |  | 6.9   |   |  | (220.6   | ) |  | 5.9   |  
|Research and development                                  |  | (197.0                                | ) |  | 3.1   |   |  | (259.7   | ) |  | 5.0   |   |  | (112.7   | ) |  | 3.0   |  
|General and administrative                                |  | (232.4                                | ) |  | 3.6   |   |  | (234.8   | ) |  | 4.5   |   |  | (235.5   | ) |  | 6.3   |  
|Employee profit sharing                                   |  |                                      |   |  |      |   |  |         |   |  |      |   |  | (42.7    | ) |  | 1.1   |  
|Other operating income (expenses), net                    |  | 16.0                                  |   |  | 0.2   |   |  | 78.3     |   |  | 1.5   |   |  | 1.6      |   |  | 0.0   |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Total operating expenses                                  |  | (806.5                                | ) |  | 12.7  |   |  | (777.5   | ) |  | 14.8  |   |  | (609.9   | ) |  | 16.2  |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Income from operations                                    |  | 537.0                                 |   |  | 8.5   |   |  | 374.2    |   |  | 7.1   |   |  | 342.8    |   |  | 9.1   |  
|Non-operating income (expense)                            |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Interest income (expenses), net                           |  | (171.4                                | ) |  | 2.7   |   |  | 163.4    |   |  | 3.1   |   |  | 105.4    |   |  | 2.8   |  
|Foreign exchange gain (loss), net                         |  | 71.7                                  |   |  | 1.1   |   |  | (37.7    | ) |  | 0.7   |   |  | (4.0     | ) |  | 0.1   |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Total non-operating income (expense)                      |  | (99.7                                 | ) |  | (1.6  | ) |  | 125.7    |   |  | 2.4   |   |  | 101.4    |   |  | 2.7   |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Income before income taxes                                |  | 437.3                                 |   |  | 6.9   |   |  | 499.9    |   |  | 9.5   |   |  | 444.2    |   |  | 11.8  |  
|Income tax expenses                                       |  | (41.1                                 | ) |  | 0.6   |   |  | (2.7     | ) |  | 0.0   |   |  | (44.4    | ) |  | 1.2   |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Income before minority interest and results of affiliates |  | 396.2                                 |   |  | 6.3   |   |  | 497.2    |   |  | 9.5   |   |  | 399.8    |   |  | 10.6  |  
|Minority interest                                         |  | (7.5                                  | ) |  | 0.1   |   |  | (8.2     | ) |  | 0.2   |   |  | (9.6     | ) |  | 0.3   |  
|Equity in results of affiliates                           |  |                                      |   |  |      |   |  | 0.3      |   |  | 0.0   |   |  | (0.1     | ) |  | 0.0   |  
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  
|Net income                                                |  | 388.7                                 |   |  | 6.1   | % |  | 489.3    |   |  | 9.3   | % |  | 390.1    |   |  | 10.4  | %
|                                                          |  |                                       |   |  |       |   |  |          |   |  |       |   |  |          |   |  |       |  

2008 Compared with 2007

Net sales. Net sales increased 20.8% from US$5,245.2 million in 2007 to US$6,335.2 million in 2008. Net sales in the commercial aviation segment
increased 25.5% from US$3,376.6 million in 2007 to US$4,237.5 million in 2008. Net sales in the executive aviation segment increased 4.3% from US$838.0 million in 2007 to US$874.0 million in 2008. Net sales from aviation services increased 14.0%
from US$528.3 million in 2007 to US$602.4 million in 2008. Defense and government net sales increased 45.6% from US$346.4 million in 2007 to US$504.5 million in 2008. Other related businesses net sales decreased 25.1% from US$155.9 million in 2007
to US$116.8 million in 2008.

The increase in commercial aviation net sales is primarily due to a higher number of deliveries during the
period. We delivered 162 aircraft in 2008, compared to 130 aircraft in 2007 for that segment, with a more favorably priced product mix. This increase in the number of deliveries for all segments is due to positive results obtained by us from
measures implemented in 2007, which continued to be perfected in 2008, with a view to adjusting our industrial processes in order to meet our delivery schedule. The



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increase in executive aviation net sales resulted from the delivery of 36 executive jets in 2008, including 33 Legacy 600, two Phenom 100 and one Embraer
175, compared to 35 Legacy 600 delivered in 2007. In addition, the product mix of the executive aircraft that we delivered in 2008 was more favorably priced than the product mix of executive aircraft delivered in 2007. The increase in net sales from
aviation services is mostly a result of the fact that the aircraft fleet that we serviced in 2008 was larger than the fleet serviced in 2007. The increase in defense and government net sales is due to increased sales in South America, including
sales of Super Tucano aircraft to Chile, Ecuador and the Dominican Republic, and of the sale of an airborne early warning and control (AEW&C) system to India. Defense and government net sales increased in 2008 as a result of further progress
made by us in certain projects, allowing us to increase the revenue we record under the corresponding long-term development contracts we have with our customers, which revenues are recognized pursuant to the percentage of completion method.

Cost of sales and services.Cost of sales and services increased 21.9% from US$4,093.5 million in 2007 to US$4,991.7 million in
2008, primarily due to the 30% increase in deliveries during 2008. As most of our costs are variable, a significant increase in deliveries will tend to cause a corresponding increase in our cost of sales and services. In addition, the fixed
component of our cost of sales and services experienced an increase as a result of a 10.1% across-the-border salary increase approved for our workforce in September 2008. Cost of sales and services as a percentage of net sales increased from 78.0%
in 2007 to 78.8% in 2008.

Gross profit.As a result of the foregoing, our gross profit increased 16.7% from US$1,151.7 million in
2007 to US$1,343.5 million in 2008. Our gross margin decreased from 22.0% in 2007 to 21.2% in 2008.

Operating expenses.As further
explained below, operating expenses increased 3.7% from US$777.5 million in 2007 to US$806.5 million in 2008. Operating expenses as a percentage of net sales decreased from 14.8% in 2007 to 12.7% in 2008.

Research and Development. Research and development expenses decreased 24.1% from US$259.7 million in 2007 to US$197.0 million in 2008. This
decrease relates mainly to the reduced spending for the development of new products for the executive aviation segment and for the research for improvements to all our products. Amounts received from our risk-sharing partners related to the
fulfillment of certain contractual milestones, which offset our research and development expenses, increased 468.8% from US$23.7 million in 2007 to US$134.8 million in 2008.

Selling expenses.Selling expenses increased 8.8% from US$361.3 million in 2007 to US$393.1 million in 2007 due to higher marketing campaign
expenses related to our executive aviation products, as well as an increase in variable sales expenses in 2008 because of the higher number of deliveries.

General and administrative expenses.General and administrative expenses decreased 1.0% from US$234.8 million in 2007 to US$232.4 million in 2008, mainly due to savings obtained from the implementation of a
process optimization program, known as the P3E (Embraer Entrepreneurial Excellence Program), focused on cost and expense control and gains in productivity, which program started to be implemented in 2007 and continued to be perfected in 2008. This
decrease in general and administrative expenses was partially offset by the 10.1% salary increase, which was also applicable to our administrative personnel.

Other operating income (expenses), net.Other operating income, net decreased 79.6% from US$78.3 million in 2007 to US$16.0 million in 2008, mainly due to the reversal in 2007 of a contingency provision in the
amount of US$104.8 million, as a result of a final Supreme Court that was granted in our favor in a lawsuit in which we challenged the broader taxable basis for calculating PIS/COFINS taxes. See Item 8A. Consolidated Statements and Other
Financial InformationLegal Proceedings and Note 17 to our audited consolidated financial statements.

Income from
operations.As a result of the foregoing factors, operating income increased 43.5% from US$374.2 million in 2007 to US$537.0 million in 2008. Our operating margin increased from 7.1% in 2007 to 8.5% in 2008.



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Financial income (expense), net.Financial income (expense), net, decreased from a net financial
income of US$163.4 million in 2007 to a net financial expense of US$171.4 million in 2008, primarily as a result of:



| |  |  | US$148.3 million in losses with derivatives;
| | - |  | --------------------------------------------



| |  |  | US$89.4 million reversal of interest expenses and penalties in 2007, related to our PIS/COFINS contingency provision, as a result of a final Supreme Court decision
that was granted in our favor in 2007 in a lawsuit in which we challenged the broader taxable basis for calculating the PIS/COFINS taxes (see Item 8A. Consolidated Statements and Other Financial InformationLegal Proceedings); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a 64% decrease in our income from temporary cash investments from US$165.7 million in 2007 to US$58.8 million in 2008, mainly as a result of (A) a decrease in
the average stock of temporary cash investments, starting at US$1,185.7 million as of December 31, 2007 and ending at US$810.1 million as of December 31, 2008 and (B) a general reduction in interest rates in Brazil and abroad.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Foreign exchange gain (loss), net. Foreign exchange gain (loss), net increased from a net foreign exchange loss
of US$37.7 million in 2007 to a net foreign exchange gain of US$71.7 million in 2008, reflecting net foreign exchange rate variations on monetary assets and liabilities denominated in other currencies which are translated into our functional
currency, the U.S. dollar.

Income tax expense.Income tax expenses increased from US$2.7 million in 2007 to US$41.1 million in
2008, mainly as a result of:



| |  |  | the effects of foreign exchange movements on our nonmonetary assets;
| | - |  | --------------------------------------------------------------------



| |  |  | a decrease in tax benefits that resulted from our reduced distributions of interest on shareholders equity in 2008; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | lower research and development tax incentives.
| | - |  | ----------------------------------------------

The effective tax rate increased from 0.5% in 2007 to 9.4% in 2008.

Net income.As a result of the
foregoing factors, our net income decreased 20.6% from US$489.3 million in 2007 to US$388.7 million in 2008. As a percent of net sales, net income decreased from 9.3% in 2007 to 6.1% in 2008.

2007 Compared with 2006

Net sales. Net
sales increased 39.5% from US$3,759.5 million in 2006 to US$5,245.2 million in 2007. Net sales in the commercial aviation segment increased 43.5% from US$2,353.2 million in 2006 to US$3,376.6 million in 2007. Net sales in the executive aviation
segment increased 44.0% from US$582.1 million in 2006 to US$838.0 million in 2007. Net sales from aviation services increased 10.1% from US$479.8 million in 2006 to US$528.3 million in 2007. Defense and government net sales increased 52.8% from
US$226.7 million in 2006 to US$346.4 million in 2007. Other related businesses net sales increased 32.5% from US$117.7 million in 2006 to US$155.9 million in 2007.

The increase in commercial aviation net sales is primarily due to a higher number of deliveries during the period. We delivered 130 aircraft in 2007, compared to 98 aircraft in 2006 for that segment, with a more
favorably priced product mix. This increase in the number of deliveries for all segments is due to positive measures we undertook during 2007 to adjust our industrial processes to meet the deliveries scheduled for the period. These measures included
the hiring of new employees, implementing a third shift for some production processes and introducing the lean manufacturing system. The increase in executive aviation net sales resulted from the delivery of 35 Legacy 600 executive jets in 2007
compared to 27 aircraft of the same model delivered in 2006. The increase in net sales from aviation services is mostly due to an increase in revenues from spare parts sales and services rendered, since the fleet of our jets is increasing. The
increase in defense and government net sales is due to higher revenue during 2007 compared to 2006 as recognized from programs subject to the percentage of completion method of revenue recognition, principally the ALX program, when we delivered 28
aircraft in 2007, compared with 14 deliveries of the same model in 2006.



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Cost of sales and services.Cost of sales and services increased 45.8% from US$2,806.8 million in
2006 to US$4,093.5 million in 2007, primarily due to the 30.0% increase in deliveries during the period, the costs related to hiring and training approximately 4,500 new employees, and overtime costs. Approximately 13% of our cost of sales and
services is denominated in reais. Cost of sales and services as a percentage of net sales increased to 78.0% in 2007, compared to 74.7% in 2006.

Gross profit.As a result of the foregoing, our gross profit increased 20.9% from US$952.7 million in 2006 to US$1,151.7 million in 2007. Our gross margin decreased from 25.3% in 2006 to 22.0% in 2007.

Operating expenses.As further explained below, operating expenses increased 27.5% from US$609.9 million in 2006 to US$777.5
million in 2007. Operating expenses as a percentage of net sales decreased from 16.2% in 2006 to 14.8% in 2007.

Research and
development.Research and development expenses increased 130.4% from US$112.7 million in 2006 to US$259.7 million in 2007. This increase is mainly attributable to the development of new products for the executive aviation segment and the
research for improvements to all our products. The amounts received from our risk-sharing partners related to the fulfillment of certain contractual milestones, which offset our research and development expenses, totaled US$23.7 million in 2007
compared to US$36.0 million in 2006.

Selling expenses.Selling expenses increased 63.8% from US$220.6 million in 2006 to US$361.3
million in 2007 mainly due to higher marketing campaign expenses related to our executive aviation products and variable sales expenses in the period because of the higher number of deliveries.

General and administrative expenses.General and administrative expenses decreased 0.3% from US$235.5 million in 2006 to US$234.8 million in 2007,
mainly due to the savings from the implementation of a process optimization program, the P3E (Embraer Entrepreneurial Excellence Program), an internal plan focused on costs and expense control and gains in productivity.

Other operating income (expense), net.Other operating income, net represented increased from US$1.6 million in 2006 to US$78.3 million in 2007,
mainly due to the reversal of a contingency provision in the amount of US$104.8 million, as a result of a final Supreme Court decision that was granted in our favor in a lawsuit in which we challenged the broader taxable basis for calculating the
PIS/COFINS taxes. See Item 8A. Consolidated Statements and Other Financial InformationLegal Proceedings and Note 17 to our audited consolidated financial statements.

Income from operations.As a result of the foregoing factors, operating income increased 9.2% from US$342.8 million in 2006 to US$374.2 million in
2007. Our operating margin decreased from 9.1% in 2006 to 7.1% in 2007.

Financial income (expense), net.Financial income,
net, increased 55.0% from US$105.4 million in 2006 in US$163.4 million in 2007, primarily as a result of a US$89.4 million reversal of interest expenses and penalties related to our PIS/COFINS contingency provision, as a result of a final Supreme
Court decision that was granted in our favor in 2007 in a lawsuit in which we challenged the broader taxable basis for calculating the PIS/COFINS taxes. See Item 8A. Consolidated Statements and Other Financial InformationLegal
Proceedings.

Foreign exchange gain (loss), net. Foreign exchange loss, net, increased from US$4.0 million in 2006 to US$37.7
million in 2007, reflecting the net foreign exchange variations on monetary assets and liabilities denominated in other currencies which are translated into our functional currency, the U.S. dollars.

Income tax expense.Income tax expenses decreased 93.9% from US$44.4 million in 2006 to US$2.7 million in 2007, mainly due to higher benefits from
having made tax-deductible distributions in the form of interest on shareholders equity, from higher research and development tax incentives and from differences in foreign jurisdiction tax rates. The effective tax rate decreased from 10.0% in
2006 to 0.5% in 2007.



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Net income.As a result of the foregoing factors, our net income increased 25.4% from US$390.1
million in 2006 to US$489.3 million in 2007. As a percent of net sales, net income decreased from 10.4% in 2006 to 9.3% in 2007.



|5B. | Liquidity and Capital Resources
|--- | -------------------------------

Overview

Our liquidity needs arise principally from research and development, capital expenditures, principal and interest payments on our debt, working capital
requirements and distributions to shareholders. We generally rely on funds provided by operations, borrowings under our credit arrangements, cash contributions from risk-sharing partners, advance payments from customers and, to a lesser extent,
capital increases to meet these needs. For further information, see Item 4B. Business OverviewSuppliers and Components; Risk-Sharing Arrangements and Item 4B. Business OverviewCommercial Aviation
BusinessProduction, New Orders and Options.

As of the date of this annual report, we believe that our traditional sources of
funds are sufficient to meet our foreseeable working capital requirements, including to (1) continue to improve the EMBRAER 170/190 jet family, the Phenom 100 and the Lineage 100 executive jets, (2) develop our new Phenom 300 executive
jets, (3) make other planned capital expenditures and (4) pay dividends and interest on shareholders equity. At this point, our access to liquidity sources has not been materially impacted by the current credit environment, and we do
not expect that such access will be materially impacted in the near future. However, there can be no assurance that our traditional sources of funds, or that the cost or availability of our credit facilities or future borrowing sources, will not be
materially impacted by the ongoing market disruptions.

Our customers may reschedule deliveries, fail to exercise options or cancel firm
orders as a result of the economic downturn and the financial volatility in the commercial airline industry. In addition, our risk-sharing partners cash contributions are refundable under certain limited circumstances and we may need to find
replacement sources of capital.

Net Cash Provided by Operating Activities and Working Capital

In 2008, net cash provided by operating activities was US$321.8 million, compared to net cash provided by operating activities of US$580.4 million in
2007, and net cash provided by operating activities of US$386.9 million in 2006. The decrease in the inflow of cash from operating activities in 2008 is mainly a result of a 350 basis point decrease in our gross profit margin in that year.

We had a working capital surplus of US$2,310.3 million at December 31, 2007 and US$2,371.2 million at December 31, 2008. Working
capital increased mainly due to an increase in our inventories in line with the increase in our aircraft production and in our spare parts to support the greater number of aircraft in service.

Net Cash Provided by (Used in) Investing Activities

In 2008, net cash provided by investing activities was US$168.9 million compared to net cash used in investing activities of US$784.3 million in 2007 and US$179.5 million in 2006.

Despite our investments in research and development and property, plant and equipment in 2008, we experienced an inflow of cash from investing activities
mainly as a result of increased net sales and redemptions of temporary cash investments in that year. In that connection, our average stock of temporary cash investments decreased, starting at US$1,185.7 million as of December 31, 2007 and
ending at US$810.1 million as of December 31, 2008, as a result of sales and redemptions of those instruments, which, in turn, contributed to the net inflow of cash from investing activities in 2008.



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Net Cash Provided by (Used in) Financing Activities and Total Debt

Net cash used in financing activities was US$395.1 million in 2006 compared to net cash provided by financing activities of US$137.0 million in 2007 and
net cash used in financing activities of US$314.5 million in 2008. In addition, during 2008 we raised new borrowings of US$1,886.2 million, compared to new borrowings of US$1,772.0 million and US$1,258.2 million during 2007 and 2006, respectively.
Furthermore, we also repaid US$1,770.4 million of our indebtedness in 2008, compared to repayment in the aggregate amount of US$1,471.9 million and US$1,497.7 million in 2007 and 2006, respectively. In 2008, we distributed US$242.7 million in the
form of interest on shareholders equity and dividends compared to US$163.5 million and US$157.8 million distributed in 2007 and 2006, respectively. Also in 2008, we spent US$183.0 million in connection with our share buyback program compared
to a negligible amount spent in 2007. In 2006 we did not spend any amounts in connection with the share buyback programs.

At
December 31, 2008, we had total debt of US$1,825.4 million under our financing arrangements described below, 71.0% of which was long-term debt and 29.0% of which consisted of short-term debt. In comparison, we had total debt of US$1,753.0
million at December 31, 2007 and US$1,349.1 million at December 31, 2006, consisting of 46.8% and 62.7% of long-term debt, respectively. Our total debt increased from 2007 to 2008 largely due to new long-term borrowings.

Credit Facilities and Lines of Credit

Long-term Facilities

In December 2002, we entered into a US$100.0 million credit facility with Santander Central Hispano Benelux S.A. that has been
fully disbursed to fund our purchases of wings and other equipment from Gamesa. As of December 31, 2008, US$0.4 million was outstanding under this facility, all of which is due in the short-term, which bears interest at a fixed rate of
4.79% per annum with final maturity in February 2009.

In March 2005, we entered into a credit agreement with Bladex  Banco
Latino Americano de Exportaciones S.A. for an import financing facility of US$51.0 million at a cost of LIBOR plus 1.88% per annum with final maturity in March 2010, of which US$25.8 million remained outstanding as of December 31, 2008
(US$17.3 million in the short-term including principal and accrued interest). The spread over LIBOR was renegotiated and from March 2007 the spread is 1.10% per annum.

In April 2005, we entered into an Export Credit Note with Banco Votorantim S.A. of US$50.0 million, at a fixed rate of 7.81% per annum with final
maturity in April 2010, of which US$50.8 million remained outstanding as of December 31, 2008 (US$0.8 million is currently short-term) including principal and accrued interest.

In June 2005, we entered into an IFC  International Finance Corporation A/B Loan Secured Facility for a total amount of US$180.0 million, which
includes the A loan for up to US$35.0 million, the B1 loan for up to US$60.0 million and the B2 loan for up to US$85.0 million. The terms of the loans are 12, ten and eight years, respectively, and the loans bear interest at an average rate of
six-month LIBOR plus 2.9% per annum. The facility is secured by a combination of mortgages on our main industrial facility in Brazil, three EMBRAER 170/190 pre-series aircraft and a bank account pledge agreement in an amount equivalent to 12
months interest coverage. In addition to the customary covenants and restrictions, including but not limited to those that require us to maintain defined debt liquidity and interest expense coverage ratios, the facility has covenants related to
compliance with IFC general environmental, health and safety guidelines. We also agreed to a mandatory pre-payment provision, which limits our net revenues generated by selling and supporting offensive attack aircraft to 12.5% of our total net
revenues. As of December 31, 2008, US$133.6 million remained outstanding under this facility (US$26.4 million in the short-term) including principal and accrued interest. We renegotiated the spread over LIBOR and since May 2007 the spread is
1.21% per annum. In addition, as of December 17, 2007 we have negotiated the release of the mortgage over three EMBRAER 170/190 pre-series aircraft.

In August 2006, we entered into two separate syndicated credit agreements with Banco BNP Paribas Brasil S.A., in each case as administrative agent for the lenders under each facility in an aggregate amount of US$500.0
million. The trade finance credit facility provides for US$250.0 million in loans to finance certain of our exports and imports, to be allocated at our discretion, provided that the aggregate amount does not exceed the US$250.0 million. This amount
is available for multiple drawdowns on a non-revolving



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basis until August 25, 2009, unless fully disbursed prior to that date. Each drawdown is repayable in full in two years from the borrowing date. The
trade finance credit facility is subject to a commitment fee of 25 basis points over the unused portion and, if disbursed, will bear interest at six-month LIBOR plus 40 and 45 basis points, respectively, for export or import finance disbursements
thereof. The other agreement is a US$250.0 million syndicated revolving credit facility, with a five-year availability period. Disbursements under the revolving credit facility will be repayable on August 25, 2011. This revolving credit
facility is subject to a commitment fee of 30 basis points per annum and, if disbursed, will bear interest at one-, two-, three- or six-month LIBOR plus 60 basis points per annum, as specified by us on each drawdown notice. We record the commitment
fees for these credit facilities as an expense. Both facilities contain customary covenants and restrictions, including, but not limited to, those that require us to maintain defined debt liquidity and interest expense coverage ratios. In addition,
in the event the Brazilian government imposes restrictions on foreign exchange transactions, only disbursements under the trade finance credit facility will be available to us. If we make any disbursements under another export finance transaction,
we will be required to grant a first priority pledge on certain of our export receivables, as determined by us at the disbursement date. As of December 31, 2008, no disbursements had been made under either of these facilities. However, we
borrowed US$96.8 million under the trade finance credit facility in March 2009 and another US$153.2 million under that facility in April 2009, totaling US$250.0 million.

In October 2006, our wholly owned finance subsidiary, Embraer Overseas Limited, or Embraer Overseas, issued US$400 million 6.375% guaranteed notes due 2017 and, as of December 31, 2008, US$408.9 million was
outstanding (US$11.1 million is currently short-term), including principal and accrued interest. Interest will be paid semiannually. The notes are unconditionally guaranteed by us. The notes have been listed on the Luxembourg Stock Exchange. On
April 5, 2007, we and Embraer Overseas commenced an exchange offer to exchange the notes for new notes registered with the SEC. The exchange offer was successfully completed as of May 18, 2007 and, as a consequence, US$376.3 million or
approximately 95% of the notes were registered. The indenture under which the notes were issued contains customary covenants and restrictions such as limitation on liens, consolidation, merger or transfer of assets. On March 31, 2009, Embraer
repurchased and canceled 19,908 (4.97%) bonds, totaling US$15.2 million (face value of US$19.9 million). These bonds were purchased by Embraer Overseas through open market transactions. We may from time to time seek to retire or purchase our
outstanding debt, including our guaranteed notes, through cash purchases and/or exchange for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on
prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

In November 2006, we entered into a credit facility in the amount equivalent of US$37.0 million with the FINEP to support the development costs of Phenom 100 and Phenom 300 aircraft, which were totally disbursed in 2007. The facility bears
interest at TJLP plus 5.0% per annum and is fully secured by a first priority mortgage of our Eugênio de Melo facility and a chattel mortgage of certain machines and equipment. The credit facility is repayable from December 2008 to
December 2013. As of December 31, 2008, we had outstanding US$59.7 million under our credit facilities with the FINEP, of which US$9.9 million is due in the short-term including principal and accrued interest. The FINEP credit facilities are
denominated in reais, and amounts appearing herein have been converted into U.S. dollars, our functional currency, for purposes of preparing our U.S. GAAP financial statements.

In December 2008, we entered into various credit agreements with BNDES for a long-term pre-export credit financing. At December 31, 2008, we had
US$534.4 million outstanding under these arrangements, bearing an average spread of 2.433% per annum over TJLP, with maturities from February 15, 2010 to June 15, 2010. BNDES credit facilities are denominated in reais, and
amounts appearing herein have been converted into U.S. dollars, our functional currency, for purposes of preparing our U.S. GAAP financial statements.



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We have various other loans and credit agreements with aggregate outstanding borrowings of US$182.7
million at December 31, 2008. See Note 20 to our audited consolidated financial statements for further information on these financing arrangements.

Some of our long-term financing agreements include customary covenants and restrictions, including those that require us to maintain: (1) a maximum leverage ratio, calculated as debt to earnings before interest,
taxes, depreciation and amortization, or EBITDA, of 3.5:1; (2) a minimum debt service coverage ratio, calculated as EBITDA to financial expenses, of 3:1; and (3) minimum shareholders equity of R$2.3 billion. Other restrictions
included in our long-term financings include negative pledge covenants and restrictions on significant changes in control, sales of substantially all of our assets, dividend payments during events of default and certain transactions with our
affiliates.

As of December 31, 2008, we were in compliance with all restrictive covenants contained in our financing agreements. The
only exception related to a financing instrument in the amount of US$8.8 million, which was entered into by OGMA, one of our subsidiaries. As of December 31, 2008, OGMA had a financial debt to EBITDA ratio of 2.74:1, which exceeded the 1.8:1
ratio required under the financing instrument. In February 26, 2009, OGMAs creditor under this facility granted OGMA a waiver of compliance with this covenant valid until December 31, 2009. The non-compliance by OGMA with the 1.8:1
financial debt to EBITDA ratio, as waived, did not trigger any cross-default clauses in any of our other agreements.

Short-term Facilities

As of December 31, 2008 we have US$332.9 million in short-term pre-export financing loans from Banco do Brasil S.A., or Banco do
Brasil, and Banco Bradesco S.A. These loans bear an average fixed interest rate of 5.71% per annum and are denominated in reais. They have been converted into U.S. dollars, our functional currency, for purposes of preparing our U.S. GAAP
financial statements.

We have various other short-term loans and credit agreements with aggregate outstanding borrowings of
US$96.6 million at December 31, 2008. See Note 20 to our audited consolidated financial statements for further information on our short-term financing arrangements.

Recently Issued Accounting Pronouncements

Adopted Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which is effective for financial statements issued for fiscal
years beginning after November 15, 2007. This standard clarifies the definition of fair value, establishes a framework for using fair value to measure assets and liabilities, and expands the disclosures on fair value measurements. This standard
also responds to investors requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings.
SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. We adopted SFAS 157 in 2008 without any material impact to
our financial position.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of SFAS no. 115. SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value in order to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of SFAS 159 did not generate a material impact on our financial position, as we did not elect to adopt the fair value
option for any of our financial assets or liabilities at January 1, 2008. In connection with this amendment to SFAS 115 contained in SFAS 159, we changed our statement of cash flows classification policy for trading securities and classified
purchases and sales of trading securities under investing activities.

In September 2008, the FASB issued an FASB Staff Position, or FSP,
that introduces new disclosure requirements for credit derivatives and guarantees and clarifies the effective date of SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. The new disclosure requirements are designed
to result in similar disclosures for financial instruments with similar risks and rewards relating to credit risk, regardless of their legal form. For some companies, the additional disclosures may be significant, particularly given the increased
use in recent years of credit default swaps to manage and gain exposure to particular credit risks. We adopted this FSP in 2008 without any material impact to our financial disclosures.



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Accounting Pronouncements Not Yet Adopted

In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combination, which replaces SFAS 141, Business Combinations. SFAS 141(R)
retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS
141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141(R) did not define the acquirer,
although it included guidance on identifying the acquirer. SFAS 141(R)s scope is broader than that of SFAS 141, which applied only to business combinations in which control was obtained by transferring consideration. The result of applying
SFAS 141s guidance on recognizing and measuring assets and liabilities in a step acquisition was to measure them at a blend of historical costs and fair values. In addition, SFAS 141(R) requires measuring the non-controlling interest in the
acquiree at fair value, which results in recognizing the goodwill attributable to the non-controlling interest in addition to that attributable to the acquirer. SFAS 141(R) applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (that is, in our case, January 1, 2009). Therefore, we will apply such pronouncement on a prospective basis for each new
business combination.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51, which clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS
160 has become effective for us in January 1, 2009. Although its earlier adoption is prohibited, the presentation and disclosure requirements shall be applied retrospectively for all periods presented.

In March 2008, the FASB issued FASB SFAS161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, financial performance, and cash flows.
It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles, which identifies the sources of accounting principles and the framework for selecting the principles used
in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. This Statement shall be effective 60 days following the SECs approval of the Public Company Accounting Oversight Board -
PCAOB amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.



|5C. | Research and Development
|--- | ------------------------

We incur research and
development costs related to our aircraft and aircraft components. We also incur research and development costs that are not associated with the development of any particular aircraft. Such costs include the implementation of quality assurance
initiatives, production line productivity improvements and studies to determine the latest developments in technology and quality standards. Research and development expense is the cost associated with the design and development of the aircraft less
amounts earned from cash contribution from risk-sharing partners based on meeting performance milestones. Under U.S. GAAP, these costs are recorded as an operating expense in our income statement and are expensed in the year in which they are
incurred.



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We invest significantly in the development of new projects. Total research and development expenses for
2006, 2007 and 2008, including expenses related to the improvement of the EMBRAER 170/190 jet family and to the development of our new Phenom 100, Phenom 300, Lineage 1000, Legacy 450 and Legacy 500 executive jets, were US$112.7 million, US$259.7
million and US$197.0 million, respectively, net of cash contributions provided by risk-sharing partners. Research and development costs as a percentage of net sales were 3.0% in 2006, 5.0% in 2007 and 3.1% in 2008. In 2006, 2007 and 2008, we
recorded US$36.0 million, US$23.7 and US$134.8 million, respectively, as reductions to our research and development costs in connection with payments previously received by us from our risk-sharing partners, as our EMBRAER 170/190 aircraft family
and Phenom 100 received their certifications and we fulfilled other contractual milestones under our risk-sharing arrangements.

In 2007,
the real appreciated by 17.2% against the dollar, which, together with increased research and development investments in connection with the testing stages of the Lineage 1000 and Phenom 100 following their first flights in the second half of
2007, also impacted our research and development costs in that year. Our research and development costs for 2008 decreased mainly because of US$134.8 million received from risk-sharing partners in connection with the certification of the Phenom 100
and the fulfillment of other contractual milestones under our risk-sharing agreements. We do not incur research and development expenses for defense programs as those are funded by the Brazilian government and other government customers. Most of our
research and development expenses are associated with particular programs either in the commercial or executive aviation segments (see Item 4. Information on the CompanyHistory and Development of the CompanyCapital Expenditures:
Research and Development).

In 2009, we expect our research and development costs to total approximately US$200 million, excluding
contributions from risk-sharing partners, but including estimated costs of approximately US$150 million related to development of our new products, and approximately US$50 million related to development of technology. We receive additional funds
from risk-sharing partners to fund our cash costs for our commercial and executive aircraft research and development. We expect to receive US$303.7 million from our risk-sharing partners in future years for the development of the Phenom 300 and
Legacy 450/500 family. In addition, the Brazilian and other governments fund substantially all of our defense and government research and development costs under long-term development contracts.



|5D. | Trend Information
|--- | -----------------

The following table summarizes
our order book for the commercial aviation segment at March 31, 2009. Our total firm order backlog at that date, including executive jets and defense aircraft, was US$19.7 billion (US$20.9 billion at December 31, 2008).



|                    |  |            |  |         |  |            |  |                  
|------------------- |  | ---------- |  | ------- |  | ---------- |  | -----------------
|Commercial Aviation |  | FirmOrders |  | Options |  | Deliveries |  | Firm OrderBacklog
|EMB 120 Brasília    |  | 352        |  |        |  | 352        |  |                 
|ERJ 135             |  | 108        |  |        |  | 108        |  |                 
|ERJ 140             |  | 74         |  |        |  | 74         |  |                 
|ERJ 145             |  | 733        |  | 50      |  | 694        |  | 39               
|EMBRAER 170         |  | 193        |  | 84      |  | 153        |  | 40               
|EMBRAER 175         |  | 135        |  | 173     |  | 117        |  | 18               
|EMBRAER 190         |  | 436        |  | 459     |  | 218        |  | 218              
|EMBRAER 195         |  | 111        |  | 76      |  | 33         |  | 78               



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The following tables set forth our commercial aviation order book at March 31, 2009 by aircraft
type, customer and country.

ERJ 135:



|                                    |  |             |  |           |  |                  
|----------------------------------- |  | ----------- |  | --------- |  | -----------------
|Customer                            |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|American Eagle (USA)                |  | 40          |  | 40        |  |                 
|British Midland (UK)                |  | 3           |  | 3         |  |                 
|City Airline AB (Sweden)            |  | 2           |  | 2         |  |                 
|ExpressJet (USA)                    |  | 30          |  | 30        |  |                 
|Flandair (France)                   |  | 3           |  | 3         |  |                 
|Jet Magic (Ireland)                 |  | 1           |  | 1         |  |                 
|Luxair (Luxembourg)                 |  | 2           |  | 2         |  |                 
|Pan Européenne (France)             |  | 1           |  | 1         |  |                 
|Proteus (France)                    |  | 3           |  | 3         |  |                 
|Regional Airlines (France)          |  | 3           |  | 3         |  |                 
|Republic Airways (USA)              |  | 15          |  | 15        |  |                 
|South Africa Airlink (South Africa) |  | 5           |  | 5         |  |                 
|                                    |  |             |  |           |  |                  
|Total                               |  | 108         |  | 108       |  |                 
|                                    |  |             |  |           |  |                  
|ERJ 140:                            |  |             |  |           |  |                  
|                                    |  |             | 
|Customer                            |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|American Eagle (USA)                |  | 59          |  | 59        |  |                 
|Republic Airways (USA)              |  | 15          |  | 15        |  |                 
|                                    |  |             |  |           |  |                  
|Total                               |  | 74          |  | 74        |  |                 
|                                    |  |             |  |           |  |                  



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ERJ 145:



|                               |  |             |  |           |  |                  
|------------------------------ |  | ----------- |  | --------- |  | -----------------
|Customer                       |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|Aerolitoral (Mexico)           |  | 5           |  | 5         |  |                 
|Air Caraibes (Guadalupe)       |  | 2           |  | 2         |  |                 
|Alitalia (Italy)               |  | 14          |  | 14        |  |                 
|American Eagle (USA)           |  | 118         |  | 118       |  |                 
|Axon (Greece)                  |  | 3           |  | 3         |  |                 
|British Midland (UK)           |  | 9           |  | 9         |  |                 
|British Regional Airlines (UK) |  | 23          |  | 23        |  |                 
|Brymon (UK)                    |  | 7           |  | 7         |  |                 
|China Southern (China)         |  | 6           |  | 6         |  |                 
|China Eastern Jiangsu (China)  |  | 5           |  | 5         |  |                 
|China Eastern Wuhan (China)    |  | 5           |  | 5         |  |                 
|Cirrus (Germany)               |  | 1           |  | 1         |  |                 
|ExpressJet (USA)               |  | 245         |  | 245       |  |                 
|ERA (Spain)                    |  | 2           |  | 2         |  |                 
|Flandre Air (France)           |  | 5           |  | 5         |  |                 
|GECAS (PB Air - Thailand)      |  | 2           |  | 2         |  |                 
|HNA Group (China)              |  | 50          |  | 11        |  | 39               
|KLM EXEL (Holland)             |  | 2           |  | 2         |  |                 
|Lot Polish (Poland)            |  | 14          |  | 14        |  |                 
|Luxair (Luxembourg)            |  | 9           |  | 9         |  |                 
|Mesa (USA)                     |  | 36          |  | 36        |  |                 
|Nigeria (Nigeria)              |  | 1           |  | 1         |  |                 
|Portugalia (Portugal)          |  | 8           |  | 8         |  |                 
|Proteus (France)               |  | 8           |  | 8         |  |                 
|Regional (France)              |  | 15          |  | 15        |  |                 
|Republic Airways (USA)         |  | 60          |  | 60        |  |                 
|Rheintalflug (Austria)         |  | 3           |  | 3         |  |                 
|Rio Sul (Brazil)               |  | 16          |  | 16        |  |                 
|Satena (Colombia)              |  | 3           |  | 3         |  |                 
|Sichuan (China)                |  | 5           |  | 5         |  |                 
|Skyways (Sweden)               |  | 4           |  | 4         |  |                 
|Swiss (Switzerland)            |  | 25          |  | 25        |  |                 
|Transtates (USA)               |  | 22          |  | 22        |  |                 
|                               |  |             |  |           |  |                  
|Total                          |  | 733         |  | 694       |  | 39               
|                               |  |             |  |           |  |                  



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EMBRAER 170:



|                                      |  |             |  |           |  |                  
|------------------------------------- |  | ----------- |  | --------- |  | -----------------
|Customer                              |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|Alitalia (Italy)                      |  | 6           |  | 6         |  |                 
|BA CityFlyer (England)                |  | 6           |  |          |  | 6                
|Cirrus (Germany)                      |  | 1           |  | 1         |  |                 
|ECC (Ireland)(1)                      |  | 4           |  | 4         |  |                 
|Egypt Air (Egypt)                     |  | 12          |  | 10        |  | 2                
|ETA Star Aviation (India)             |  | 7           |  |          |  | 7                
|Finnair (Finland)                     |  | 10          |  | 10        |  |                 
|Gecas (USA)                           |  | 9           |  | 9         |  |                 
|JAL (Japan)                           |  | 10          |  | 2         |  | 8                
|Jetscape (USA)                        |  | 1           |  |          |  | 1                
|Lot Polish (Poland)                   |  | 6           |  | 6         |  |                 
|Regional (France)                     |  | 9           |  | 3         |  | 6                
|Republic Airline (USA)                |  | 48          |  | 48        |  |                 
|Satena (Colombia)                     |  | 1           |  | 1         |  |                 
|Saudi Arabian Airlines (Saudi Arabia) |  | 15          |  | 15        |  |                 
|Sirte Oil (Libya)                     |  | 1           |  | 1         |  |                 
|South Africa Airlink (South Africa)   |  | 2           |  |          |  | 2                
|Suzuyo (Japan)                        |  | 2           |  | 1         |  | 1                
|TAME (Ecuador)                        |  | 2           |  | 2         |  |                 
|US Airways (USA)                      |  | 28          |  | 28        |  |                 
|Virgin Blue (Australia)               |  | 6           |  | 6         |  |                 
|Virgin Nigeria (Nigeria)              |  | 7           |  |          |  | 7                
|                                      |  |             |  |           |  |                  
|Total                                 |  | 193         |  | 153       |  | 40               
|                                      |  |             |  |           |  |                  



|(1) | Customer is Embraers ECC Leasing, which delivered one aircraft to Cirrus, two to Paramount and one to Satena.
|--- | --------------------------------------------------------------------------------------------------------------

EMBRAER 175:



|                         |  |             |  |           |  |                  
|------------------------ |  | ----------- |  | --------- |  | -----------------
|Customer                 |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|Air Canada (Canada)      |  | 15          |  | 15        |  |                 
|ECC (Ireland)(2)         |  | 1           |  | 1         |  |                 
|Gecas (USA)              |  | 5           |  | 5         |  |                 
|Lot Polish (Poland)      |  | 16          |  | 4         |  | 12               
|Northwest Airlines (USA) |  | 36          |  | 36        |  |                 
|Republic Airlines (USA)  |  | 54          |  | 54        |  |                 
|Royal Jordanian (Jordan) |  | 2           |  | 2         |  |                 
|TRIP (Brazil)            |  | 5           |  |          |  | 5                
|Suzuyo (Japan)           |  | 1           |  |          |  | 1                
|                         |  |             |  |           |  |                  
|Total                    |  | 135         |  | 117       |  | 18               
|                         |  |             |  |           |  |                  



|(2) | Customer is Embraers ECC Leasing, which delivered one aircraft to Air Caraibes (Guadalupe).
|--- | --------------------------------------------------------------------------------------------



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EMBRAER 190:



|                             |  |             |  |           |  |                  
|---------------------------- |  | ----------- |  | --------- |  | -----------------
|Customer                     |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|Aero Republica (Colombia)    |  | 5           |  | 5         |  |                 
|Aeromexico (Mexico)          |  | 12          |  | 2         |  | 10               
|Air Canada (Canada)          |  | 45          |  | 45        |  |                 
|Air Caraibes (Guadalupe)     |  | 1           |  | 1         |  |                 
|Air Moldova (Moldova)        |  | 1           |  |          |  | 1                
|Azul (Brazil)                |  | 5           |  |          |  | 5                
|BA CityFlyer (England)       |  | 5           |  |          |  | 5                
|Copa (Panama)                |  | 15          |  | 15        |  |                 
|Finnair (Finland)            |  | 13          |  | 10        |  | 3                
|Gecas (USA)                  |  | 24          |  | 23        |  | 1                
|HNA Group (China)            |  | 50          |  | 10        |  | 40               
|JetBlue (USA)                |  | 104         |  | 40        |  | 64               
|ECC (Ireland) (3)            |  | 1           |  | 1         |  |                 
|Jetscape (USA)               |  | 9           |  | 1         |  | 8                
|KLM (Holland)                |  | 10          |  | 3         |  | 7                
|Kunpeng (China)              |  | 5           |  | 4         |  | 1                
|LAM (Republic of Mozambique) |  | 2           |  |          |  | 2                
|Lufthansa (Germany)          |  | 16          |  |          |  | 16               
|M1 Travel (Lebanon)          |  | 8           |  | 3         |  | 5                
|NAS Air (Saudi Arabia)       |  | 10          |  | 1         |  | 9                
|NIKI (Austria)               |  | 5           |  |          |  | 5                
|Regional (France)            |  | 11          |  | 8         |  | 3                
|Taca (El Salvador)           |  | 11          |  | 5         |  | 6                
|TAME (Ecuador)               |  | 3           |  | 3         |  |                 
|US Airways (USA)             |  | 42          |  | 25        |  | 17               
|Virgin Blue (Australia)      |  | 18          |  | 12        |  | 6                
|Virgin Nigeria (Nigeria)     |  | 3           |  | 1         |  | 2                
|Undisclosed                  |  | 2           |  |          |  | 2                
|                             |  |             |  |           |  |                  
|Total                        |  | 436         |  | 218       |  | 218              
|                             |  |             |  |           |  |                  



|(3) | Customer is Embraers ECC Leasing, which delivered one aircraft to Jet Blue (USA).
|--- | ----------------------------------------------------------------------------------

EMBRAER 195:



|                         |  |             |  |           |  |                  
|------------------------ |  | ----------- |  | --------- |  | -----------------
|Customer                 |  | Firm Orders |  | Delivered |  | Firm OrderBacklog
|Alpi Eagles (Italy)      |  | 10          |  |          |  | 10               
|Azul (Brazil)            |  | 31          |  | 4         |  | 27               
|BRA (Brazil)             |  | 20          |  |          |  | 20               
|Flybe (UK)               |  | 14          |  | 14        |  |                 
|Gecas (USA)              |  | 7           |  | 6         |  | 1                
|Globalia (Spain)         |  | 12          |  | 3         |  | 9                
|Royal Jordanian (Jordan) |  | 2           |  | 2         |  |                 
|Lufthansa (Germany)      |  | 14          |  | 4         |  | 10               
|Montenegro (Montenegro)  |  | 1           |  |          |  | 1                
|                         |  |             |  |           |  |                  
|Total                    |  | 111         |  | 33        |  | 78               
|                         |  |             |  |           |  |                  

For additional information regarding trends in our business, see Item 4B. Business
OverviewBusiness Strategies and Item 5A. Operating ResultsCurrent Conditions and Future Trends in the Commercial Airline Industry and Executive Jet Market. For risks affecting our business, see Item 3D. Risk
Factors.



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|5E. | Off-Balance Sheet Arrangements
|--- | ------------------------------

In the normal
course of our business, we enter into certain off-balance sheet arrangements, including guarantees, trade-in obligations, financial and residual value guarantees and product warranty commitments. We also have a number of swap transactions that are
described in Item 11. Quantitative and Qualitative Disclosures about Market Risk.

Despite the current global economic crisis,
we have not yet experienced any material effects to our financial condition or results of operations, as a result of the exercise of trade-in option or guarantees that we have extended to third parties. However, there can be no assurance that we
would not be materially impacted by the exercise of these trade-in options or guarantees if the current global economic downturn became more severe. See also Note 35 to our audited consolidated financial statements for additional information on our
off-balance sheet arrangements. In addition, see Item 3D. Risk FactorsRisks Relating to EmbraerOur aircraft sales are subject to trade-in options and financial and residual value guarantees that may require us to make significant
cash disbursements in the future.

Trade-in Obligations

In connection with the signing of a purchase contract for new aircraft, we may provide trade-in options to our customers. These options provide a customer with the right to trade-in existing aircraft upon the purchase
and acceptance of a new aircraft. In 2008, we entered into a total of 15 trade-in aircraft options. Of these 15 trade-in options, 12 rights had been exercised through December 31, 2008. Of these 12 aircraft, four were received in fiscal year
ending 2008 and the remaining eight will be received in 2009. Our obligation to receive the remaining three aircraft as trade-ins are directly tied to contractual obligations with our customer of them actually taking delivery of certain new
aircraft. The trade-in price for commercial aircraft is determined in the manner discussed under Item 5A. Operating ResultsCritical Accounting EstimatesGuarantees and Trade-In Rights. We continue to monitor all trade-in
commitments to anticipate any adverse economic impact they may have in our financial condition. Based on our current evaluation and on third parties appraisals, we believe that any aircraft accepted in connection with trade-in commitments may
be sold or leased in the market without significant profits or losses.

At December 31, 2008, three commercial aircraft were subject
to trade-in options, and additional aircraft may become subject to trade-in options due to new sales contracts. See Item 5A. Operating ResultsCritical Accounting EstimatesGuarantees and Trade-In Rights. We may be required to
accept trade-ins at prices that are slightly above the then-market price of the aircraft, which would result in financial loss for us when we resell the aircraft. Based on our current estimates and third party appraisals, we believe that any
aircraft accepted for trade-in could be sold without any material gain or loss. However, there can be no assurance that we would not experience material losses in these cases, particularly if the current global economic downturn were to exert
material downward pressures to the pre-owned aircraft market.

Guarantees

Financial guarantees are triggered if customers do not perform their obligation to service the debt during the term of the financing under the relevant
financing arrangements. Financial guarantees provide credit support to the guaranteed party to mitigate default-related losses. The underlying assets collateralize these guarantees. The value of the underlying assets may be adversely affected by an
economic or industry downturn. Upon an event of default, we are usually the agent for the guaranteed party for the refurbishment and remarketing of the underlying asset. We may be entitled to a fee for such remarketing services. Typically a claim
under the guarantee shall be made only upon surrender of the underlying asset for remarketing.

Residual value guarantees provide a third
party with a specific guaranteed asset value at the end of the financing agreement. In the event of a decrease in market value of the underlying asset, we shall bear the difference between the specific guaranteed amount and the actual fair market
value. Our exposure is mitigated by the fact that, in order to benefit from the guarantee, the guaranteed party has to make the underlying assets meet stringent specific return conditions.

The following table provides quantitative data regarding guarantees we render to third parties. The maximum potential payments represent the worst-case
scenario and do not necessarily reflect the results expected by us. Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets we could liquidate or receive from other parties to offset our
payments under guarantees.



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|                                                                     |  |                     |   |  |                     |  
|-------------------------------------------------------------------- |  | ------------------- | - |  | ------------------- | -
|Description                                                          |  | At December 31,2008 |   |  | At December 31,2007 |  
|                                                                     |  | (in US$ millions)   |  
|Maximum financial guarantees                                         |  | 1,537.4             |   |  | 1,701.6             |  
|Maximum residual value guarantees                                    |  | 754.0               |   |  | 946.4               |  
|Mutually exclusive exposure(*)                                       |  | (393.9              | ) |  | (415.4              | )
|Provisions and liabilities recorded                                  |  | (27.4               | ) |  | (24.5               | )
|                                                                     |  |                     |   |  |                     |  
|                                                                     |  |                    
|Off-balance sheet exposure                                           |  | 1,870.1             |   |  | 2,208.1             |  
|Estimated proceeds from performance guarantees and underlying assets |  | 2,013.5             |   |  | 2,352.7             |  



|(*) | When an underlying asset is covered by mutually exclusive financial and residual value guarantees, the residual value guarantee may only be exercised if the financial guarantee has
expired without having been exercised. On the other hand, if the financial guarantee is exercised, the residual value guarantee is automatically terminated. After a financial guarantee expires without being exercised, there is an average three-month
period in which a guaranteed party may exercise the residual value guarantee. This means that our exposure to mutually exclusive financial and residual value guarantees covering a single underlying asset cannot be cumulative. Therefore, the maximum
exposure shown in this line item is not an aggregate amount of the combined value of mutually exclusive financial and residual value guarantees covering a single underlying asset.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As discussed in Note 35 of our audited consolidated financial statements included, as of December 2007 and December 2008, we maintained escrow deposits
in the total amount of US$287.5 million and US$299.7 million, respectively, in favor of third parties for whom we have provided financial and residual value guarantees in connection with certain aircraft sales financing structures.

Financial and Residual Value Guarantees

We
have guaranteed the financial performance of a portion of the financing for, and the residual value of, some of our aircraft which have already been delivered. Financial guarantees are provided to financing parties to support a portion of the
payment obligations of purchasers of our aircraft under their financing arrangements to mitigate default-related losses. These guarantees are collateralized by the financed aircraft.

Assuming all customers supported by financial guarantees defaulted on their aircraft financing arrangements, and also assuming we were required to pay
the full aggregate amount of outstanding financial and residual value guarantees and were not able to remarket any of the aircraft to offset our obligations, our maximum exposure under these guarantees (less provisions and liabilities) would have
been US$1,870.1 million as of December 31, 2008. For further discussion of these off-balance sheet arrangements, see Note 35 to our audited consolidated financial statements.

At December 31, 2008, we had US$299.7 million deposited in escrow accounts as collateral for financing and residual value guarantees of certain
aircraft sold. If the guarantor of the debt (an unrelated third party) is required to pay the creditors of such financing arrangement or the residual value guarantee, the guarantor has the right to withdraw from the escrow account. Based on current
estimates, we believe that the proceeds from the sale or lease of the covered aircraft (based on resale value as of December 31, 2008) and from other offsetting collections, such as cash deposits, would be US$2,013.5 million. The deposited
amounts will be released when the financing contracts mature (from 2013 to 2021) if no default by the buyers of the aircraft occurs or the aircraft market price is above the residual value guarantee.

The interest earned on the escrow funds is added to the balance in escrow and is recorded as interest income by us. In order to earn a better interest
rate on such guarantee deposits, at December 31, 2008, we had invested part of the US$299.7 million deposited in escrow accounts in 14-year structured notes in a total amount of US$123.4 million with the depositary bank, which generated
interest in the amount of US$7.6 million in 2008 that was added to the principal amount and recognized in our consolidated statements of income and comprehensive income. This yield enhancement was obtained through a credit default swap (CDS)
transaction, which provides the right of early redemption of the note in case of a credit event by us. Upon such a credit event, the note may be redeemed by the holder at the greater of the notes market value or its original face amount, which
would result in a loss of all



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interest accrued on such note to date. Credit events include obligation and payment defaults under the terms of the guarantees above specified thresholds,
events related to the restructuring of the obligations above a specified threshold, bankruptcy and a repudiation of and/or moratorium on the obligations above a specified threshold. See Note 11 to our audited consolidated financial statements.

Residual value guarantees typically ensure that, in the 15th year after delivery, the relevant aircraft will have a residual market value
of a percentage of the original sale price. Most of our residual value guarantees are subject to a limitation (a cap) and, therefore, in average our guaranteed residual value is 18% of the original sale price. In the event of a decrease
in the market value of the underlying aircraft and an exercise by the purchaser of the residual value guarantee, we will bear the difference between the guaranteed residual value and the market value of the aircraft at the time of exercise. Our
exposure is mitigated by the fact that the guaranteed party, in order to benefit from the guarantee, must make the aircraft meet specific return conditions.

We continually re-evaluate our risk under our guarantees and trade-in obligations based on a number of factors, including the estimated future market value of our aircraft based on third party appraisals, including
information developed from the sale or lease of similar aircraft in the secondary market, and the credit rating of customers.



|5F. | Tabular Disclosure of Contractual Obligations
|--- | ---------------------------------------------

The
following table and discussion provide additional disclosure regarding our material contractual obligations and commercial commitments as of December 31, 2008.



|                               |  |                   |  |                 |  |             |  |             |  |                 
|------------------------------ |  | ----------------- |  | --------------- |  | ----------- |  | ----------- |  | ----------------
|Contractual Obligations        |  | Total             |  | Less than1 year |  | 1  3 years |  | 3  5 years |  | More than5 years
|                               |  | (in US$ millions)
|Loans and interest             |  | 2,155.3           |  | 590.8           |  | 791.4       |  | 226.5       |  | 546.6           
|Pension fund                   |  | 116.1             |  | 16.0            |  | 22.2        |  | 22.2        |  | 55.6            
|Capital lease obligations      |  | 19.6              |  | 4.9             |  | 7.4         |  | 4.9         |  | 2.4             
|Operating leases               |  | 24.5              |  | 6.3             |  | 7.6         |  | 1.7         |  | 8.9             
|Purchase obligations           |  | 1,082.3           |  | 1,082.3         |  |            |  |            |  |                
|Non recourse and recourse debt |  | 504.6             |  | 137.7           |  | 17.1        |  | 212.9       |  | 136.9           
|Customer advances              |  | 1,573.2           |  | 1,151.5         |  | 316.4       |  | 86.2        |  | 19.1            
|Contribution from suppliers    |  | 44.3              |  | 31.3            |  | 3.0         |  |            |  | 10.0            
|Other long-term liabilities    |  | 716.7             |  | 256.6           |  | 250.2       |  | 119.2       |  | 90.7            
|                               |  |                   |  |                 |  |             |  |             |  |                 
|Total                          |  | 6,236.5           |  | 3,277.4         |  | 1,415.3     |  | 673.6       |  | 870.2           
|                               |  |                   |  |                 |  |             |  |             |  |                 

The above table shows the sum of the outstanding principal and anticipated interest due at
maturity date. For the fixed rate loans, the interest expenses were calculated based on the rate established in each debt contract. For the floating rate loans, the interest expenses were calculated based on a market forecast for each period (LIBOR
6m  12m), dated on December 31, 2008. This floating rate exposure is managed through derivatives operations. See Item 11. Quantitative and Qualitative Disclosures About Market Risk.

The above table does not reflect contractual commitments related to trade-in options and financial and residual value guarantees discussed in Item
5E. Off-Balance Sheet Arrangements above. See Item 3D. Risk FactorsRisks Relating to EmbraerOur aircraft sales are subject to trade-in options and financial and residual value guarantees that may require us to make
significant cash disbursements in the future.

Purchase obligations consist of trade accounts payable and insurance payables.

Other long-term liabilities include taxes and social charges payable in the total amount of US$401.4 million at December 31, 2008.
The above table does not reflect any information about our derivative instruments, which are discussed more fully in Item 11. Quantitative and Qualitative Disclosures About Market Risk.



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|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



|6A. | Directors and Senior Management
|--- | -------------------------------

We are managed by
our Conselho de Administração, or Board of Directors, composed of 11 members, and our Diretoria, or executive officers, composed of at least four and at the most 11 members (each an executive officer). We have a permanent
Conselho Fiscal, which is composed of five members and an equal number of alternates.

There are no family relationships among the
members of our Board of Directors and/or our executive officers.

Board of Directors

Our Board of Directors ordinarily meets four times a year and extraordinarily when called by the chairman or by the majority of members of the Board. It
has responsibility, among other things, for establishing our general business policies and for electing our executive officers and supervising their management.

Our Board of Directors is appointed by our shareholders for a two-year term, reelection being permitted, having three reserved seats as follows: (1) one to be appointed by the Brazilian government, as holder of
the golden share, and (2) two to be appointed by our employees. The remaining eight directors are elected in accordance with the slate voting or cumulative voting rules contained in our bylaws. See Item 10B. Memorandum and
Articles of AssociationBoard of DirectorsElection of Board of Directors for a detailed description of the rules and procedures regarding the nomination and election of our Board members. The Brazilian Corporate Law requires that
each director to hold at least one of our shares. There is no mandatory retirement age for our directors.

Under the rules of the Novo
Mercado, the members of our Board of Directors have agreed to comply with the Novo Mercado Regulations and with the rules of the São Paulo Stock Exchange Arbitration Chamber before taking office, and for such purpose have executed
a Term of Agreement of Management (Termo de Anuência dos Administradores).

Set forth below are the names, ages, positions,
the year first elected and brief biographical descriptions of the members of our Board of Directors elected at our annual shareholders meeting held on April 29, 2009.



|                               |  |     |  |                                    |  |                   
|------------------------------ |  | --- |  | ---------------------------------- |  | ------------------
|Name                           |  | Age |  | Position                           |  | Year First Elected
|Maurício Novis Botelho         |  | 66  |  | Chairman of the Board of Directors |  | 2000              
|Sérgio Eraldo de Salles Pinto  |  | 44  |  | Member of the Board of Directors   |  | 2009              
|Cecília Mendes Garcez Siqueira |  | 51  |  | Member of the Board of Directors   |  | 2009              
|Wilson Carlos Duarte Delfino   |  | 62  |  | Member of the Board of Directors   |  | 2004              
|Neimar Dieguez Barreiro        |  | 64  |  | Member of the Board of Directors   |  | 2004              
|Israel Vainboim                |  | 64  |  | Member of the Board of Directors   |  | 2009              
|Wilson Nélio Brumer            |  | 60  |  | Member of the Board of Directors   |  | 2009              
|Hermann Wever                  |  | 72  |  | Member of the Board of Directors   |  | 2006              
|Samir Zraick                   |  | 68  |  | Member of the Board of Directors   |  | 2006              
|Paulo Cesar de Souza Lucas     |  | 49  |  | Member of the Board of Directors   |  | 1999              
|Claudemir Marques de Almeida   |  | 56  |  | Member of the Board of Directors   |  | 2004              

Maurício Novis Botelho. Mr. Botelho has been the Chairman of the Board of
Directors of Embraer since March 2006. He has served as our President and Chief Executive Officer since September 1995 and has led the company after its privatization, instituting a new entrepreneurial corporate culture focused on customer
satisfaction, which resulted in a successful turnaround and positioning of Embraer as one of the world leaders in the aeronautical market. Mr. Botelho served as CEO of Stelar Telecom, former OTL  Odebrecht
Automação & Telecomunicações Ltda., a telecommunications company, from 1988 to 1995. He also served as CEO of CMW Equipamentos S.A., an industrial automation company, from 1985 to 1995, STL  Engenharia de
Sistemas Ltda., a project engineering company, from 1985 to 1995, and Soluções Integradas PROLAN Ltda., a corporate network company, from 1994 to 1995. Mr. Botelho was the executive vice-president of TENENGE  Técnica
Nacional de Engenharia Ltda., a construction company,



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during 1992 and an executive officer of Cia. Bozano during 1995. In addition to his position as Chairman of our Board of Directors, he is the President of
Mogno Consultoria de Negócios Ltda., a business consulting company, and is a board member of various companies and organizations, such as Perdigão S.A., one of the largest meat and milk processing companies in Brazil, CBMM - Companhia
Brasileira de Metalurgia e Mineração, the largest world producer of niobium, Deutsche Bank, and CDES, a strategic advisory board to the Presidency of Brazil. Mr. Botelho has been awarded, among others, the Ordem do Rio Branco (the
highest condecoration from the Brazilian government), Commander, and the Legion dHonneur, Chevalier from France.

Sérgio
Eraldo de Salles Pinto. Mr. Salles Pinto has been a member of the Board of Directors of Embraer since April 2009. Mr. Salles Pinto has been the Executive Manager of Cia. Bozano and of Bozano Holdings since 2000, being responsible for
the administration of the companies funds through several financial instruments. From 1988 to 2000, he worked at several companies of Banco Bozano, Simonsen S.A. Mr. Salles Pinto earned undergraduate degrees in Economics and Electrical
Engineering from the Center of Unified Teaching of Brasília (CEUB) and the University of Brasília (UnB), respectively. He holds a Master degree in Economics from Fundação Getúlio Vargas - Rio de Janeiro (EPGE) and
a Master degree in Administration from the Catholic University of Rio de Janeiro (PUC).

Cecília Mendes Garcez Siqueira.
Mrs. Siqueira has been a member of the Board of Directors of Embraer since April 2009. Mrs. Siqueira is the Vice Chairman of the Board of Directors of CPFL Energia, or CPFL, a major Brazilian energy company, and Executive Officer of
Business Planning of the Caixa de Assistência dos Funcionários do Banco do Brasil (Pension Fund of Banco do Brasils Employees), or PREVI. She was a board member of PREVI from 2002 to 2004 and of Neoenergia, a Brazilian renewable
energy company, from 2002 to 2005. Mrs. Siqueira earned an undergraduate degree in Education from the University of Brasília - DF and in Psychology at the Foundation of Higher Education of São João del Rei (FUNREI) - MG.
She holds a postgraduate degree in Business and Pension Fund Management, both from the Fundação Getúlio Vargas - DF. She is also a specialist in Pension Fund Management at Wharton School of Business and a Masters in
Administration from IBMEC - RJ.

Wilson Carlos Duarte Delfino. Mr. Delfino has been a member of the Board of Directors of
Embraer since 2004. Mr. Delfino has been President and CEO of Fundação Sistel de Seguridade Social (Pension Fund of Brazilian Telecomunication Companies Employees), or SISTEL, a pension fund, since January 2004, and has
served as executive officer of Planning, Controlling and Administrative Offices of SISTEL since March 2000. From September 1993 to September 1994 Mr. Delfino served as assistant to the executive officer and was responsible for the Coordination
of the Committee of Investments of SISTEL. From October 1994 to March 2000 he was Manager of the Investment Analysis Department of SISTEL. He was also a member of the board of directors of Paranapanema, a mining company, from April 1998 to April
2006 and a member of the board of directors of Perdigão S.A from April 2004 to April 2006.

Neimar Dieguez Barreiro.Mr. Barreiro has been a member of the Board of Directors of Embraer since 2004. Mr. Barreiro has been a Lieutenant Brigadier in the Brazilian Air Force since November 2005 and Secretary of Economy and Financing of the Brazilian Air
Force since August 2001. He is also the representative of the Air Force in the Interministerial Follow-up Group of the Strengthening Program of Control of the Brazilian Air Space. He has served in the Brazilian Air Force since 1963. He is the
representative of the Brazilian government in our Board of Directors, as a result of the governments ownership of our golden share.

Israel Vainboim. Mr. Vainboim has been a member of the Board of Directors of Embraer since April 2009. Mr. Vainboim is a member of the Board of Directors of Itaú Unibanco Banco Múltiplo
S.A., Souza Cruz S.A., Cia. Iochpe-Maxion, the leading Brazilian manufacturer of wheels and frames for commercial vehicles and railway freight cars, the Museu de Arte Moderna de São Paulo (Museum of Modern Art of São Paulo), the alumni
association of the Federal University of Rio de Janeiro, and the Albert Einstein Hospital in São Paulo. He is also Vice President of the Board of the House of Culture of Israel in São Paulo and a member of the International Advisory
Council of the General Atlantic Partners, located in New York, New York. Mr. Vainboim was also the President of Unibanco  União de Banco Brasileiros S.A. from 1988 to 1992, President of Unibanco Holdings S.A. from 1994 to 2007,
Chairman of the Board of Directors and the President of the Audit Committee of Unibanco Holdings S.A. from 2007 to February 2009. Mr. Vainboim earned an undergraduate degree in Mechanical Engineering from the Federal University of Rio de
Janeiro and holds an MBA from Stanford University.



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Wilson Nélio Brumer. Mr. Bruner has been a member of the Board of Directors of Embraer
since April 2009. Mr. Brumer is the co-founder and has been partner of Winbros Participações, Gestão e Empreendimentos Ltda. since April 2007. He is co-founder and Chairman of the Board of Directors of Omega Energia
Renovável, an energy company, since March 2008. He is also Chairman of the Board of Directors of Usiminas S.A., and member of the Board of Directors of Localiza S.A, a car rental company. He was CEO of CVRD  Companhia Vale do Rio Doce,
or CVRD, from 1990 to 1992 and Acesita  Companhia Aços Especiais Itabira from November 1992 to October 1998. He participated in the administration of the Government of the State of Minas Gerais as Secretary of Economic Development.
Mr. Brumer earned an undergraduate degree in Business from the School of Administrative and Accounting Economical Sciences of FUMEC  MG.

Hermann Wever.Mr. Wever has been a member of Embraers Board of Directors of Embraer since 2006. He was also the president of the Consulting Board of Siemens Ltda. since 2001. From 1987 to 2001, Mr. Wever was
president of Siemens do Brasil. He was also Officer of Energy and Installations at Siemens do Brasil from 1980 to 1987. Prior to that, Mr. Wever held several positions at General Electric, including Industrial Officer of the department of light
bulbs and lighting from 1968 to 1974, and Vice President of Domestic Appliances from 1974 to 1978.

Samir Zraick. Mr. Zraick
has been a member of the Board of Directors of Embraer since 2006. Mr. Zraick was chief financial officer of CVRD, and head of its U.S. affiliate from 1971 to 1986. He was also a Board Member of CVRD in 2000 and served as a Special Advisor and
member of CVRDs Strategic Committee from 2001 to 2004. He was CFO and VP Business Development of Caemi Mineração e Metalurgia S.A., a Brazilian mining company, from 1986 to 1998. He was a member of the Board of Directors and
Chairman of the Marketing Committee of Quebec Cartier Mining, in Montreal, Quebec, from 1990 to 1999. He served as a Board Member of Canico Resources in Vancouver, British Columbia, from July 2004 to March 2006. Mr. Zraick is also member of the
Board of Directors of Mineração e Metálicos S.A. - MMX, a Brazilian mining company, MPX Energia S.A., a Brazilian energy company, and LLX Logística S.A., a Brazilian logistics company.

Paulo Cesar de Souza Lucas. Mr. Lucas has been a member of the Board of Directors of Embraer since 1999. Mr. Lucas has participated in
our strategic planning division since 1998 and was implementation coordinator of Embraers modernization and cost-reduction strategy from 1990 to 1996. Mr. Lucas has been working at Embraer for more than 17 years and is a representative of
our shareholder employees.

Claudemir Marques de Almeida. Mr. Almeida has been a member of the Board of Directors of Embraer
since 2004. Mr. Almeida has been an employee of Embraer since 1987, and currently holds the position of Quality Controller I at Embraer. He previously served as a member of our Board of Directors from January 1995 to April 2001.
Mr. Almeida is the representative of our non-shareholder employees.

Committees

Three committees were formed to assist the Board of Directors in its duties and responsibilities:



| |  |  | Executive Committee: which may have up to four members, but has no executive power. The primary purpose of the Executive Committee is to assist the Board of
Directors in its functions. Members of our Board of Directors, their alternates, or our executive officers may be nominated for the committee. The Executive Committees responsibilities are to: (1) establish a general direction for our
businesses; (2) approve and follow-up on our action plan proposed by the executive officers, including annual and multi-annual budgets, strategic plans, expansion projects, as well as investment and acquisition programs; (3) set, follow-up
on and evaluate the achievement of planned results to be established for the President and CEO in accordance with the approved action plan, which will guide his participation in our results based on current policy; and (4) assist the Board of
Directors in specific matters as requested. The current members of the Executive Committee are Maurício Novis Botelho, Hermann Wever, Israel Vainboim and Cecília Mendes Garcez Siqueira.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Human Resources Committee: which has four members appointed by our Board of Directors. The members of the Human Resources Committee may be members of our Board of
Directors, their alternates, or our executive officers. One of the members will be the Chairman of the Board of Directors, who will be responsible for coordinating the activities of the committee. The Human Resources Committee will operate until the
end of the tenure of our current Board of Directors or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | before if so decided by the Board of Directors. Its purpose is to assist the Board of Directors in the following duties, according to our bylaws:
(1) appoint and remove executive officers from office and designate their duties as provided by the bylaws; (2) subject to the duties of the executive officers, establish the functions and responsibilities of our executive officers and
select the Investor Relations Officer in accordance with CVM regulations; (3) approve our compensation and human relations policy, including compensation criteria, rights and benefits, as well as executive officers individual
compensation; and (4) authorize the transfer of our resources to employee associations, charity and recreational entities, the private security fund and foundation. The current members of the Human Resources Committee are Maurício Novis
Botelho, Wilson Nélio Brumer, Wilson Carlos Duarte Delfino and Sérgio Eraldo de Salles Pinto.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Conselho Fiscal: See Board PracticesConselho Fiscal below.
| | - |  | --------------------------------------------------------------

Executive Officers

Our executive officers are
responsible for our day-to-day management. The executive officers have individual responsibilities established by our bylaws and by the Board of Directors.

The terms of office for members of our Board of Directors and for our executive officers is two years, with each executive officer eligible for reelection.

Until the annual general meeting of our shareholders to be held in 2009, a majority vote of the members of our Board of Directors will be necessary to
remove an officer. After the annual general meeting of our shareholders, a vote of at least seven members of our Board of Directors will be necessary to remove an officer.

Our bylaws forbid any executive officer from also serving at the same time as a member of our Board of Directors. Our bylaws contain a provision that our
CEO will participate in meetings of the Board of Directors, but shall not vote on resolutions of the Board of Directors.

Under the rules
of the Novo Mercado, our executive officers have agreed to comply with the Novo Mercado Regulations and to the rules of the São Paulo Stock Exchange Arbitration Chamber before taking office and for such purpose have executed a
Term of Agreement of Management (Termo de Anuência dos Administradores).

Set forth below are the names, ages, positions, the
year first elected and brief biographical descriptions of our executive officers elected at our Board of Directors meeting held on April 29, 2009:



|                                 |  |     |  |                                                                          |  |                  
|-------------------------------- |  | --- |  | ------------------------------------------------------------------------ |  | -----------------
|Name                             |  | Age |  | Position                                                                 |  | Year FirstElected
|Frederico Pinheiro Fleury Curado |  | 47  |  | President and Chief Executive Officer                                    |  | 1995             
|Mauro Kern Junior                |  | 48  |  | Executive Vice-President  Airline Market                                |  | 2007             
|Luis Carlos Affonso              |  | 49  |  | Executive Vice-President  Executive Aviation                            |  | 2006             
|Orlando José Ferreira Neto       |  | 49  |  | Executive Vice-President  Defense Market and Governments                |  | 2009             
|Emílio Kazunoli Matsuo           |  | 56  |  | Executive Vice-President  Strategic Planning and Technology Development |  | 2009             
|Artur Aparecido V. Coutinho      |  | 60  |  | Executive Vice-President  Procurement and Industrial Operations         |  | 2005             
|Luiz Carlos Siqueira Aguiar      |  | 46  |  | Executive Vice-President  Finance and Chief Financial Officer           |  | 2006             
|Flávio Rímoli                    |  | 50  |  | Executive Vice-President  Legal Counsel                                 |  | 2007             
|Horácio Aragonés Forjaz          |  | 57  |  | Executive Vice-President  Administration and Communication              |  | 1998             
|Antônio Júlio Franco             |  | 60  |  | Executive Vice-President  Organizational Development and Personnel      |  | 2007             



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Frederico Pinheiro Fleury Curado. On April 23, 2007, Mr. Curado was appointed
Embraers President and CEO. Mr. Curado was our Executive Vice-President for the Airline Market from 1998 to April, 2007, and Executive Vice-President for Planning and Organizational Development from 1995 to August, 1998. Prior to that, he
held several different positions at Embraer in the areas of manufacturing, procurement, information technology, contracts and sales. Mr. Curado holds a Bachelors degree in Mechanical and Aeronautical Engineering from the Instituto
Tecnológico de Aeronáutica (Technological Aeronautics Institute), or ITA, and an MBA from the University of São Paulo. Mr. Curado has been awarded the Medal of Aeronautical Merit by the Brazilian government and the Medal of
Merit by the Brazilian Association of Military Engineering.

Mauro Kern Junior.In April 2007, Mr. Kern Junior was appointed
Embraers Executive Vice-President for the Airline Market. He joined Embraer in 1982 as a System Engineer and he worked on the landing gear project of the military aircraft AMX. In 1984, he joined Embraers Equipment Division (EDE), a
company specialized in landing gear and hydraulic equipment. Mr. Kern Junior worked for 11 years in different departments of Embraer, including engineering, marketing, sales and customer support. In 1999, Mr. Kern Junior joined the Program
Management Office of the Embraer 170/190 program as its Chief Engineer and Program Manager. In April 2004, Mr. Kern Junior was appointed the Senior General Manager of the EMBRAER 170/190 program. In July 2005, Mr. Kern Junior was appointed
Embraers Vice-President of Airline Market Programs. Mr. Kern Junior holds a Bachelors degree in Engineering from the University of Rio Grande do Sul.

Luis Carlos Affonso. In June, 2006, Mr. Affonso was appointed Embraers Executive Vice-President for Executive Aviation. Prior to that he held several positions at Embraer, including Vice-President
for Executive Aviation from 2005 to 2006, Vice-President of Engineering and Development from 2004 to 2005 and manager of the EMBRAER 170/190 program from 1999 to 2004.

Orlando José Ferreira Neto. In January 2009, Mr. Ferreira Neto was appointed Embraers Executive Vice President for Defense Market and Governments. At the end of 2006, he was appointed CEO of
Embraers integral subsidiary in Pacific Asia (EAP Pte. Ltd.). From 2004 to 2006, Mr. Ferreira Neto was the Officer for Marketing and Sales of Commercial Aviation for Latin America. In November 1998 he was appointed Embraers Market
Intelligence Officer for Commercial Aviation, remaining in this position until mid-2004. Before that, he was the Corporate Planning Manager, General Planning and IT Manager, and Programs Planning Manager of Embraer. Mr. Ferreira Neto has also
worked as an Industrial Systems Manager for Multitel/GTE and as a Materials Engineer for Pratt & Whitney Canada. In 1983, he earned an undergraduate degree in Engineering at ITA. He graduated in Management of Projects and Programs at ITA,
and earned an Executive MBA in 1998 from FIA/USP.

Emilio Kazunoli Matsuo. In April 2009, Mr. Matsuo was appointed
Embraers Executive Vice-President of Strategic Planning and Technology Development. Mr. Matsuo earned an undergraduate degree in Aeronautical Engineering from ITA in 1977. Mr. Matsuo began his career at Embraer in 1978 as a Systems
Engineer, working in the environment and flight control system areas. Mr. Matsuo also worked for three years in Italy on the AMX Military Program and the fly-by-wire Electronic Control project.



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During the 80s and 90s, Mr. Matsuo lead significant new projects for Embraer. In late 1990, he became Embraers executive officer of the ERJ 145
family program and in 2002 he was appointed Embraers Engineering Development officer. Mr. Matsuo also played an important role in the development and certification of the EMBRAER 170/190 jet family as the programs Chief Engineer. In
January 2007, he was appointed our Vice President of Engineering responsible for the development of product support engineering, flight testing and roduct integrity certification. In October 2008, he was appointed Embraers Executive Vice
President of Engineering.

Artur Aparecido V. Coutinho. In 2005, Mr. Coutinho was appointed Embraers Executive
Vice-President for Procurement and Industrial Operations. From January 2003 to March 2005, Mr. Coutinho was Embraers Vice-President responsible for marketing, sales and customer support activities in North America. From February 2000 to
December 2002, he was our Vice-President for Customer Service. Prior to that, Mr. Coutinho held several different positions at Embraer in the areas of marketing, training and quality control.

Luiz Carlos Siqueira Aguiar. In January 2009, Mr. Aguiar was appointed Embraers Chief Financial Officer. Mr. Aguiar is an
economist with a masters degree in Business Administration from the Rio Grande do Sul Federal University. From 2003 to 2005, Mr. Aguiar was PREVIs Chief Investment Officer responsible for US$28 billion in assets and a member of the
International Corporate Governance Network (ICGN). From 2003 to 2005, he was appointed to represent PREVI on the board of directors of various companies, including Embraer. During this period, he also represented Banco do Brasil on the Finance
Committee of CVRD, the Board of Directors of CPFL and the Board of Directors of SBCESeguradora Brasileira de Crédito à Exportação S.A, a Brazilian insurance company. During most of his career he worked at Banco do
Brasil, where he had the opportunity to plan and introduce major international operations. He worked at the Banco do Brasils New York branch and later in its international division in São Paulo in charge of Trade Finance Portfolio
Management. At the end of 2005, Mr. Aguiar was appointed Executive Vice-President of Embraer responsible for worldwide Defense Market and Governmental Aviation products and systems marketing, sales and contract administration, product
development and product support engineering, as well as the management of serial and phased-out programs.

Flávio
Rímoli. In April 2007, Mr. Rímoli was appointed Embraers Executive Vice-President and General Counsel. Since May 2005, he has been Secretary of Embraers Board of Directors. Mr. Rímoli has been working
at Embraer for more than 28 years, having occupied different positions, particularly in the industrial and commercial areas. He was our Senior General Manager of Contracts for the commercial aviation market for many years and our Vice-President for
Commercial Aviation Market from 2002 until May 2005. Mr. Rímoli holds a Bachelors degree in Mechanical Engineering from the Escola de Engenharia Industrial de São José dos Campos, a Law degree from Universidade Vale
do Paraíba, and specialization degrees in Operational Research and Corporate Law from ITA and Fundação Getúlio Vargas, respectively.

Horácio Aragonés Forjaz. In 2008, Mr. Forjaz was appointed Embraers Executive Vice-President for Administration and Communication. Prior to that, Mr. Forjaz was our Executive
Vice-President for Corporate Communications from 2001 to January 2008, and Executive Vice-President for Planning and Organizational Development from 1998 to 2001. From 1991 to 1994 and from 1997 to 1998, he was Embraers Chief Engineer. From
1995 to 1997, Mr. Forjaz was the operational director of Compsis Computadores e Sistemas Ltda., a Brazilian systems engineering and software company. From 1975 to 1995, he held several different positions at Embraer in the areas of engineering
and systems design. Mr. Forjaz holds a Bachelors degree in Electronic Engineering from ITA and a MSc degree in Applied Computer Science from the Instituto Nacional de Pesquisas Espaciais (Brazilian Institute of Aerospace Research).

Antonio Júlio Franco. In 2007, Mr. Franco was appointed Embraers Executive Vice-President for Organizational
Development and Personnel. He is responsible for Human Resources, Organizational Development, Corporate Quality and Management Support. Before joining Embraer, Mr. Franco worked at the Odebrecht Group for 25 years. From 1999 to 2002
Mr. Franco worked as a business consultant for various Brazilian and international companies, focusing on human resources matters. Mr. Franco joined Embraer in 2002, having worked in different positions within the Human Resources
department. Mr. Franco holds a Law degree and a Bachelors degree in Business Administration.



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|6B. | Compensation
|--- | ------------

For the fiscal year ended
December 31, 2008, the aggregate compensation (including benefits in kind granted) that we paid to members of the Board of Directors, the Conselho Fiscal and the executive officers for services in all capacities was approximately US$16.3
million. In addition, in 2008, we set aside approximately US$0.4 million for the payment of pension benefits to our executive officers. Members of our Board of Directors and Conselho Fiscal do not receive such benefits. The board members,
Conselho Fiscal members and executive officers did not receive any compensation (including benefits in kind) from any of our subsidiaries. At December 31, 2008, none of the board members, Conselho Fiscal members or executive
officers had any financial or other interests in any transaction involving us which was not in the ordinary course of our business.

At our
annual shareholders meeting held on April 29, 2009, a maximum amount of R$45.0 million was approved to be paid as aggregate compensation to our directors, executive officers and members of our Conselho Fiscal.

In addition, at May 1, 2009, the board members and executive officers owned an aggregate of 2,196,324 common shares.

Stock Option Plan

At a special shareholders
meeting held on April 17, 1998, our controlling shareholders approved a stock option plan for management and employees, including those of our subsidiaries, subject to restrictions based on continuous employment with us for at least two years.
The five-year term for the granting of options under the plan expired on May 31, 2003.

Under the terms of the plan, we were
authorized to grant options to purchase up to 25,000,000 common shares over the five-year period from the date of the first grant. As of the end of this five-year period, we had granted options for an aggregate of 20,237,894 common shares, including
662,894 options granted in connection with our share dividend in 2002, at a weighted average exercise price of R$6.17 per share. The options granted to each employee vest as follows: 30% after three years from the date granted, an additional 30%
after four years and the remaining 40% after five years. Employees may exercise their options for up to seven years from the date they are granted. At December 31, 2008, 17,892,239 of the total options granted had been exercised. Of the total
number of options granted, options to purchase an aggregate of 7,799,470 common shares have been granted to our executive officers at a weighted average exercise price of R$4.57 per share, of which 7,057,105 were exercised during the period from
June 1, 2001 through December 31, 2008.

Profit Sharing Plan

We first implemented a profit sharing plan in 1998 that by linked employee profit sharing to dividend payments. In December 2008, the Board of Directors approved changes to the methodology for calculating the employee
profit sharing. The new program, as amended in 2008 by our Board of Directors, is now tied to our net income, calculated in accordance with U.S. GAAP, and to individual and business unit performance targets. Of the total amount reserved to the
profit sharing program, 30% is distributed in equal parts to all employees, while 70% is distributed proportionally to the employees salary.

Under the new plan, we may pay, on a discretionary basis, additional amounts of up to 2.5% of our net income, calculated in accordance with U.S. GAAP, to employees who have performed exceptionally. We believe that this policy encourages
individual employees to meet our production goals.

The policy provides that this additional distribution of up to 2.5% to exceptionally
performing employees, is subject to, and must be adjusted in accordance with, certain cash flow events. Such distribution, if applicable, is made in cash after our annual general shareholders meeting at which our annual financial statements
are approved. For certain high level employees two-thirds of the distribution is distributed in cash on the same date and the remaining one-third is allocated as virtual common shares and payments related thereto is made over a
three-year period, using a weighted average price formula. As a result, the value of these payments is tied to the future market performance of our common shares.



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For the 2006, 2007 and 2008 fiscal years, we distributed US$42.7 million, US$71.0 million and US$50.1
million, respectively, to our employees under our profit sharing plan.



|6C. | Board Practices
|--- | ---------------

Our Board of Directors is
appointed for two-year terms. See Item 6A. Directors and Senior ManagementBoard of Directors for the year each of the members of our Board of Directors was first elected.

The executive officers are elected by the Board of Directors. Our current executive officers were elected on April 29, 2009, with a term of office
until the meeting of our Board of Directors to be held following the annual general meeting of our shareholders in 2011 to approve our financial statements for the fiscal year ended December 31, 2010.

The members of our Board of Directors and our executive officers have a uniform two-year term and are eligible for reelection. A vote of at least seven
members of our Board of Directors is necessary to remove an officer. See Item 6.A. Directors and Senior ManagementExecutive Officers for the year each of our executive officers was first elected.

None of our Directors is party to an employment contract providing for benefits upon termination of employment. All our executive officers are party to
an employment agreement setting forth the rights and obligations of the executive officers. If we terminate an employment agreement with any of our executive officers, we will be required to pay a termination benefit to such executive officer
equivalent to 50% of his/her remaining annual compensation, provided that a minimum of six monthly wages of the annual compensation is paid. Maurício Botelho has agreed to a three-year non-compete agreement, which became effective in 2007.

Conselho Fiscal

Under the Brazilian
Corporate Law, the Conselho Fiscalis a corporate body independent of management and a companys external auditors. The Conselho Fiscalhas not typically been equivalent to or comparable with a U.S. audit committee; its primary
responsibility has been to monitor managements activities, review the financial statements, and report its findings to the shareholders. However, pursuant to an exemption under the rules of the SEC regarding the audit committees of listed
companies, a foreign private issuer is not required to have a separate audit committee composed of independent directors if it has a board of auditors established and selected pursuant to home country legal or listing provisions that expressly
require or permit such a board and if such board meets certain requirements. Pursuant to this exemption, our Conselho Fiscal can exercise the required duties and responsibilities of a U.S. audit committee to the extent permissible under the
Brazilian Corporate Law. To comply with the rules of the SEC, the board of auditors must meet the following standards: it must be separate from the full board, its members must not be elected by management, no executive officer may be a member and
Brazilian law must set forth standards for the independence of the members. In addition, in order to qualify for the exemption, the board of auditors must, to the extent permitted by Brazilian law:



| |  |  | be responsible for the appointment, retention, compensation and oversight of the external auditors (including the resolution of disagreements between management and
the external auditors regarding financial reporting);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | be responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing
matters, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | have the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | receive appropriate funding from the company for payment of compensation to the external auditors, for any advisors and for ordinary administrative expenses.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



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As a foreign private issuer, we decided to modify our Conselho Fiscal to comply with the exemption
requirements. Our Board of Directors has delegated to the Conselho Fiscal certain additional responsibilities and the Conselho Fiscal and the Board of Directors adopted an additional charter delegating to the Conselho Fiscal the
duties and responsibilities of a U.S. audit committee to the extent permitted under the Brazilian Corporate Law. Because the Brazilian Corporate Law does not permit the Board of Directors to delegate responsibility for the appointment, retention and
compensation of the external auditors and does not provide the Board of Directors or the Conselho Fiscal with the authority to resolve disagreements between management and the external auditors regarding financial reporting, the Conselho
Fiscal cannot fulfill these functions. Therefore, in addition to its oversight responsibilities, the Conselho Fiscal may only make recommendations to the Board of Directors with respect to the appointment, retention and compensation of
the external auditors. With regard to resolution of disagreements between management and the external auditors, the Conselho Fiscal may only make recommendations to the executive officers and the Board of Directors.

Under the Brazilian Corporate Law, the Conselho Fiscal may not contain members who are members of the Board of Directors or the executive
committee, or who are our employees or employees of a controlled company or of a company of this group, or a spouse or relative of any member of our management. In addition, the Brazilian Corporate Law requires that Conselho Fiscal members
receive a remuneration at least 10% of the average amount paid to each executive officer. The Brazilian Corporate Law requires a Conselho Fiscal to be composed of a minimum of three and a maximum of five members and their respective
alternates. Under the rules of the Novo Mercado, the members of the Conselho Fiscal have agreed to comply with the Novo Mercado Regulations and to the rules of the São Paulo Stock Exchange Arbitration Chamber before
taking office and for such purpose have executed a Term of Agreement of the Conselho Fiscal.

Our Conselho Fiscal is composed
of five members who are elected at the annual shareholders meeting, with terms lasting until the next annual shareholders meeting after their election. Under the Brazilian Corporate Law, in the event a company acquires control of another
company, minority shareholders that in the aggregate hold at least 10% of the voting shares also have the right to elect separately one member of the Conselho Fiscal. Such provision will not be applicable to us as long as we are subject to
widespread control. Set forth below are the names, ages, the year first elected and positions of the members of our Conselho Fiscal and respective alternates, elected at our annual shareholders meeting held on April 29, 2009.



|                                         |  |     |  |                  |  |                  
|---------------------------------------- |  | --- |  | ---------------- |  | -----------------
|Name                                     |  | Age |  | Position         |  | Year FirstElected
|Rolf Von Paraski (1)                     |  | 57  |  | Effective member |  | 2006             
|Maria de Jesus Tapia Rodriguez Migliorin |  | 51  |  | Alternate        |  | 2008             
|Ivan Mendes do Carmo (2)                 |  | 46  |  | Effective member |  | 2008             
|Tarcísio Luiz Silva Fontenele            |  | 43  |  | Alternate        |  | 2001             
|Taiki Hirashima (3)                      |  | 68  |  | Effective member |  | 2004             
|Guillermo Oscar Braunbeck                |  | 36  |  | Alternate        |  | 2005             
|Eduardo Coutinho Guerra                  |  | 42  |  | Effective member |  | 2007             
|Leandro Giacomazzo                       |  | 49  |  | Alternate        |  | 2007             
|Alberto Carlos Monteiro dos Anjos        |  | 46  |  | Effective member |  | 2003             
|Celso Clemente Giacometti                |  | 65  |  | Alternate        |  | 2009             



|(1) | President of the Conselho Fiscal.
|--- | ---------------------------------

|(2) | Vice-President of the Conselho Fiscal.
|--- | --------------------------------------

|(3) | Finance and accounting specialist.
|--- | ----------------------------------



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|6D. | Employees
|--- | ---------

The table below sets forth the number of
our employees by category as of the dates indicated, which number includes the employees of our consolidated joint ventures and subsidiaries OGMA and HEAI.



|                                    |  |                 |  |        |  |       
|----------------------------------- |  | --------------- |  | ------ |  | ------
|                                    |  | At December 31,
|                                    |  | 2008            |  | 2007   |  | 2006  
|Production Process                  |  | 12,294          |  | 12,392 |  | 9,157 
|Research and Development            |  | 3,764           |  | 3,838  |  | 3,627 
|Customer Support                    |  | 2,957           |  | 3,099  |  | 2,808 
|Administrative  Production Support |  | 2,245           |  | 2,067  |  | 1,472 
|Administrative  Corporate          |  | 2,249           |  | 2,338  |  | 2,201 
|                                    |  |                 |  |        |  |       
|Total                               |  | 23,509          |  | 23,734 |  | 19,265
|                                    |  |                 |  |        |  |       

Approximately 88% of our workforce is employed in Brazil. Most of our technical staff is trained
at leading Brazilian engineering schools, including the Instituto Tecnológico Aeronáutico, known as the ITA, located in São José dos Campos. A small percentage of our employees belong to one of three labor unions:
the Sindicato dos Metalúrgicos (Union of Metallurgical Workers), the Sindicato dos Engenheiros do Estado de São Paulo (Union of Engineers of the State of São Paulo) or the Sindicato dos Trabalhadores nas
Indústrias de Construção de Aeronaves, Equipamentos Gerais Aeroespacial, Aeropeças, Montagem e Reparação de Aeronaves e Instrumentos Aeroespacial do Estado de São PauloSINDIAEROSPACIAL-SP
(Union of Employees of the Areospace Industry of the State of São Paulo). Overall, union membership as a percentage of total workforce has declined significantly in past years. At December 31, 2000, approximately 74.1% of our employees
were not affiliated with any unions, compared to 90% at December 31, 2008. We believe that relations with our employees are good.

We
actively support the training and professional development of our employees. We have established a program at our facility in São José dos Campos to provide newly graduated engineers with specialized training in aerospace engineering.

In the first quarter of 2009, we had to lay off approximately 20% of our labor force as part of our efforts to reposition Embraer in face
of the current global economic crisis. The cost of these layoffs was approximately US$53.5 million.

As of March 31, 2009, Embraer had
a workforce of 19,283 employees, which includes the employees of our consolidated joint ventures and subsidiaries OGMA and HEAI.



|6E. | Share Ownership
|--- | ---------------

At December 31, 2008, our
board members and executive officers owned an aggregate of 2,748,974 common shares. None of the officers or directors individually own more than 1% of the outstanding common shares. As of December 31, 2008, none of our directors or executive
officers owned any options to purchase shares of our common stock.

See Item 6B. CompensationStock Option Plan for a
description of our stock option plan applicable to our management and employees, including those of our subsidiaries.



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|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|7A. | Major Shareholders
|--- | ------------------

Shareholders

We have total authorized capital of 1,000,000,000 shares, with a total aggregate of 740,465,044 common shares, including one special golden
share held by the Brazilian federal government, issued and outstanding as of March 31, 2009. The golden share provides the Brazilian federal government with veto rights in certain specific circumstances. In addition, non-Brazilian
shareholders may have their voting rights restricted in certain specific circumstances. See Item 10B. Memorandum and Articles of AssociationVoting Rights of Shares.

The following table sets forth share ownership information for each significant shareholder that beneficially owns our equity securities and sets forth
the aggregate shareholdings on the São Paulo Stock Exchange and the New York Stock Exchange at March 31, 2009.



|                                               |  |               |  |       
|---------------------------------------------- |  | ------------- |  | ------
|                                               |  | Common Shares
|                                               |  | Shares        |  | (%)   
|PREVI (1)                                      |  | 103,082,901   |  | 13.92 
|Bozano Group (2)                               |  | 75,133,589    |  | 10.15 
|Janus Capital Management (3)                   |  | 46,571,080    |  | 6.29  
|Oppenheimer Funds (4)                          |  | 41,964,436    |  | 5.67  
|Thornburg Investment Management (5)            |  | 37,726,280    |  | 5.09  
|BNDESPAR (6)                                   |  | 37,412,579    |  | 5.05  
|Barclays Plc (7)                               |  | 37,107,858    |  | 5.01  
|União Federal/Brazilian Federal Government (8) |  | 2,349,911     |  | 0.32  
|Shares in company treasury                     |  | 16,800,000    |  | 2.27  
|Officers and directors as a group              |  | 2,196,324     |  | 0.30  
|Others (São Paulo Stock Exchange)              |  | 144,889,272   |  | 19.56 
|Others (NYSE)                                  |  | 195,230,814   |  | 26.37 
|                                               |  |               |  |       
|Total                                          |  | 740,465,044   |  | 100.00
|                                               |  |               |  |       



|(1) | Banco do Brasil Employee Pension Fund, also known as PREVI, was founded in 1904 as a pension fund for the employees of Banco do Brasil S.A., which is controlled by the Brazilian
government.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Shares belonging to the Bozano Group belong to both Cia. Bozano and Bozano Holdings Ltd., which are owned and controlled by Julio Bozano. 18,786,088 of the shares owned by Cia.
Bozano have been pledged in favor of Banco Santander Central Hispano, S.A. in connection with its acquisition from Cia. Bozano of substantially all of the capital stock of Banco Meridional S.A.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Janus Capital Management is a public company headquartered in Denver, CO, US. It pursues growth and risk-managed investment strategies. As of December 31, 2007, Janus managed
$206.7 billion in assets for more than four million shareholders, clients and institutions around the globe. Outside the U.S., Janus has offices in London, Milan, Tokyo, Hong Kong, Melbourne and Singapore. Janus Capital Group consists of Janus
Capital Management LLC, Enhanced Investment Technologies, LLC (INTECH) and Capital Group Partners, Inc. (doing business as Rapid Solutions Group). In addition, Janus Capital Group owns 30% of Perkins, Wolf, McDonnell and Company, LLC.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Oppenheimer Funds, Inc. has been helping investors achieve their financial goals since 1960. Oppenheimer Funds is one of the U.S.s largest asset management companies, and its
controlled affiliates offer a broad range of products and services to individuals, corporations and institutions, including mutual funds, separately managed accounts, investment management for institutions, hedge fund products, qualified retirement
plans and subadvisory investment-management services.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Thornburg Investment Management is an employee-owned investment management company based in Santa Fe, New Mexico with assets under management of over $31 billion (as of
March 31, 2009). The firm manages six equity funds, nine bond funds and separate portfolios for select institutions and individuals.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | BNDESPAR is a wholly owned subsidiary of Banco Nacional de Desenvolvimento Econômico e SocialBNDES, the government-owned national development bank of Brazil.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Barclays is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management
services with an extensive international presence in Europe, the Americas, Africa and Asia.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | The Brazilian federal government also holds the golden share.
|--- | ---------------------------------------------------------------



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Other than as discussed in Item 4. Information on the CompanyHistory and Development of the
Company, there have been no significant changes in percentage ownership by any major shareholder in the past three years.

On
March 31, 2009, we had 31,910 holders of common shares, including common shares in form of ADSs. On March 31, 2009, an aggregate of 358,600,468 common shares, including common shares in form of ADSs, were held by 166 record holders,
including DTC in the United States.



|7B. | Related Party Transactions
|--- | --------------------------

Overview: Brazilian Federal
Government

The Brazilian federal government, through its direct and indirect stakes in us and its ownership of our golden
share, is one of our major shareholders. As of March 31, 2009, the Brazilian federal government owned a direct 0.32% of our capital stock, including our golden share. In addition, as of that date, the Brazilian federal government owned an
indirect 5.05% stake in us through the BNDESPAR, a wholly-owned subsidiary of the Banco Nacional do Desenvolvimento Econômico e Social (the Brazilian Development Bank), which, in turn, is controlled by the Brazilian federal government. As a
result, transactions between Embraer and the Brazilian federal government or its agencies come within the definition of related party transactions.

The Brazilian government plays a key role in our business activities, including as:



| |  |  | a major customer of our defense products (through the Brazilian Air Force);
| | - |  | ---------------------------------------------------------------------------



| |  |  | a source for research and development debt financing through technology development institutions such as the FINEP and the BNDES;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | an export credit agency (through the BNDES); and
| | - |  | ------------------------------------------------



| |  |  | a source of short-term and long-term financing and a provider of money management and commercial banking services (through Banco do Brasil).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

See Item 5B. Liquidity and Capital ResourcesCredit Facilities and Lines of Credit, Item 4B.
Business OverviewAircraft Financing Arrangements and Item 3D. Risk FactorsRisks Relating to EmbraerAny decrease in Brazilian government sponsored customer financing, or increase in government sponsored financing that
benefits our competitor, may decrease the cost competitiveness of our aircraft and Risks Relating to EmbraerBrazilian government budgetary constraints could reduce amounts available to our customers under government sponsored
financing programs. For more information regarding our related party transactions, see Note 31 to our audited consolidated financial statements.

Significant Customer: Brazilian Air Force

The Brazilian government, principally through the Brazilian Air Force, has
been a significant customer of Embraer since its inception. For the year ended December 31, 2008, the Brazilian government accounted for 3.4%, or R$214.1 million, of our total net sales. In addition, as of December 31, 2008, the Brazilian
Air Force owed us R$95.4 million in trade account receivables and had a credit against us of R$43.8 million in customer advances. We expect to continue to be the primary source of new aircraft and spare parts and services for the Brazilian
government. For a description of our transactions with the Brazilian government, see Item 4B. Business OverviewDefense and Government Business.

Financing Source

BNDES

We are borrowers under a number of credit facilities extended to us by the BNDES, the sole parent of BNDESPAR, one of our significant direct shareholders and an affiliate of the Brazilian federal government. As of December 31, 2008, we
had a total outstanding balance of loans borrowed from the BNDES in the aggregate amount of US$558.4 million. In 2008, we paid US$40.4 million in interest expenses to the BNDES. For further information on the amounts, maturity dates and interest
rates of the principal loans we have with the BNDES, see Item 5B. Liquidity and Capital ResourcesCredit Facilities and Lines of Credit.



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FINEP

We maintain credit facilities with the FINEP, which as of December 31, 2008 had total outstanding balance of US$59.7 million at December 31, 2008. These loans were extended to us primarily to fund development costs of the Phenom
100 and Phenom 300 aircraft. For further information on the amounts, maturity dates and interest rates of the principal loans we have with the FINEP, see Item 5B. Liquidity and Capital ResourcesCredit Facilities and Lines of
Credit.

Banco do Brasil

Banco do Brasil is a publicly-listed, state-owned bank controlled by the Brazilian federal
government. As of December 31, 2008, we maintained outstanding short-term and long-term credit facilities with Banco do Brasil and its affiliates in the total amount of US$241.2 million. In addition, as of December 31, 2008 we had
non-recourse and recourse debt with Banco do Brasil in the total amount of US$286.7 million, which is recorded as a non-current liability in our balance sheet. For further information on the amounts, maturity dates and interest rates of the
principal loans we have with Banco do Brasil, see Item 5C. Liquidity and Capital ResourcesCredit Facilities and Lines of Credit.

Customer Financing by BNDES

The Brazilian government has been an important source of export financing for our customers
through the BNDES-exim program, administered by the BNDES. Beginning in the second half of 2007, the BNDES started providing financing to our customers on financial terms and conditions which complied with the OECD agreement (see Item
4B. Business OverviewAircraft Financing Arrangements).

Service Provider: Banco do Brasil

At December 31, 2008, we maintained cash and cash equivalents of US$252.9 with Banco do Brasil and several of its affiliates. At that date, we also
had deposited with Banco do Brasil an amount of US$185.4 million in cash and cash equivalents, which served as collateral for a loan extended by Banco do Brasil to one of our subsidiaries. Banco do Brasil has been a provider of regular commercial
banking and asset management services to us for many decades. These services include maintaining our checking account and managing exclusive investment funds in which we are the sole investor.



|7C. | Interests of Experts and Counsel
|--- | --------------------------------

Not applicable.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|8A. | Consolidated Statements and Other Financial Information
|--- | -------------------------------------------------------

See Item 3A. Selected Financial Data.

Legal Proceedings

We are defendants in individual labor lawsuits, for which we are awaiting the decision of the Brazilian labor courts. We do not believe that any
liabilities related to these individual lawsuits would have a material adverse effect on our financial condition or results of operations.



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We have challenged the constitutionality of certain Brazilian taxes and payroll charges, as well as
modifications and the increases in the rates and basis of calculation of such taxes and charges and have obtained writs of mandamus or injunctions to avoid their payments or recover past payments.

Interest on the total amount of unpaid taxes and payroll charges accrues monthly based on the Selic rate, the key lending rate of the Central Bank, and
we make an accrual to the interest income (expenses), net item of our statements of income. As of December 31, 2008, we had obtained preliminary injunctions permitting us not to pay certain taxes in the total amount, including interest.
Nevertheless, we have recorded a US$332.1 million provision as a liability (taxes and payroll charges) on our balance sheet in connection with litigation contingencies that we view as representing probable losses to us. See Item 3D. Risk
FactorsRisks Relating to EmbraerWe may have to make significant payments as a result of unfavorable outcomes of pending challenges to various taxes and payroll charges and Note 17 to our audited consolidated financial statements
for a further discussion of these challenges.

In addition, we are involved in other legal proceedings, including tax disputes, all of
which are in the ordinary course of business.

Our management does not believe that any of our proceedings, if adversely determined, would
materially or adversely affect our business, financial condition or results of operations. See Note 17 to our audited consolidated financial statements for a further discussion of our legal proceedings.

Dividends and Dividend Policy

Amounts Available for
Distribution

At each annual shareholders meeting, the Board of Directors is required to recommend how net profits for the
preceding fiscal year are to be allocated. For purposes of the Brazilian Corporate Law, net profits are defined as net income after income taxes and social contribution taxes for such fiscal year, net of any accumulated losses from prior fiscal
years and any amounts allocated to employees and managements participation in our profits, determined under Brazilian GAAP. In accordance with the Brazilian Corporate Law and our bylaws, the amounts available for dividend distribution
are the amounts determined under Brazilian GAAP equal to our net profits less any amounts allocated from such net profits to:



| |  |  | the legal reserve;
| | - |  | ------------------



| |  |  | a contingency reserve for anticipated losses; and
| | - |  | -------------------------------------------------



| |  |  | an unrealized revenue reserve.
| | - |  | ------------------------------

We
are required to maintain a legal reserve, to which we must allocate 5% of net profits for each fiscal year until the amount for such reserve equals 20% of our paid-in capital. However, we are not required to make any allocations to our legal reserve
in respect of any fiscal year in which it, when added to our other established capital reserves, exceeds 30% of our capital. Net losses, if any, may be charged against the legal reserve. The balance of our legal reserve was US$80.4 million, which
was equal to 5.6% of our paid-in capital at December 31, 2008.

The Brazilian Corporate Law also provides for two additional,
discretionary allocations of net profits that are subject to approval by the shareholders at the annual meeting. First, a percentage of net profits may be allocated to a contingency reserve for anticipated losses that are deemed probable in future
years. Any amount so allocated in a prior year must be either reversed in the fiscal year in which the loss was anticipated if such loss does not in fact occur, or written off in the event that the anticipated loss occurs. Second, if the amount of
unrealized revenue exceeds the sum of:



| |  |  | the legal reserve;
| | - |  | ------------------



| |  |  | the investment and working capital reserve;
| | - |  | -------------------------------------------



| |  |  | retained earnings; and
| | - |  | ----------------------



| |  |  | the contingency reserve for anticipated losses,
| | - |  | -----------------------------------------------



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Such excess amount may be allocated to an unrealized revenue reserve. Under the Brazilian Corporate Law,
unrealized revenue is defined as the sum of:



| |  |  | price-level restatement of balance sheet accounts;
| | - |  | --------------------------------------------------



| |  |  | the share of equity earnings of affiliated companies; and
| | - |  | ---------------------------------------------------------



| |  |  | profits from installment sales to be received after the end of the next succeeding fiscal year.
| | - |  | -----------------------------------------------------------------------------------------------

According to our bylaws and subject to shareholder approval, our Board of Directors may allocate up to 75% of our adjusted net income to an investment
and working capital reserve. The reserve may not exceed 80% of our capital. The purpose of the investment and working capital reserve is to make investments in fixed assets or increase our working capital. This reserve may also be used to amortize
our debts. We may also grant a participation in our net income to our management and employees. However, the allocation to the investment and working capital reserve or the participation of our management and employees cannot reduce the mandatory
distributable amount (discussed below). Otherwise, the amount in excess of our capital must be used to increase our capital or be distributed as a cash dividend. The balance of the investment and working capital reserve may be used:



| |  |  | in the deduction of accumulated losses, whenever necessary;
| | - |  | -----------------------------------------------------------



| |  |  | in the distribution of dividends, at any time;
| | - |  | ----------------------------------------------



| |  |  | in the redemption, withdrawal, purchase or open market repurchase of shares, as authorized by law; and
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | to increase our capital, including by means of an issuance of new shares.
| | - |  | -------------------------------------------------------------------------

The amounts available for distribution may be further increased by a reversion of the contingency reserve for anticipated losses constituted in prior
years but not realized, or further increased or reduced as a result of the allocations of revenues to or from the unrealized revenue reserve. The amounts available for distribution are determined on the basis of financial statements prepared in
accordance with the Brazilian Corporate Law method. We have no such contingency reserve.

At December 31, 2008, unappropriated
retained earnings of R$1,173.3 million were recorded in the statutory books. At December 31, 2008, such amounts were net of dividends payable and interest on shareholders equity payable in the amount of US$243.0 million, which had been
approved by the Board of Directors but, as they were still subject to approval and declaration by the shareholders, no liability or reduction in shareholders equity was recorded for U.S. GAAP purposes.

Mandatory Distribution

The Brazilian
Corporate Law generally requires that the bylaws of each Brazilian corporation specify a minimum percentage of the amounts available for distribution by such corporation for each fiscal year that must be distributed to shareholders as dividends,
also known as the mandatory distributable amount. Under our bylaws, the mandatory distribution is based on a percentage of adjusted net income, not lower than 25%, rather than a fixed monetary amount per share. The Brazilian Corporate Law, however,
permits a publicly held company, such as Embraer, to suspend the mandatory distribution of dividends if the Board of Directors and the audit committee report to the shareholders meeting that the distribution would be inadvisable in view of the
companys financial condition. This suspension is subject to approval of holders of common shares. In this case, the Board of Directors shall file a justification for such suspension with the CVM. Profits not distributed by virtue of the
suspension mentioned above shall be attributed to a special reserve and, if not absorbed by subsequent losses, shall be paid as dividends as soon as the financial condition of such company permits such payments.

Payment of Dividends

We are required by the
Brazilian Corporate Law and by our bylaws to hold an annual shareholders meeting by the end of the fourth month after the end of each fiscal year at which, among other things, the shareholders have to decide on the payment of an



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annual dividend. The payment of annual dividends is based on the financial statements prepared for the relevant fiscal year. Under the Brazilian Corporate
Law, dividends generally are required to be paid within 60 days following the date the dividend was declared, unless a shareholders resolution sets forth another date of payment, which, in either case, must occur prior to the end of the fiscal
year in which the dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends (or interest payments) in respect of its shares, after which the amount of the unclaimed dividends reverts to us.

The Brazilian Corporate Law permits a company to pay interim dividends out of preexisting and accumulated profits determined under
Brazilian GAAP for the preceding fiscal year or semester, based on financial statements approved by its shareholders. According to our bylaws, the shareholders may declare, at any time, interim dividends based on the preexisting and accumulated
profits, provided the mandatory dividend has already been distributed to the shareholders. Our bylaws also permit us to prepare financial statements semiannually and for shorter periods. Our Board of Directors may approve the distribution of
dividends calculated with reference to those financial statements, even before they have been approved by the shareholders. However, such dividends cannot exceed the amount of capital reserves.

In general, shareholders who are not residents of Brazil must register with the Central Bank to have dividends, sales proceeds or other amounts with
respect to their shares eligible to be remitted outside of Brazil. The common shares underlying our ADSs will be held in Brazil by Banco Itaú S.A., also known as the custodian, as agent for the depositary, which will be the registered owner
on the records of the registrar for our shares. Our current registrar is Banco Itaú S.A. The depositary electronically registers the common shares underlying our ADSs with the Central Bank and, therefore, is able to have dividends, sales
proceeds or other amounts with respect to these shares eligible to be remitted outside Brazil.

Payments of cash dividends and
distributions, if any, will be made in Brazilian currency to the custodian on behalf of the depositary, which will then convert such proceeds into U.S. dollars and will cause such U.S. dollars to be delivered to the depositary for distribution to
holders of ADSs. Under current Brazilian law, dividends paid to shareholders who are not Brazilian residents, including holders of ADSs, will not be subject to Brazilian withholding income tax, except for dividends declared based on profits
generated prior to December 31, 1995. See Item 10E. TaxationMaterial Brazilian Tax Consequences.

History of Dividend Payments
and Dividend Policy and Additional Payments on Shareholders Equity

We did not pay dividends from 1988 through 1997 because we
did not have net profits for any year during that period. On January 16, 1998, we reduced our capital in order to offset our accumulated deficit. As a result, we were then able to distribute profits achieved in 1998.

Law No. 9,249, dated December 26, 1995, as amended, provides for distribution of interest on shareholders equity as an alternative form
of payment to shareholders and treat those payments as a deductible expense for purposes of calculating Brazilian corporate income tax and social contribution on net profits. These distributions may be paid in cash. Such interest is limited to the
daily pro rata variation of the TJLP and cannot exceed the greater of:



| |  |  | 50% of net income (after the deduction of social contribution on net profits, but before taking into account the provision for corporate income tax and the amounts
attributable to shareholders as net interest on shareholders equity) for the period in respect of which the payment is made; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 50% of the sum of retained profits and profit reserves as of the beginning of the period in respect of which the payment is made.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

Any payment of interest on shareholders equity to holders of ADSs or common shares, whether or not they are Brazilian residents, is subject to
Brazilian withholding income tax at the rate of 15% or 25% if the beneficiary is resident in a tax haven jurisdiction, that is, a country or location that does not impose any income tax or which imposes such tax at a maximum rate of less than 20%,
or in which the domestic legislation imposes restrictions on the disclosure of the shareholding composition or the ownership of the investment (Tax Haven Holder). See Item 10E. TaxationMaterial Brazilian Tax
Consequences. The amount paid to shareholders as interest on shareholders equity, net of any withholding tax, may be included as part of any mandatory distributable amount.



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Under Brazilian law, we are obligated to distribute to shareholders an amount sufficient to ensure that the net amount received by them, after payment by us
of applicable Brazilian withholding taxes in respect of the distribution of interest on shareholders equity, plus the amount of declared dividends, is at least equal to the mandatory distributable amount. When we distribute interest on net
worth, and that distribution is not accounted for as part of the mandatory distribution, Brazilian withholding tax will apply. All payments to date were accounted for as part of the mandatory distribution.

The following table sets forth the historical payments of dividends and historical payments of interest on shareholders equity we have made to our
shareholders.



|                         |  |                                        |  |                              |  |                     
|------------------------ |  | -------------------------------------- |  | ---------------------------- |  | --------------------
|Date of approval         |  | Period in which profits were generated |  | Total amount of Distribution
|                         |  |                                        |  | (in R$ millions)             |  | (in US$ millions)(3)
|September 18, 1998(1)    |  | First two quarters of 1998             |  | 21.3                         |  | 17.9                
|March 30, 1999(1)        |  | Remaining two quarters of 1998         |  | 33.9                         |  | 19.7                
|September 28, 1999(1)    |  | First two quarters of 1999             |  | 36.8                         |  | 19.1                
|January 31, 2000(1)      |  | Remaining two quarters of 1999         |  | 86.7                         |  | 48.1                
|March 24, 2000(2)        |  | First quarter of 2000                  |  | 19.6                         |  | 11.2                
|June 16, 2000(2)         |  | Second quarter of 2000                 |  | 19.9                         |  | 11.0                
|July 6, 2000(1)          |  | First two quarters of 2000             |  | 79.6                         |  | 44.8                
|September 22, 2000(2)    |  | Third quarter of 2000                  |  | 27.7                         |  | 15.0                
|December 15, 2000(2)     |  | Fourth quarter of 2000                 |  | 33.5                         |  | 17.1                
|March 16, 2001(1)        |  | Remaining two quarters of 2000         |  | 107.5                        |  | 49.7                
|March 16, 2001(2)        |  | First quarter of 2001                  |  | 33.8                         |  | 15.7                
|June 13, 2001(2)         |  | Second quarter of 2001                 |  | 41.4                         |  | 18.0                
|September 14, 2001(1)    |  | First two quarters of 2001             |  | 123.1                        |  | 46.1                
|September 14, 2001(2)    |  | Third quarter of 2001                  |  | 48.4                         |  | 18.1                
|December 15, 2001(2)     |  | Fourth quarter of 2001                 |  | 57.1                         |  | 24.6                
|March 19, 2002(1)        |  | Remaining two quarters of 2001         |  | 100.0                        |  | 43.0                
|March 19, 2002(2)        |  | First quarter of 2002                  |  | 58.9                         |  | 25.4                
|June 14, 2002(2)         |  | Second quarter of 2002                 |  | 59.5                         |  | 20.9                
|September 13, 2002(2)    |  | Third quarter of 2002                  |  | 66.3                         |  | 17.0                
|December 13, 2002(2)     |  | Fourth quarter of 2002                 |  | 70.0                         |  | 19.8                
|December 13, 2002(2)     |  | 1998 and 1999                          |  | 72.5                         |  | 20.5                
|June 16, 2003(2)         |  | First two quarters of 2003             |  | 76.7                         |  | 26.7                
|December 12, 2003(2)     |  | Remaining two quarters of 2003         |  | 118.5                        |  | 41.0                
|March 12, 2004(2)        |  | First quarter of 2004                  |  | 101.0                        |  | 34.7                
|June 25, 2004(2)         |  | Second quarter of 2004                 |  | 160.0                        |  | 51.5                
|September 20, 2004(2)    |  | Third quarter of 2004                  |  | 160.0                        |  | 55.9                
|December 17, 2004(2)     |  | Fourth quarter of 2004                 |  | 164.1                        |  | 61.8                
|March 11, 2005(2)        |  | First quarter of 2005                  |  | 106.5                        |  | 39.9                
|June 3, 2005(2)          |  | Second quarter of 2005                 |  | 110.8                        |  | 47.1                
|September 16, 2005(2)    |  | Third quarter of 2005                  |  | 113.5                        |  | 51.0                
|December 19, 2005(2)     |  | Fourth quarter of 2005                 |  | 112.9                        |  | 48.2                
|June 12, 2006(2)         |  | First two quarters of 2006             |  | 114.4                        |  | 52.9                
|June 12, 2006(1)         |  | First two quarters of 2006             |  | 35.6                         |  | 16.4                
|September 15, 2006(2)    |  | Third quarter of 2006                  |  | 92.3                         |  | 42.5                
|December 8, 2006(2)      |  | Fourth quarter of 2006                 |  | 85.0                         |  | 39.8                
|March 9, 2007(2)         |  | First quarter of 2007                  |  | 43.4                         |  | 21.2                
|June 11, 2007(2)         |  | Second quarter of 2007                 |  | 50.0                         |  | 26.0                
|September 14, 2007(2)    |  | Third quarter of 2007                  |  | 149.6                        |  | 81.4                
|December 7, 2007(2)(4)   |  | Fourth quarter of 2007                 |  | 82.8                         |  | 46.7                
|March 7, 2008(1)(4)      |  | Full year of 2007                      |  | 123.0                        |  | 69.4                
|March 7, 2008(2)(4)      |  | First quarter of 2008                  |  | 65.9                         |  | 37.7                
|June 13, 2008(2)(4)      |  | Second quarter of 2008                 |  | 65.4                         |  | 40.7                
|September 12, 2008(2)(4) |  | Third quarter of 2008                  |  | 92.9                         |  | 48.5                



|(1) | Represents dividend payments.
|--- | -----------------------------



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|(2) | Represents interest on shareholders equity.
|--- | --------------------------------------------

|(3) | Translated from nominal reais into U.S. dollars at the commercial selling rates in effect on the last date of the month in which the dividends were approved.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Under U.S. GAAP dividends are only declared when approved by the shareholders. Our shareholders approved the payment of these dividends and interest on shareholders equity on
April 14, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

No payment of dividends or interest on shareholders equity in connection with the fourth quarter
of 2008 and first quarter of 2009 has been proposed by our Board of Directors or demanded by our shareholders at the annual shareholders meeting held on April 29, 2009.

We intend to declare and pay dividends and/or interest on shareholders equity, as required by the Brazilian Corporate Law and our bylaws. Our Board
of Directors may approve the distribution of dividends and/or interest on shareholders equity, calculated based on our semiannual or quarterly financial statements. The declaration of annual dividends, including dividends in excess of the
mandatory distribution, requires approval by the vote of the majority of the holders of our common stock. The amount of any distributions will depend on many factors, such as our results of operations, financial condition, cash requirements,
prospects and other factors deemed relevant by our Board of Directors and shareholders. Within the context of our tax planning, we may in the future continue to determine that it is to our benefit to distribute interest on shareholders equity.



|8B. | Significant Changes
|--- | -------------------

No significant changes or
events have occurred after the close of the balance sheet date at December 31, 2008, other than the events already described in this annual report.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|9A. | Offer and Listing Details
|--- | -------------------------

Our ADSs are listed on
the New York Stock Exchange, or NYSE, under the symbol ERJ. In addition, our common shares are traded on the São Paulo Stock Exchange under the symbol EMBR3. Each ADS represents four common shares.

The reported high and low closing prices in U.S. dollars for the ADSs on the NYSE for the periods indicated are set forth in the following table. Trading
prices for the ADSs until June 2, 2006 are for the former Embraer ADSs, each of which represented four preferred shares of former Embraer. Our ADSs began trading on the NYSE on June 5, 2006, with each ADS representing four common shares
issued by us.



|               |  |                              |  |      
|-------------- |  | ---------------------------- |  | -----
|               |  | Price in U.S. dollarsper ADS
|               |  | High                         |  | Low  
|2004:          |  |                              |  |      
|Year-end       |  | 36.81                        |  | 23.28
|2005:          |  |                              |  |      
|Year-end       |  | 41.78                        |  | 28.71
|2006:          |  |                              |  |      
|Year-end       |  | 43.50                        |  | 31.99
|2007           |  |                              |  |      
|First quarter  |  | 46.23                        |  | 39.01
|Second quarter |  | 51.43                        |  | 45.85
|Third quarter  |  | 51.18                        |  | 40.32
|Fourth quarter |  | 50.31                        |  | 42.76
|Year-end       |  | 51.43                        |  | 39.01
|2008           |  |                              |  |      
|First quarter  |  | 48.01                        |  | 39.27
|Second quarter |  | 43.95                        |  | 26.50
|Third quarter  |  | 34.65                        |  | 24.42
|Fourth quarter |  | 26.62                        |  | 12.30
|Year-end       |  | 48.01                        |  | 12.30



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|                  |  |                              |  |      
|----------------- |  | ---------------------------- |  | -----
|                  |  | Price in U.S. dollarsper ADS
|                  |  | High                         |  | Low  
|Month ended:      |  |                              |  |      
|October 31, 2008  |  | 26.62                        |  | 15.71
|November 30, 2008 |  | 21.65                        |  | 12.30
|December 31, 2008 |  | 17.24                        |  | 14.40
|January 31, 2009  |  | 19.09                        |  | 15.07
|February 28, 2009 |  | 16.64                        |  | 10.81
|March 31, 2009    |  | 14.67                        |  | 9.75 

The table below sets forth, for the periods indicated, the reported high and low closing sale
prices in nominal reais for the former Embraer preferred shares on the São Paulo Stock Exchange. The former Embraer preferred shares were cancelled on June 5, 2006, date on which the Embraer common shares began trading on the
São Paulo Stock Exchange:



|                                |  |                                |  |      
|------------------------------- |  | ------------------------------ |  | -----
|                                |  | Nominalreaisperpreferred share
|                                |  | High                           |  | Low  
|2002:                           |  |                                |  |      
|Year-end                        |  | 15.30                          |  | 11.20
|2003:                           |  |                                |  |      
|Year-end                        |  | 25.70                          |  | 8.10 
|2004:                           |  |                                |  |      
|First quarter                   |  | 26.43                          |  | 20.30
|Second quarter                  |  | 23.50                          |  | 18.30
|Third quarter                   |  | 22.20                          |  | 18.20
|Fourth quarter                  |  | 22.50                          |  | 17.10
|Year-end                        |  | 26.43                          |  | 17.10
|2005:                           |  |                                |  |      
|First quarter                   |  | 23.30                          |  | 19.80
|Second quarter                  |  | 20.75                          |  | 17.90
|Third quarter                   |  | 22.19                          |  | 18.50
|Fourth quarter                  |  | 23.73                          |  | 20.12
|Year-end                        |  | 23.73                          |  | 17.90
|2006:                           |  |                                |  |      
|First quarter                   |  | 23.68                          |  | 19.86
|Second quarter (through June 2) |  | 20.50                          |  | 18.55
|Month ended:                    |  |                                |  |      
|January 31, 2006                |  | 23.68                          |  | 21.55
|February 28, 2006               |  | 22.51                          |  | 19.90
|March 31, 2006                  |  | 21.86                          |  | 19.86
|April 30, 2006                  |  | 20.50                          |  | 19.20
|May 31, 2006                    |  | 20.17                          |  | 18.55
|June 30, 2006 (through June 2)  |  | 19.70                          |  | 19.55

The tables below set forth, for the periods indicated, the reported high and low closing prices in
nominal reais for the common shares on the São Paulo Stock Exchange. Trading prices for the common shares until June 2, 2006 are for the former Embraer common shares. Our common shares began trading on the Novo Mercado
segment of the São Paulo Stock Exchange on June 5, 2006.



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|         |  |                             |  |      
|-------- |  | --------------------------- |  | -----
|         |  | Nominalreaispercommon share
|         |  | High                        |  | Low  
|2004:    |  |                             |  |      
|Year-end |  | 20.30                       |  | 12.31
|2005:    |  |                             |  |      
|Year-end |  | 18.50                       |  | 13.50
|2006:    |  |                             |  |      
|Year-end |  | 23.50                       |  | 17.41



|                  |  |                             |  |      
|----------------- |  | --------------------------- |  | -----
|                  |  | Nominalreaispercommon share
|                  |  | High                        |  | Low  
|2007:             |  |                             |  |      
|First quarter     |  | 24.00                       |  | 20.86
|Second quarter    |  | 24.60                       |  | 23.40
|Third quarter     |  | 23.90                       |  | 19.90
|Fourth quarter    |  | 22.74                       |  | 19.33
|Year-end          |  | 24.60                       |  | 19.33
|2008              |  |                             |  |      
|First quarter     |  | 21.03                       |  | 16.85
|Second quarter    |  | 18.50                       |  | 17.25
|Third quarter     |  | 14.45                       |  | 9.60 
|Fourth quarter    |  | 13.06                       |  | 7.85 
|Year-end          |  | 21.00                       |  | 7.85 
|Month ended:      |  |                             |  |      
|October 31, 2008  |  | 13.06                       |  | 8.97 
|November 30, 2008 |  | 11.21                       |  | 7.85 
|December 31, 2008 |  | 10.24                       |  | 8.75 
|January 31, 2009  |  | 10.45                       |  | 8.69 
|February 28, 2009 |  | 9.33                        |  | 6.59 
|March 31, 2009    |  | 8.12                        |  | 5.80 

On March 31, 2009, we had 28,974 holders, either directly or through ADSs, of common shares.
On March 31, 2009, an aggregate of 391,683,260 common shares were held, either directly or through ADSs, by 171 record holders, including DTC, in the United States.

On March 31, 2009, the closing sale price for our common shares on the São Paulo Stock Exchange was R$7.77 which is equivalent to US$13.42 per ADS. On the same date, the closing sale price for our ADSs on
the NYSE was US$13.27. The ADSs are issued under a deposit agreement and JPMorgan Chase Bank serves as depositary under that agreement.



|9B. | Plan of Distribution
|--- | --------------------

Not applicable.



|9C. | Markets
|--- | -------

Trading on the São Paulo Stock Exchange

In 2000, the São Paulo Stock Exchange was reorganized through the execution of memoranda of understanding by the Brazilian stock
exchanges. Under the memoranda, all securities are now traded only on the São Paulo Stock Exchange, with the exception of electronically traded public debt securities and privatization auctions, which are traded on the Rio de Janeiro Stock
Exchange.

The common shares are listed and traded on the Novo Mercado segment of the São Paulo Stock Exchange. Trades in our
common shares on the São Paulo Stock Exchange settle in three business days after the trade date. Delivery of and payment for shares is made through the facilities of the CBLCCompanhia Brasileira de Liquidação e
Custódia (clearinghouse for the São Paulo Stock Exchange), which maintains accounts for member brokerage firms.



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In order to better control volatility, the São Paulo Stock Exchange adopted a circuit
breaker system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of this stock exchange fall below the limit of 10% and 15%, respectively, in relation to the index registered in the
previous trading session.

The São Paulo Stock Exchange is less liquid than the NYSE and other major exchanges in the world. The
São Paulo Stock Exchange had an aggregate market capitalization of approximately R$1.4 trillion, equivalent to US$588 billion at December 31, 2008. In comparison, the NYSE had a market capitalization of approximately US$14.3 trillion at
the same date. Although any of the outstanding shares of a listed company may trade on the São Paulo Stock Exchange, in most cases less than one-half of the listed shares are actually available for trading by the public, the remainder being
held by small groups of controlling persons, by governmental entities or by one principal shareholder. At April 20, 2009, we accounted for approximately 0.41% of the market capitalization of all listed companies on the São Paulo Stock
Exchange.

There is also significantly greater concentration in the Brazilian securities markets than in the NYSE or other major exchanges.
During the one-year period ended December 31, 2008, the ten largest companies listed on the São Paulo Stock Exchange represented approximately 52% of the total market capitalization of all listed companies and the 10 largest companies
listed on the NYSE represented approximately 15% of the total market capitalization of all listed companies.

Trading on the São
Paulo Stock Exchange by non-residents of Brazil is subject to limitations under Brazilian foreign investment legislation.

Novo
MercadoCorporate Governance Practices

In 2000, the São Paulo Stock Exchange introduced three special listing
segments, known as Levels 1 and 2 of Differentiated Corporate Governance Practices and the Novo Mercado, aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on the São Paulo Stock
Exchange, by prompting such companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and
disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders rights and enhance the quality of information provided to shareholders.

To become a Level 1 (Nível 1) company, in addition to the obligations imposed by current Brazilian law, an issuer must agree to
(a) ensure that shares of the issuer representing 25% of its total capital are effectively available for trading, (b) adopt offering procedures that favor widespread ownership of shares whenever making a public offering, (c) comply
with minimum quarterly disclosure standards, (d) follow stricter disclosure policies, with regards to contracts with related parties, material contracts and transactions made by controlling shareholders, directors and officers involving
securities issued by the issuer, (e) submit any existing shareholders agreements and stock option plans to the São Paulo Stock Exchange, and (f) make a schedule of corporate events available to shareholders.

To become a Level 2 (Nível 2) company, in addition to the obligations imposed by current Brazilian law, an issuer must agree to
(a) comply with all of the listing requirements for Level 1 companies, (b) grant tag-along rights for all shareholders in connection with a transfer of control of the company, offering the same price paid per share for controlling block
common shares and 80% of the price paid per share of controlling block preferred shares, (c) grant voting rights to holders of preferred shares in connection with certain corporate restructurings and related party transactions, such as
(1) any transformation of the company into another corporate form, (2) any merger, consolidation or spin-off of the company, (3) approval of any transactions between the company and its controlling shareholder, including parties
related to the controlling shareholder, (4) approval of any valuation of assets to be delivered to the company in payment for shares issued in a capital increase, (5) appointment of an expert firm to ascertain the fair value of the company
in connection with any deregistration and delisting tender offer, and (6) any changes to these voting rights, (d) have a Board of Directors comprised of at least five members, of which 20% must be independent directors, with a term limited
to two years, (e) prepare annual financial statements in English, including cash flow statements, in accordance with international accounting



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standards, such as U.S. GAAP or International Financial Reporting Standards, (f) if it elects to delist from the Level 2 segment, hold a tender offer by
the companys controlling shareholder (the minimum price of the shares to be offered will be determined by an appraisal process), and (g) adhere exclusively to the rules of the São Paulo Stock Exchange Arbitration Chamber for
resolution of disputes between the company and its investors.

To be listed on the Novo Mercado, an issuer must meet all of the
requirements described above, in addition to (a) issuing only voting shares and (b) granting tag-along rights for all shareholders in connection with a transfer of control of the company, offering the same price paid per share for
controlling block common shares. Our shares are listed on the Novo Mercado segment.

Regulation of Brazilian Securities Markets

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over stock exchanges and the securities markets generally,
and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

Under the Brazilian Corporate Law, a corporation is either public (companhia aberta), like us, or closely held (companhia fechada). All public companies, including us, are registered with the CVM and are
subject to reporting requirements. Our shares are listed and traded on the Novo Mercado segment of the São Paulo Stock Exchange and may be traded privately subject to limitations.

We have the option to ask that trading in our securities on the São Paulo Stock Exchange be suspended in anticipation of a material announcement.
Trading may also be suspended on the initiative of the São Paulo Stock Exchange or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a material event or has provided
inadequate responses to the inquiries by the CVM or the São Paulo Stock Exchange.

Trading on the São Paulo Stock Exchange by
non-residents of Brazil is subject to limitations under Brazilian foreign investment and tax legislation. The Brazilian custodian for our common shares and the depositary for our ADSs have obtained an electronic certificate of registration from the
Central Bank to remit U.S. dollars abroad for payments of dividends, any other cash distributions, or upon the disposition of the shares and sales proceeds thereto. In the event that a holder of ADSs exchanges ADSs for common shares, the holder will
be entitled to continue to rely on the depositarys electronic certificate of registration for five business days after the exchange. Thereafter, the holder may not be able to obtain and remit U.S. dollars abroad upon the disposition of the
common shares, or distributions relating to the common shares, unless the holder obtains a new electronic certificate of registration or registers its investment in the common shares under Resolution No. 2,689.

Disclosure Requirements

Pursuant to CVM Rule
No. 358, of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information on the
trading and acquisition of securities issued by publicly held companies.

These requirements include provisions that:



| |  |  | establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders,
resolutions of the general meeting of shareholders and of management of the company, or any other facts related to the companys business (whether occurring within the company or otherwise somehow related thereto) that may influence the price
of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities underlying rights;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | specify examples of facts that are considered to be material, which include, among others, the execution of shareholders agreements providing for the transfer
of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the company, and any corporate restructuring undertaken among related companies;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | oblige the investor relations officer, controlling shareholders, other officers, directors, members of the audit committee and other advisory boards to disclose
material facts;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | require simultaneous disclosure of material facts to all markets in which the corporations securities are admitted for trading;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the
corporations shares, within one year;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | restrict the use of insider information.
| | - |  | ----------------------------------------



|9D. | Selling Shareholders
|--- | --------------------

Not applicable.



|9E. | Dilution
|--- | --------

Not applicable.



|9F. | Expenses of the Issue
|--- | ---------------------

Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



|10A. | Share Capital
|---- | -------------

Not applicable.



|10B. | Memorandum and Articles of Association
|---- | --------------------------------------

Set forth
below is certain information concerning our capital stock, and a brief summary of certain significant provisions of our bylaws, the Brazilian Corporate Law, the relevant rules and regulations of the CVM, and the relevant rules of the Novo
Mercado applicable to our capital stock. This description does not purport to be complete and is qualified by reference to our bylaws and to Brazilian law.

Corporate Purpose

We are a joint stock company with a principal place of business and jurisdiction in the city of
São José dos Campos, São Paulo, Brazil, governed mainly by our bylaws and the Brazilian Corporate Law. Our corporate purpose, as stated in our bylaws, is to (1) design, manufacture and market aircraft and aerospace
materials and their respective accessories, components and equipment in accordance with the highest technology and quality standards, (2) promote and carry out technical activities related to the production and maintenance of aerospace
materials, (3) contribute towards the education of technical personnel required for the aerospace industry and (4) conduct technological, industrial and commercial activities and services related to the aerospace industry.

Description of Capital Stock

General

As of March 31, 2009, our capital stock consisted of a total of 740,465,044 outstanding common shares, without par value, including 16,800,000 common
shares held in treasury and one special class of common share known as the golden share, held by



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the Brazilian federal government. Our bylaws authorize the Board of Directors to increase the capital stock up to 1,000,000,000 common shares without seeking
specific shareholder approval. All our outstanding shares are fully paid. Our shareholders must approve at a shareholders meeting any capital increase that exceeds the above-referenced authorized amounts. Our shareholders are not liable for
further capital calls. Their liability is limited to the amount of any portion of our capital which they have subscribed but not fully paid in.

Share Buyback

Pursuant to our bylaws, our Board of Directors approved on December 7, 2007 a share buyback
program for our common shares, in compliance with Instrução CVM No. 10/80, for the purpose of adding value to our shareholders through the management of our capital structure. We were authorized to buy back up to an aggregate of
16,800,000 common shares, representing approximately 2.3% of our outstanding capital, which totaled 740,465,044 common shares outstanding. The acquisition of the shares was made on the São Paulo Stock Exchange and the common shares bought
back will be kept in treasury form, and the treasury shares would not have any political or economic rights. The program was terminated on March 31, 2008 and no new share buyback programs were approved after that. A total of 16,800,000 shares
were purchased at an average price of R$19.06 per share. See Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Common Shares

Each common share entitles the holder thereof to one vote at our annual and special shareholders
meetings. Pursuant to our bylaws and the São Paulo Stock Exchange listing agreement in connection with the listing of our shares on the Novo Mercado, we cannot issue shares without voting rights or with restricted voting rights.

The Brazilian Corporate Law and our bylaws require that all our shareholders meetings be called by publication of a notice in the
Diário Oficial do Estado de São Paulo (official government publication of the State of São Paulo), and in a newspaper of general circulation in the city in which our principal place of business is located, currently the
ValeParaibano in São José dos Campos, at least 30 days prior to the meeting, and in another newspaper of general circulation in São Paulo, where the São Paulo Stock Exchange is located, currently the Valor
Econômico. The quorum to hold general meetings of our shareholders at first call is the presence of shareholders representing 35% of the common shares; at second call the meetings can be held with the presence of shareholders representing
25% of the common shares; and at third call the meeting can be held with the presence of any number of shareholders.

According to our
by-laws, in order to attend a shareholders meeting, a shareholder must show the ownership of the shares it intends to vote by showing an identification document and a proof of share ownership. Our shareholders may be represented at
shareholders meetings by (1) a proxy, issued within a one-year period prior to the meeting, (2) one of our directors or officers, (3) a lawyer or (4) a financial institution. Investment funds must be represented by their
administrator.

According to the Brazilian Corporate Law, the common shares are entitled to dividends in proportion to their share of the
amount available for distribution. See Item 8A. Consolidated Statements and Other Financial InformationDividends and Dividend Policy for a more complete description of payment of dividends on our shares. In addition, upon any
liquidation of the company, the common shares are entitled to return of capital in proportion to their share of our net worth.

According
to the Brazilian Corporate Law, neither our bylaws nor actions taken at a shareholders meeting may deprive a shareholder of the following rights:



| |  |  | the right to participate in the distribution of profits;
| | - |  | --------------------------------------------------------



| |  |  | the right to participate equally and proportionally in any remaining residual assets in the event of liquidation of the company;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



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| |  |  | preemptive rights in the event of issuance of shares, convertible debentures or warrants, except in some specific circumstances under Brazilian law described in
Item 10D. Exchange ControlsPreemptive Rights;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the right to supervise our management in accordance with Article 109 of the Brazilian Corporate Law; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the right to appraisal rights in the cases specified in the Brazilian Corporate Law, which are described in Item 10D. Exchange ControlsRedemption and
Right of Withdrawal.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Golden Share

The golden share is held by the Federative Republic of Brazil. For a discussion of the rights to which the golden share is entitled, see Voting Rights of SharesGolden Share.

Voting Rights of Shares

Each share of common
stock is generally empowered with one vote at general meetings of our shareholders. Pursuant to our bylaws and the São Paulo Stock Exchange listing agreement in connection with the listing of our shares on the Novo Mercado, we cannot
issue shares without voting rights or with restricted voting rights.

Limitations on the Voting Rights of Certain Holders of Common Shares

Our bylaws provide that, at any general meeting of our shareholders, no shareholder or group of shareholders, including brokers acting
on behalf of one or more holders of ADSs, may exercise votes representing more than 5% of the quantity of shares into which our capital stock is divided. Votes that exceed this 5% threshold will not be counted.

For purposes of our bylaws, two or more of our shareholders are considered to be a group of shareholders if:



| |  |  | they are parties in a voting agreement;
| | - |  | ---------------------------------------



| |  |  | one of them is, directly or indirectly, a controlling shareholder or controlling parent company of the other, or the others;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | they are companies directly or indirectly controlled by the same person/entity, or group of persons/entities, which may or may not be shareholders; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | they are companies, associations, foundations, cooperatives and trusts, investment funds or portfolios, universalities of rights or any other forms of organization
or undertaking (a) with the same administrators or managers, or further (b) whose administrators or managers are companies that are directly or indirectly controlled by the same person/entity, or group of persons/entities, which may or may
not be shareholders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the case of investment funds having a common administrator, only funds with policies of
investment and of exercise of voting rights at shareholders meetings that fall under the responsibility of the administrator on a discretionary basis will be considered to be a group of shareholders.

In addition, shareholders represented by the same proxy, administrator or representative on any account at any general meeting of our shareholders will
be considered to be a group of shareholders, except for holders of our ADSs when represented by the relevant depositary. All signatories to a shareholders agreement that addresses the exercise of voting rights will also be considered to be a
group of shareholders for purposes of the foregoing limitation.



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This limitation on the voting rights of certain holders of common shares is illustrated in the following
table:



|                                                        |  |                                                   
|------------------------------------------------------- |  | --------------------------------------------------
|Equity Interest of Shareholder or Group of Shareholders |  | Voting Rights as a Percentage of our Capital Stock
|1%                                                      |  | 1%                                                
|2%                                                      |  | 2%                                                
|3%                                                      |  | 3%                                                
|4%                                                      |  | 4%                                                
|5%                                                      |  | 5%                                                
|> 5%                                                    |  | 5%                                                

Limitation on the Voting Rights of Non-Brazilian Shareholders

In accordance with the edital (invitation to bid) issued by the Brazilian government in connection with the privatization of Embraer in 1994,
voting participation of non-Brazilian holders of Embraer common shares was limited to 40% of Embraer common shares.

Our bylaws provide
that, at any general meeting of our shareholders, non-Brazilian shareholders and groups of non-Brazilian shareholders may not exercise voting rights representing more than two-thirds of the total votes of all of the Brazilian shareholders present at
such meeting. The total number of votes that may be exercised by Brazilian shareholders and by non-Brazilian shareholders will be assessed after giving effect to the 5% voting limitation described in Limitation on the Rights of Certain
Holders of Common Shares above. Votes of non-Brazilian shareholders that exceed this two-thirds threshold will not be counted. If the total vote of non-Brazilian shareholders at any general meeting of our shareholders exceeds two-thirds of the
votes that may be exercised by the Brazilian shareholders present at such meeting, the number of votes of each non-Brazilian shareholder will be proportionately reduced so that the total vote of non-Brazilian shareholders does not exceed two-thirds
of the total votes that can be exercised by Brazilian shareholders present at such shareholders meeting.

The fraction of two-thirds
effectively limits the voting rights of non-Brazilian shareholders and groups of non-Brazilian shareholders to 40% of our total share capital. The objective of this limitation is to ensure that Brazilian shareholders constitute a majority of the
total votes cast at any general meeting of our shareholders. This limitation will effectively prevent our takeover by non-Brazilian shareholders and limit the ability of non-Brazilian shareholders to effect control over us.

For purposes of our bylaws, the following are considered to be Brazilian shareholders:



| |  |  | Brazilian individuals, whether native or naturalized, resident in Brazil or abroad;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | legal private entities organized under the laws of Brazil that have their administrative head offices in Brazil and (a) do not have a foreign controlling
parent company, unless the parent company meets the requirements of clause (b) of this item, and (b) are controlled, directly or indirectly, by one or more Brazilian individuals, whether native or naturalized, resident in Brazil or abroad;
and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | investment funds or clubs organized under the laws of Brazil that have their administrative head office in Brazil and whose managers and/or quotaholders holding the
majority of their quotas are persons/entities referred to above.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A Brazilian shareholder will be required to provide
evidence to us and the depositary for the book-entry registry that such shareholder satisfies the foregoing requirements and only after such evidence is given will such shareholder be included in the records of Brazilian shareholders.

For purposes of our bylaws, non-Brazilian shareholders are considered to be persons or legal entities, investment funds or clubs and any
other entities not comprised of Brazilian shareholders and that cannot evidence that they satisfy the requirements to be considered Brazilian shareholders.

A group of shareholders, as defined above, will be considered to be non-Brazilian whenever one or more of its members is a non-Brazilian shareholder.



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The effect of this limitation on the voting rights of non-Brazilian shareholders (i.e., their
participation) is illustrated in the following table, where the column Non-Brazilian Shareholder Participation indicates the maximum percentage of votes a non-Brazilian shareholder may cast:



|                                    |  |                                         |  |                                           
|----------------------------------- |  | --------------------------------------- |  | ------------------------------------------
|Brazilian Shareholder Participation |  | Non-Brazilian Shareholder Participation |  | Non-Brazilian Shareholder Participation(1)
|(% of capital stock)                |  | (% of capital stock)                    |  | (%)                                       
|90                                  |  | 10                                      |  | 10.00                                     
|80                                  |  | 20                                      |  | 20.00                                     
|70                                  |  | 30                                      |  | 30.00                                     
|60                                  |  | 40                                      |  | 40.00                                     
|59                                  |  | 41                                      |  | 39.33                                     
|50                                  |  | 50                                      |  | 33.33                                     
|40                                  |  | 60                                      |  | 26.67                                     
|30                                  |  | 70                                      |  | 20.00                                     
|20                                  |  | 80                                      |  | 13.33                                     
|10                                  |  | 90                                      |  | 6.67                                      



|(1) | Number of votes calculated based on two-thirds of the Brazilian shareholders votes.
|--- | ------------------------------------------------------------------------------------

The tables below illustrate, in different situations, the voting system that will apply at our shareholders meetings.

Example 1

All Brazilian shareholders
hold less than 5% and non-Brazilian shareholders hold a total of 40%, but without any individual holdings higher than 5%. This example shows a situation where the general restriction for non-Brazilian shareholders does not affect the voting ratio.



|                  |  |                   |  |                                              |  |                                                    |  |                 |     |  |                        
|----------------- |  | ----------------- |  | -------------------------------------------- |  | -------------------------------------------------- |  | --------------- | --- |  | -----------------------
|Shareholder       |  | % SharesAttending |  | Effective % ofVotes After 5%Vote Restriction |  | Effective % of VotesAfter Non-BrazilianRestriction |  | % of ValidVotes |     |  | Vote Ratio(Votes/Share)
|Brazilian A       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian B       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian C       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian D       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian E       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian F       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian G       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian H       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian I       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian J       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian K       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|Brazilian L       |  | 5                 |  | 5                                            |  | 5                                                  |  | 5               |     |  | 1.00                   
|                  |  |                   |  |                                              |  |                                                    |  |                 |     |  |                        
|Total Brazilians  |  | 60                |  | 60                                           |  | 60                                                 |  | 60              |     |  | 1.00                   
|Non-Brazilians(1) |  | 40                |  | 40                                           |  | 40                                                 |  | 40              | (2) |  | 1.00                   
|                  |  |                   |  |                                              |  |                                                    |  |                 |     |  |                        
|Total             |  | 100               |  | 100                                          |  | 100                                                |  | 100             |     |  | 1.00                   
|                  |  |                   |  |                                              |  |                                                    |  |                 |     |  |                        



|(1) | Assumes that no individual non-Brazilian shareholder holds more than 5% of our capital. If a non-Brazilian shareholder holds more than 5% of our capital, such shareholder will also
be subject to the 5% voting restriction on such holding.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Two-thirds of 60 (total votes of the Brazilian shareholders after application of the 5% voting restriction) equals 40 votes.
|--- | ----------------------------------------------------------------------------------------------------------------------------



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Example 2

One Brazilian shareholder holds more than 5% of our capital, the other Brazilian shareholders hold 5% and non-Brazilian shareholders hold a total of 50%, but without any individual holdings higher than 5%.



|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|----------------- |  | ----------------- |  | ------------------------------------------- |  | ------------------------------------------------- | --- |  | --------------- |  | -----------------------
|Shareholder       |  | % SharesAttending |  | Effective % ofVotesAfter 5% VoteRestriction |  | Effective % of VotesAfterNon-BrazilianRestriction |     |  | % of ValidVotes |  | Vote Ratio(Votes/Share)
|Brazilian A       |  | 20                |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 0.25                   
|Brazilian B       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|Brazilian C       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|Brazilian D       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|Brazilian E       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|Brazilian F       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|Brazilian G       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 8.57            |  | 1.00                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|Total Brazilians  |  | 50                |  | 35                                          |  | 35.0                                              |     |  | 59.99           |  | 1.00                   
|Non-Brazilians(1) |  | 50                |  | 50                                          |  | 23.3                                              | (2) |  | 40.00           |  | 0.47                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|Total             |  | 100               |  | 85                                          |  | 58.3                                              | (2) |  | 100.00          |  | 0.58                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        



|(1) | Assumes that no individual non-Brazilian shareholder holds more than 5% of our capital. If a non-Brazilian shareholder holds more than 5% of our capital, such shareholder will also
be subject to the 5% voting restriction on such holding.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Two-thirds of 35 (total votes of the Brazilian shareholders after application of the 5% voting restriction) equals 23 votes.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Example 3

No Brazilian shareholders
hold more than 5% of our capital, a non-Brazilian shareholder holds 30% and other non-Brazilian shareholders hold a total of 40%, but without any individual holdings higher than 5%.



|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|----------------- |  | ----------------- |  | ------------------------------------------- |  | ------------------------------------------------- | --- |  | --------------- |  | -----------------------
|Shareholder       |  | % SharesAttending |  | Effective % ofVotesAfter 5% VoteRestriction |  | Effective % of VotesAfterNon-BrazilianRestriction |     |  | % of ValidVotes |  | Vote Ratio(Votes/Share)
|Brazilian A       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|Brazilian B       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|Brazilian C       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|Brazilian D       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|Brazilian E       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|Brazilian F       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 10.0            |  | 1.00                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|Total Brazilians  |  | 30                |  | 30                                          |  | 30.0                                              |     |  | 60.0            |  | 1.00                   
|Non-Brazilians A  |  | 30                |  | 5                                           |  | 2.2                                               | (2) |  | 4.4             |  | 0.07                   
|Non-Brazilians(1) |  | 40                |  | 40                                          |  | 17.8                                              | (2) |  | 35.6            |  | 0.44                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        
|Total             |  | 100               |  | 75                                          |  | 50.0                                              |     |  | 100.0           |  | 0.50                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |  |                        



|(1) | Assumes that no individual non-Brazilian shareholder (except Non-Brazilian A) holds more than 5% of our capital. If a non-Brazilian shareholder holds more than 5% of our capital,
such shareholder will also be subject to the 5% voting restriction on such holding.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Two-thirds of 30 (total votes of the Brazilian shareholders after application of the 5% voting restriction) equals 20 votes, proportionally divided between Non-Brazilian A and the
other non-Brazilians.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Example 4

Two Brazilian shareholders holding more than 5% of our capital, three Brazilian shareholders holding 5% and non-Brazilian shareholders holding a total of 30%, but without individual holdings higher than 5%.



|                  |  |                   |  |                                             |  |                                                   |     |  |                 |   |  |                        
|----------------- |  | ----------------- |  | ------------------------------------------- |  | ------------------------------------------------- | --- |  | --------------- | - |  | -----------------------
|Shareholder       |  | % SharesAttending |  | Effective % ofVotesAfter 5% VoteRestriction |  | Effective % of VotesAfterNon-BrazilianRestriction |     |  | % of ValidVotes |   |  | Vote Ratio(Votes/Share)
|Brazilian A       |  | 30                |  | 5                                           |  | 5.0                                               |     |  | 12              |   |  | 0.17                   
|Brazilian B       |  | 25                |  | 5                                           |  | 5.0                                               |     |  | 12              |   |  | 0.20                   
|Brazilian C       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 12              |   |  | 1.00                   
|Brazilian D       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 12              |   |  | 1.00                   
|Brazilian E       |  | 5                 |  | 5                                           |  | 5.0                                               |     |  | 12              |   |  | 1.00                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |   |  |                        
|Total Brazilians  |  | 70                |  | 25                                          |  | 25.0                                              |     |  | 60              |   |  | 1.00                   
|Non-Brazilians(1) |  | 30                |  | 30                                          |  | 16.7                                              | (2) |  | 40              |   |  | 0.56                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |   |  |                        
|Total             |  | 100               |  | 55                                          |  | 41.7                                              |     |  | 100             | % |  | 0.42                   
|                  |  |                   |  |                                             |  |                                                   |     |  |                 |   |  |                        



|(1) | Assumes that no individual non-Brazilian shareholder (except Non-Brazilian A) holds more than 5% of our capital. If a non-Brazilian shareholder holds more than 5% of our capital,
such shareholder will also be subject to the 5% voting restriction on such holding.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Two-thirds of 25 (total votes of the Brazilian shareholders after application of the 5% voting restriction) equals 16.7 votes.
|--- | ------------------------------------------------------------------------------------------------------------------------------

Shareholders Agreement

In connection with the
merger of former Embraer with and into Embraer approved on March 31, 2006, Cia. Bozano, PREVI and SISTEL, the former controlling shareholders of former Embraer, terminated the shareholders agreement governing matters relating to their
equity ownership of former Embraer, and relinquished voting control over former Embraer in favor of all Embraer shareholders. As of the implementation of the merger, Cia. Bozano, PREVI and SISTEL no longer have the ability to control the outcome of
matters submitted to a vote of Embraer shareholders. Our bylaws prohibit any shareholder or group of shareholders from exercising voting control over us.

Golden Share

The golden share is held by the Federative Republic of Brazil. The golden share is entitled to the same voting
rights as the holders of common shares. In addition, the golden share entitles the holder thereof to veto rights over the following corporate actions:



| |  |  | change of our name and corporate purpose;
| | - |  | -----------------------------------------



| |  |  | amendment and/or application of our logo;
| | - |  | -----------------------------------------



| |  |  | creation and/or alteration of military programs (whether or not involving Brazil);
| | - |  | ----------------------------------------------------------------------------------



| |  |  | development of third party skills in technology for military programs;
| | - |  | -----------------------------------------------------------------------



| |  |  | discontinuance of the supply of spare parts and replacement parts for military aircraft;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | transfer of our control;
| | - |  | ------------------------



| |  |  | any amendments to the list of corporate actions over which the golden share carries veto rights, including the right of the Brazilian government to appoint one
member and alternate to our Board of Directors and the right of our employees to appoint two members and their respective alternates to our Board of Directors, and to the rights conferred to the golden share; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes to certain provisions of our bylaws pertaining to voting restrictions, rights of the golden share and the mandatory tender offer requirements applicable to
holders of 35% or more of our outstanding shares.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The matters listed above are subject to prior approval by our Board of Directors and the approval within
30 days of the Brazilian federal government, as holder of the golden share. Such matters are also subject to prior notice to the Brazilian Ministry of Finance. In the absence of the approval of the Brazilian government within the 30-day period, the
matter will be deemed to have been approved by our Board of Directors.

Disclosure of Significant Interest

Brazilian Requirements

Brazilian law and our
bylaws provide that all shareholders or groups of shareholders will be required to disclose, through notice to us and to the stock exchanges on which our securities are traded, the acquisition of shares that, together with those already held by
them, exceed 5% of our capital stock. A violation of this disclosure obligation could result in the suspension of rights, including voting rights, by a resolution of shareholders at a shareholders meeting.

Certain U.S. Legal Requirements

In addition,
the U.S. Exchange Act imposes reporting requirements on shareholders or groups of shareholders who acquire beneficial ownership (as such term is defined under Rule 13d-3 of the U.S. Exchange Act) of more than 5% of our common shares. In general,
such shareholders must file, within ten days after such acquisition, a report of beneficial ownership with the SEC containing the information prescribed by the regulations under the U.S. Exchange Act. This information is also required to be sent to
us and to each U.S. securities exchange on which our common shares are traded. Shareholders should consult with their own legal advisor regarding their reporting obligations under the U.S. Exchange Act.

Form and Transfer

As our shares are in registered
book-entry form, the transfer of shares is governed by the rules of Article 35 of the Brazilian Corporate Law. This Article provides that a transfer of shares is effected by an entry made by Banco Itaú S.A., also known as the registrar, in
its books, by debiting the share account of the transferor and crediting the share account of the transferee. Banco Itaú S.A. also performs all the services of safe-keeping and transfer of shares and related services for us.

Transfers of shares by a non-Brazilian shareholder are made in the same way and executed by that shareholders local agent on the shareholders
behalf except that if the original investment was registered with the Central Bank pursuant to Resolution No. 2,689, the foreign investor must also seek amendment, if necessary, through its local agent, of the electronic registration to reflect
the new ownership.

The São Paulo Stock Exchange operates as a central clearing system. A holder of our shares may choose, in its
discretion, to participate in this system and all shares elected to be put into this system will be deposited in the custody of the São Paulo Stock Exchange (through a Brazilian institution duly authorized to operate by the Central Bank and
having a clearing account with the São Paulo Stock Exchange). The fact that those shares are held in the custody of the São Paulo Stock Exchange will be reflected in our register of shareholders. Each participating shareholder will, in
turn, be registered in our register of beneficial shareholders maintained by the São Paulo Stock Exchange and will be treated in the same way as registered shareholders.

Board of Directors

Under the Brazilian Corporate Law, the members of a companys Board of
Directors must be shareholders of the company. There is no requirement as to the number of shares an individual must own in order to act as a member of the Board of Directors.

According to the Brazilian Corporate Law, our officers and directors are prohibited from voting on, or acting in, matters in which their interests
conflict with ours.

Our bylaws provide that the shareholders are responsible for determining the global remuneration of the members of our
management bodies. Our Board of Directors is responsible for dividing such remuneration among the members of management. There are no specific provisions regarding the directors power to vote on their compensation in the absence of an
independent quorum.



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With respect to the borrowing powers of the Board of Directors, the Board of Directors has the power to
authorize the borrowing of funds, either in the form of bonds, notes, commercial papers or other instruments of regular use in the market. Other financing arrangements, including bank loans, may be entered into by us upon the joint signatures of
(1) two executive officers, (2) one officer and one attorney-in-fact, or (3) two attorneys-in-fact.

There is no requirement
under the Brazilian Corporate Law or our bylaws that directors retire upon reaching a certain age. In addition, our bylaws do not provide for the re-election of directors at staggered intervals.

For a discussion of our Board of Directors, see Item 6A. Directors and Senior ManagementBoard of Directors and Item 6C. Board
Practices.

Election of Board of Directors

The election of members of our Board of Directors, absent a request to adopt a cumulative voting system, will be conducted under a system of slate voting whereby voting will be based on a slate of directors and no
voting will be allowed on individual candidates. According to our bylaws, the current members of the board at the time of the election will always be candidates as a slate for a new term of office. Our Board of Directors is appointed by our
shareholders for a two-year term, having three reserved seats as follows: (1) one to be appointed by the Brazilian government, as holder of the golden share and (2) two to be appointed by our employees. The remaining eight
directors are elected in accordance with the slate voting or cumulative voting rules contained in our bylaws. A person may participate in two or more different slates. Each shareholder may only vote on one slate and the slate that receives the
highest number of votes shall be declared elected.

Any shareholder has a right to propose and submit other slates of members for election
to the Board of Directors, other than the slate of members provided according to our bylaws. Our bylaws also contain a provision whereby a shareholder that intends to appoint one or more members of the Board of Directors, other than the current
members of the Board of Directors, must notify the company in writing at least ten days prior to the general meeting at which the members of the Board of Directors will be elected, providing us with the name and resume of the candidate. In case we
receive such a notification, we must disclose receipt and the contents of such notification (1) immediately, electronically, to the CVM and the São Paulo Stock Exchange and (2) through a press release to our shareholders that must
also be available on our website, within at least eight days before the date of the general meeting.

Alternatively, the election of
members of the Board of Directors may be conducted under a system of cumulative voting. According to the regulations of the CVM and to our bylaws, adoption of a resolution for cumulative voting depends on a written request by shareholders
representing at least 5% of our capital stock, submitted at least 48 hours in advance of the time for which the general shareholders meeting has been called. Under the cumulative voting system, each share is entitled to the same number of
votes as the number of board members to be elected (subject to the restriction on shareholders holding greater than 5% of the common shares and restrictions on non-Brazilian shareholders), and each shareholder is entitled to concentrate votes in
just one member or to distribute the votes among more than one or all of the members. Any vacant offices not filled due to a tie in the voting will be subject to a new vote, under the same process.

Preemptive Rights

Each of our shareholders has a
general preemptive right to subscribe for shares in the event of any capital increase, or securities convertible into shares, in proportion to its shareholding, except in the event of the grant and exercise of any option to acquire shares of our
capital stock. A period of at least 30 days following the publication of notice of the issuance of shares or securities convertible into shares is allowed for exercise of the right, and the right is negotiable. According to the Brazilian Corporate
Law and our bylaws, the Board of Directors may, in its discretion, eliminate the preemptive rights of the shareholders in the event that we issue shares, debentures convertible into shares, or subscription warrants that will be offered either
through a stock exchange or in a public offering, or through an exchange of shares in a public offering, the purpose of which is to acquire control of another company, as established by law.



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In the event of a capital increase by means of the issuance of new shares, holders of ADSs, or of common
shares, would, except under the circumstances described above, have preemptive rights to subscribe to any class of our newly issued shares. However, a holder may not be able to exercise the preemptive rights relating to the common shares underlying
the ADSs unless a registration statement under the Securities Act is effective with respect to those shares to which the rights relate or an exemption from the registration requirements of the Securities Act is available. See Item 3D. Risk
FactorsRisks Relating to our Common Shares and ADSsHolders of our ADSs might be unable to exercise preemptive rights with respect to the common shares. We are not obligated to file such registration statement.

Redemption and Right of Withdrawal

According to our
bylaws, our common shares will not be redeemable.

The Brazilian Corporate Law provides that, under limited circumstances, a shareholder
has the right to withdraw his equity interest from the company and to receive payment for the portion of shareholders equity attributable to his equity interest. This right of withdrawal may be exercised by our dissenting shareholders in the
event that at least half of all voting shares outstanding authorize us to:



| |  |  | reduce the mandatory distribution of dividends;
| | - |  | -----------------------------------------------



| |  |  | change our corporate purpose;
| | - |  | -----------------------------



| |  |  | merge into or consolidate with another company, subject to the conditions set forth in the Brazilian Corporate Law;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | transfer all of our shares to another company or receive shares of another company in order to make the company whose shares were transferred a wholly owned
subsidiary of such other company, known as incorporação de ações;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquire control of another company at a price which exceeds the limits set forth in the Brazilian Corporate Law;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | participate in a centralized group of companies as defined under the Brazilian Corporate Law and subject to the conditions set forth therein; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | conduct a spin-off that results in (a) a change of our corporate purposes, except if the assets and liabilities of the spun-off company are contributed to a
company that is engaged in substantially the same activities, (b) a reduction in the mandatory dividend or (c) any participation in a centralized group of companies, as defined under the Brazilian Corporate Law.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, in the event that the entity resulting from a merger, incorporação de
ações, as described above, or a consolidation or a spin-off of a listed company fails to become a listed company within 120 days of the shareholders meeting at which such decision was taken, the dissenting shareholders may
also exercise their right of withdrawal.

The Brazilian Corporate Law contains provisions that restrict withdrawal rights and allow
companies to redeem their shares at their economic value, subject to certain requirements. As our bylaws currently do not provide that our shares would be redeemable at their economic value, our shares would be redeemable at their book value,
determined on the basis of the last balance sheet approved by the shareholders. If the shareholders meeting giving rise to withdrawal rights occurs more than 60 days after the date of the last approved balance sheet, a shareholder may demand
that its shares be valued on the basis of a new balance sheet that is as of a date within 60 days of such shareholders meeting.

According to the Brazilian Corporate Law, in events of consolidation, merger, incorporação de ações, participation in a group of companies, and acquisition of control of another company, the right to
withdraw does not apply if the shares in question meet certain tests relating to market liquidity and float. Shareholders would not be entitled to withdraw their shares if the shares are a component of a general stock index in Brazil or abroad and
shares held by persons unaffiliated with the controlling shareholder represent more than half of the outstanding shares of the relevant type or class.



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Mechanism to Promote Dispersed Ownership of Our Shares

Our bylaws contain provisions that have the effect of avoiding concentration of our shares in the hands of an investor or a small group of investors, in
order to promote more dispersed ownership of our shares. To this end, these provisions place certain obligations on a shareholder or group of shareholders that becomes a holder of 35% or more of our total capital stock, or an Acquiring Shareholder.
Not later than 15 days after a shareholder becomes an Acquiring Shareholder, such shareholder must submit a request to the Brazilian government, through the Ministry of Finance, to make a public tender offer to acquire all of our capital stock. The
Brazilian government will have full discretion to accept or deny this request. The Acquiring Shareholder may not purchase any additional shares until the Brazilian government provides its opinion on the public offer. If the request is accepted by
the Brazilian government, the Acquiring Shareholder must make a public offer for all shares within 60 days of acceptance. The offer must be made in accordance with the CVM and the São Paulo Stock Exchange regulations and the provisions of our
bylaws. If the request is denied by the Brazilian government, the Acquiring Shareholder must sell all shares such Acquiring Shareholder owns in excess of 35% of our total capital stock within 30 days. Failure to comply with these provisions will
subject the Acquiring Shareholder to the potential suspension of all voting rights inherent to the shares held by it, if a resolution to such effect is approved at a general meeting of our shareholders called by our management. These provisions are
not applicable to shareholders who become holders of 35% or more of our total capital stock in certain transactions specified in our bylaws as, for example, cancellation of our common shares held in treasury.

The public tender offer must be (1) directed to all of our shareholders, (2) made through an auction to take place on the São Paulo
Stock Exchange, (3) launched at a set price calculated in accordance with the procedure set forth below, (4) paid upfront, in Brazilian currency, (5) made so as to assure equal treatment to all shareholders, (6) irrevocable and
not subject to any changes after publication of the bidding offer, and (6) based on a valuation report to be prepared in accordance with the rules set forth in our bylaws and in applicable CVM rules and regulations.

The price to be offered for the shares in such public tender offer shall be calculated as follows:



| |  |  | Tender Offer Price = Value of the Share + Premium,
| | - |  | --------------------------------------------------

where:



| |  |  | Tender Offer Price corresponds to the acquisition price for each share issued by us in the public offering of shares provided hereunder.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Value of the Share corresponds to the greater of:
| | - |  | ---------------------------------------------------



| | (1) | the highest unit quotation obtained for the shares issued by us during the 12-month period prior to the tender offer among values recorded on any stock exchange on which the shares
were traded;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the highest price paid by the Acquiring Shareholder, during the 36-month period prior to the tender offer, for a share or tranche of shares issued by us;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | the amount equivalent to 14.5 times our Consolidated Average EBITDA, as defined below, reduced by our net consolidated indebtedness, divided by the total number of shares issued by
us; or
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | the amount equivalent to 0.6 times the amount of our firm backlog orders, according to the last information disclosed by the latter, reduced by our net consolidated indebtedness,
divided by the total number of shares issued by us.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Premium corresponds to 50% of the Value of the Share.
| | - |  | -------------------------------------------------------



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| |  |  | Consolidated EBITDA is our consolidated operating profit before net financial expenses, income tax and social contribution, depreciation, depletion and
amortization, as assessed based on the audited statements for our most recent complete fiscal year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Average Consolidated EBITDA is the arithmetic average of our consolidated EBITDA for the two most recent complete fiscal years.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

The launch of a public tender offer does not preclude us or any of our shareholders from launching a competing public
tender offer, in accordance with applicable regulations.

Arbitration

Any disputes or controversies relating to the listing rules of the Novo Mercado, our bylaws, the Brazilian Corporate Law, the rules published by the CMN, the Central Bank, the CVM, any shareholders
agreement filed at our headquarters, and other rules applicable to the Brazilian capital markets in general, must be submitted to arbitration conducted in accordance with the rules of the São Paulo Stock Exchange Arbitration Chamber.
According to Chapter 12 of such Rules, the parties may consensually agree to use another arbitration chamber or center to resolve their disputes. Any shareholder that becomes a holder of shares representing our control must agree to comply with the
rules of the São Paulo Stock Exchange Arbitration Chamber within 30 days of the acquisition of the shares. These provisions will not apply however, in the event of a dispute or controversy related to the member of the Board of Directors
elected by the Brazilian government or to a dispute or controversy deriving from the golden share.

Going Private Process

We may become a private company only if we or our controlling shareholders conduct a public tender offer to acquire all of our outstanding shares subject
to prior approval of the public offer by the Brazilian government, as holder of the golden share, and in accordance with the rules and regulations of the Brazilian Corporate Law and the CVM regulations and rules of the Novo Mercado, if
applicable. The minimum price offered for the shares in the public tender offer will correspond to the economic value of such shares, as determined by a valuation report issued by a specialized firm.

The valuation report must be prepared by a specialized and independent firm of recognized experience chosen by the shareholders representing the majority
of the outstanding shares (excluding, for such purposes, the shares held by the controlling shareholder, its partner and any dependents included in the income tax statement, should the controlling shareholders be an individual, treasury shares,
shares held by our affiliates and by other companies that are a part of our economic group, as well as blank votes) from a list of three institutions presented by our Board of Directors. All the expenses and costs incurred in connection with the
preparation of the valuation report must be paid for by the controlling shareholder.

Shareholders holding at least 10% of our outstanding
shares may require our management to call a special meeting of our shareholders to determine whether to perform another valuation using the same or a different valuation method. This request must be made within 15 days following the disclosure of
the price to be paid for the shares in the public offering. The shareholders who make such request, as well as those who vote in its favor, must reimburse us for any costs involved in preparing the new valuation, if the new valuation price is not
higher than the original valuation price. If the new valuation price is higher than the original valuation price, the public offering must be made at the higher price. If our shareholders determine to take us private and at that time we are
controlled by a shareholder holding less than 50% of our total capital stock or by a shareholder that is not a member of a group of shareholders (as defined in its bylaws), we must conduct the public tender offer, within the limits imposed by law.
In this case, we may only purchase shares from shareholders that have voted in favor of us becoming a private company after purchasing all shares from the other shareholders that did not vote in favor of such deliberation and that have accepted the
public tender offer.

Delisting from theNovo Mercado

At any time, we may delist our shares from the Novo Mercado, provided that shareholders representing the majority of our shares approve the action
and that at least 30 days written notice is given to the São Paulo Stock Exchange. The decision of the



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shareholders must specify if the delisting will occur because the securities will no longer be traded on the Novo Mercado, or because we are going
private. Our delisting from the Novo Mercado will not result in the loss of our registration as a public company on the São Paulo Stock Exchange.

If we delist from the Novo Mercado, by decision taken at a shareholders meeting, any controlling shareholder or group of controlling shareholders at the time, if any, must conduct a public offering for
the acquisition of our outstanding shares, within a period of 90 days if we delist in order for its shares to be tradable outside the Novo Mercado, or within a period of 120 days if we delist as a result of a corporate reorganization in which
the surviving company is not listed on the Novo Mercado. The price per share shall be equivalent to the economic value of those shares as determined in a valuation report prepared by a specialized and independent company of recognized
experience, which will be chosen at a shareholders meeting from a list of three institutions presented by our Board of Directors, by an absolute majority of the votes of the shareholders of our outstanding shares present at the meeting
(excluding, for such purposes, the shares held by any controlling shareholder or group of shareholders at the time, if any, its partners and dependents included in our income tax statement, should the controlling shareholder be an individual,
treasury shares, shares held by our affiliates and by other companies that are a part of our economic group, as well as blank votes). All the expenses and costs incurred in connection with the preparation of the valuation report must be paid by the
controlling shareholder.

If we are subject to widespread control at the time of our delisting from the Novo Mercado, either for our
shares to be traded outside the Novo Mercado or as a result of a corporate reorganization, the shareholders that voted in favor of such deliberation must conduct a public tender offer for the acquisition of our shares.

Pursuant to our bylaws, we may also be delisted if the São Paulo Stock Exchange decides to suspend trading of our shares on the Novo
Mercado due to our non-compliance with the Novo Mercado Regulations. In this case, the Chairman of the Board of Directors must call a shareholders meeting, within two days of the determination by the São Paulo Stock Exchange,
in order to replace all members of our Board of Directors. If the Chairman of the Board of Directors does not call the shareholders meeting, any shareholder may do so. The new Board of Directors will be responsible for the compliance with the
requirements that resulted in the delisting.

Additionally, if we are delisted from the Novo Mercado (1) because a decision
taken at a general meeting of our shareholders resulted in non-compliance with the Novo Mercado Regulations, the public tender offer must be conducted by the shareholders that voted in favor of the deliberation, or (2) as a result of our
non-compliance with the Novo Mercado Regulations resulting from acts of our management, we must conduct the public tender offer in order to become a private company, within the limits imposed by law.

According to the Novo Mercado Regulations, in the event of a transfer of our shareholding control within 12 months following our delisting from
the Novo Mercado, the selling controlling shareholders and the acquirer must offer to acquire the remaining shares for the same price and terms offered to the selling controlling shareholders, adjusted for inflation.

If our shares are delisted from the Novo Mercado, we will not be permitted to have shares listed on the Novo Mercado for a period of two
years after the delisting date, unless there is a change in our control after our delisting from the Novo Mercado.

According to the
Novo Mercado Regulations, the São Paulo Stock Exchange may issue complementary rules to regulate the public offering in the event of delisting in case a company has dispersed ownership.

Sarbanes Oxley Act of 2002

We maintain control and
procedures designed to ensure that we are able to collect the information required to disclose in the report we file with the SEC, and to process, summarize and disclose the information within the periods specified in the rules of the SEC. We have
filed the relevant officer certifications under Section 404 of the U.S. Sarbanes Oxley Act of 2002 regarding internal controls over financial reporting as Exhibits 12.1 and 12.2 to this annual report.



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|10C. | Material Contracts
|---- | ------------------

Issuance of US$400 million 6.375% Guaranteed
Notes due 2017

In October 2006, our wholly owned finance subsidiary, Embraer Overseas, issued US$400 million 6.375% guaranteed notes
due 2017 and, as of December 31, 2008, US$408.9 million was outstanding, US$11.1 million of which is currently short-term, including principal and accrued interest. Interest will be paid semiannually. The notes are unconditionally guaranteed by
us. The notes are listed on the Luxembourg Stock Exchange. On March 30, 2007, we and Embraer Overseas commenced an exchange offer to exchange the notes for now notes duly registered with the SEC. The exchange offer was concluded on May 18,
2007 and US$376.3 million, or 95% of the principal amount of unregistered notes were exchanged for registered notes. The indenture under which the notes were issued contains customary covenants and restrictions such as limitation on liens,
consolidation, merger or transfer of assets.

For more information on additional financing arrangements, see Item 5B. Liquidity and
Capital ResourcesCredit Facilities and Lines of CreditLong-term Facilities.



|10D. | Exchange Controls
|---- | -----------------

There are no restrictions on
ownership of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit such amounts outside Brazil is
subject to restrictions under foreign investment legislation which generally requires, among other things, the registration of the relevant investment with the Central Bank.

Pursuant to Brazilian law, investors may invest in the common shares under Resolution No. 2,689, of January 26, 2000, of the CMN. The rules of
Resolution No. 2,689 allow foreign investors to invest in almost all financial assets and to engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled. In
accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities domiciled or headquartered abroad.

Pursuant to the rules, foreign investors must: (1) appoint at least one representative in Brazil with powers to perform actions relating to the
foreign investment; (2) complete the appropriate foreign investor registration form; (3) register as a foreign investor with the CVM; and (4) register the foreign investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit
accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the-counter markets licensed by the CVM.

Under Resolution No. 2,689, foreign investors registered with the CVM may buy and sell shares on the São Paulo Stock Exchange
without obtaining a separate certificate of registration for each transaction. Investors under these regulations are also generally entitled to favorable tax treatment.

Annex V to Resolution No. 1,289, as amended, of the CMN, also known as the Annex V Regulations, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers.

In connection with the equity offerings of our common shares, an electronic registration was issued in the name of the depositary with
respect to the ADSs and is maintained by the custodian on behalf of the depositary. This electronic registration was carried out through the Central Bank Information System-SISBACEN. Pursuant to the registration, the custodian and the depositary are
able to convert dividends and other distributions with respect to the common shares represented by ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges such ADSs for common shares, the holder
will be entitled to continue to rely on the depositarys registration for five business days after the exchange. Thereafter, a holder must seek to obtain its own electronic registration. Unless the common shares are held pursuant to Resolution
No. 2,689 by a duly registered investor or a holder of common shares who applies for and obtains a new certificate of registration, that holder may not be able to convert into foreign currency and remit outside Brazil the proceeds from the
disposition of, or distributions with respect to, the



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common shares. In addition, if the foreign investor resides in a tax haven jurisdiction or is not an investor registered under Resolution
No. 2,689, the investor will be subject to less favorable Brazilian tax treatment than a holder of ADSs.

See Item 3D. Risk
FactorsRisks Relating our Common Shares and ADSsIf holders of ADSs exchange the ADSs for common shares, they risk losing the ability to remit foreign currency abroad and Brazilian tax advantages and Item 10E.
TaxationMaterial Brazilian Tax Consequences.



|10E. | Taxation
|---- | --------

The following discussion, subject to the
limitations set forth below, describes material Brazilian and United States tax considerations relating to the ownership of our common shares or ADSs. This discussion does not purport to be a complete analysis of all tax considerations in those
countries and does not address tax treatment of shareholders under the laws of other countries. Shareholders who are resident in countries other than Brazil and the United States, along with shareholders that are resident in those two countries, are
urged to consult with their own tax advisors as to which countries tax laws could be relevant to them. This summary is based upon the tax laws of Brazil and the United States as in effect on the date of this annual report, which are subject to
change, possibly with retroactive effect, and to differing interpretations. Any change in such law may change the consequences described below.

Although there presently is no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, as to if or when a
treaty will enter into force or how it will affect the U.S. holders of common shares or ADSs.

Material Brazilian Tax Consequences

General. The following discussion summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposition of common
shares or ADSs, as the case may be, by a holder that is not considered domiciled in Brazil (Non-Brazilian Holder), for purposes of Brazilian taxation.

Taxation of Dividends. Dividends, including stock dividends and other dividends paid in property, paid by us to the depositary in respect of the ADSs, or to a non-Brazilian holder in respect of the common
shares, are currently not subject to income withholding tax, provided that they are paid out of profits generated as of January 1, 1996 (or out of reserves derived therefrom). We do not have retained earnings generated prior to January 1,
1996 (or reserves out of such earnings).

Taxation of Gains. According to Law No. 10,833, enacted on December 29, 2003,
the sale or disposition of assets located in Brazil, by a Non-Brazilian Holder, regardless of whether the sale or the disposition is made to another non-Brazilian resident or to a Brazilian resident, are subject to taxation in Brazil. Accordingly,
on the disposition of the common shares, which are considered assets located in Brazil, the Non-Brazilian Holder will be subject to income tax on the gains assessed, following the rules described below, regardless of whether the transactions are
conducted in Brazil or abroad and with a Brazilian resident or not. Regarding the ADSs, although the matter is not free from doubt, arguably the gains realized by a Non-Brazilian Holder on the disposition of ADSs to another non-Brazilian resident
are not taxed in Brazil, based on the argument that ADSs would not constitute assets located in Brazil for purposes of Law No. 10,833/03. However, we cannot assure you of how Brazilian courts would interpret the definition of assets located in
Brazil in connection with the taxation of gains realized by a Non-Brazilian Holder on the disposition of ADSs to another non-Brazilian resident. Thus, the gain on a disposition of ADSs by a Non-Brazilian Holder to a resident in Brazil (or even to a
non-Brazilian resident in the event that courts determine that ADSs would constitute assets located in Brazil) may be subject to income tax in Brazil according to the rules described below for ADSs or those applicable to the disposition of common
shares, when applicable.

As a general rule, gains assessed are the positive difference between the amount in reais realized on the
sale of exchange of the security and its acquisition cost measured in reais (without correction for inflation).

Under Brazilian
law, income tax rules on such gains can vary depending on the domicile of the Non-Brazilian Holder, the type of registration of the investment by the Non-Brazilian Holder with the Central Bank and how the disposition is carried out, as described
below.



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The deposit of common shares in exchange for ADSs may be subject to Brazilian income tax on capital gains
at the rate of 15% or 25%, in case of a Non-Brazilian Holder located in a tax haven jurisdiction (as defined below), if the acquisition cost of the common shares is lower than (1) the average price per common share on a Brazilian stock exchange
on which the greatest number of such shares were sold on the day of deposit or (2) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold in the 15
trading sessions immediately preceding such deposit. In such case, the difference between the average price of the common shares, calculated as above, and the corresponding acquisition cost, will be considered a capital gain. There are arguments to
support that such taxation is not applicable in case of Non-Brazilian Holders registered under Resolution No. 2,689/00 (2,689 Holder) that are not Tax Haven Holders. The withdrawal of ADSs in exchange for common shares is not
subject to Brazilian tax as far as the regulatory rules in respect to the registration of the investment before the BACEN are duly observed.

Gains assessed on the disposition of common shares carried out on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market):



| |  |  | are exempt from income tax when assessed by a Non-Brazilian Holder that is a 2,689 Holder and is not a Tax Haven Holder; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | are subject to income tax at a rate of 15% in any other case, including the gains assessed by a Non-Brazilian Holder that (1) is not a 2,689 Holder; or
(2) is a 2,689 Holder but a Tax Haven Holder. In these cases, a withholding income tax of 0.005% on the sale value shall be applicable and can be later offset with the eventual income tax due on the capital gain.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any other gains assessed on a disposition of the common shares that is not carried out on Brazilian stock exchanges are subject to income tax at a
rate of 15%, except for Tax Haven Holders, which, in this case, are subject to income tax at a rate of 25%. In case the gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the
withholding income tax of 0.005% on the sale value shall also be applicable and can be offset with the eventual income tax due on the capital gain.

In the case of a redemption of common shares or a capital reduction, the positive difference between the amount effectively received by the Non-Brazilian Holder and the acquisition cost of the securities redeemed or returned, is treated as
capital gain derived from sale or exchange of common shares carried out in a Brazilian stock exchange market and is therefore subject to income tax at the rate of 15%, or 25%, in case of Tax Haven Holders.

Any exercise of preemptive rights relating to the common shares or ADSs will not be subject to Brazilian taxation. Any gain on the sale or assignment of
preemptive rights relating to our common shares by the depositary on behalf of holders of our ADSs or to Non-Brazilian Holders of common shares will be subject to Brazilian income taxation according to the same rules applicable to the sale or
disposition of these shares.

Taxation on Interest on Shareholders Equity. Any payment of interest on shareholders
equity (see Item 8A. Consolidated Statements and Other Financial InformationDividends and Dividend PolicyHistory of Dividend Payments and Dividend Policy and Additional Payments on Shareholders Equity) to Non-Brazilian
Holders of ADSs or common shares is subject to Brazilian withholding income tax at the rate of 15% at the time Embraer records such liability, whether or not the effective payment has been made at that time. In the case of Tax Haven Holders, the
applicable rate of withholding income tax is 25%. For tax purposes this interest is limited to the daily pro ratavariation of the TJLP, as determined by the Central Bank from time to time, and the amount of the deduction may not exceed the
greater of:



| |  |  | 50% of net income (after the deduction of social contribution on net profits but before taking into account the provision for corporate income tax and the amounts
attributable to shareholders as net interest on shareholders equity) related to the period in respect of which the payment is made; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 50% of the sum of retained profits and profit reserves as of the date of the beginning of the period in respect of which the payment is made.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

The Brazilian Corporation Law establishes that interest attributed to shareholders equity can either be accounted
for as part of the mandatory dividend or not. In the event that the payment of such interest is accounted for as part of the mandatory dividend, we



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would be required to pay an additional amount to ensure that the net amount received by the shareholders, after the income tax, plus the amount of declared
dividends, is at least equal to the minimum mandatory dividend. The distribution of interest attributed to shareholders equity would be proposed by our Board of Directors and subject to subsequent declaration by the shareholders at a general
meeting.

Taxation on Foreign Exchange Transactions. Brazilian law imposes a Tax on Foreign Exchange Transactions, or IOF/Exchange,
due on the conversion of reais into foreign currency and on the conversion of foreign currency into reais. Currently, for most exchange transactions, the rate of IOF/Exchange is 0.38%.

However, on the inflow of resources into Brazil for investments carried out by Non-Brazilian Holders in the Brazilian financial and capital markets,
IOF/Exchange is assessed at a 1.5% rate, except for the rate of zero percent applicable to investments related to (a) variable yield instruments carried out in the stock, commodities and future exchanges; and (b) the acquisition of shares
in a public offering registered with the CVM, or for the underwriting of shares, provided, in both cases, that the issuer is authorized to trade its shares at the Brazilian stock exchange. The outflow of funds related to investments carried out by
Non-Brazilian Holders in the Brazilian financial and capital markets, as well as the remittance of dividends and interest on shareholders equity, are subject to IOF/Exchange at a zero percent rate.

In any case, the Brazilian government may increase the rate at any time, up to 25.0%. However, any increase in rates may only apply to future
transactions.

Taxation on Bonds and Securities Transactions. Brazilian law imposes a Tax on Transactions Involving Bonds and
Securities, or IOF/Bonds, on any transactions involving bonds and securities, even if these transactions are performed on the Brazilian stock, futures or commodities exchange. As a rule, the rate of this tax is currently 0% for transactions
involving common shares or ADSs, although the Brazilian government may increase such rate up to 1.5% per day, but only with respect to future transactions.

Other Brazilian Taxes. There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs, except for gift and inheritance taxes which are
levied by some states of Brazil on gifts made or inheritances bestowed by Non-Brazilian Holders to individuals or entities resident or domiciled or residing within such state in Brazil. There are no Brazilian stamp, issue, registration or similar
taxes or duties payable by holders of common shares or ADSs.

Material U.S. Federal Income Tax Consequences

The following discussion, subject to the limitations and conditions set forth herein, describes the material U.S. federal income tax consequences of the
purchase, ownership and disposition of Embraer common shares and ADSs. This discussion only applies to beneficial owners of Embraer common shares or ADSs that are U.S. Holders (as defined below) that hold common shares or ADSs of Embraer
as capital assets (generally for investment purposes). This discussion does not address all aspects of U.S. federal income taxation that may be applicable to a U.S. Holder or the tax consequences to U.S. Holders subject to special treatment under
U.S. federal income tax law, including:



| |  |  | partnerships and other entities classified as partnerships for U.S. federal income tax purposes;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | persons subject to the alternative minimum tax;
| | - |  | -----------------------------------------------



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | dealers and traders in securities or foreign currencies;
| | - |  | --------------------------------------------------------



| |  |  | insurance companies;
| | - |  | --------------------



| |  |  | certain financial institutions;
| | - |  | -------------------------------



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| |  |  | persons who own Embraer common shares or ADSs as part of an integrated investment, including a straddle, hedging or conversion transaction, comprised of the Embraer
common shares or ADSs and one or more other positions for tax purposes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | persons whose functional currency is not the U.S. dollar for U.S. federal income tax purposes;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | persons who actually or constructively own 10% or more of Embraers voting stock;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | persons who acquired Embraer common shares or ADSs pursuant to the exercise of any employee stock option or otherwise as compensation; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | persons holding Embraer common shares or ADSs in connection with a trade or business conducted outside the United States.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

In addition, there is no discussion of state, local, or non-U.S. tax consequences of the purchase, ownership and disposition of Embraer common shares or
ADSs. The discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, or Code, its legislative history, existing final, temporary, and proposed U.S. Treasury regulations, rulings and other pronouncements of the U.S.
Internal Revenue Service, or IRS, and judicial decisions as of the date hereof. Such authorities may be repealed, revoked or modified (with possible retroactive effect) so as to result in U.S. federal income tax consequences different from those
discussed below.

This discussion is also based in part on the representations of the depository and the assumption that each obligation in
the deposit agreement and any related agreement will be performed in accordance with its terms.

Shareholders are urged to consult their
own independent tax advisors concerning the U.S. federal income tax consequences of the ownership of Embraer common shares and ADSs in light of their particular situations, as well as any consequences arising under the laws of any other taxing
jurisdiction.

As used herein, the term U.S. Holder means a beneficial owner of Embraer common shares or ADSs representing
Embraer common shares that is (1) an individual who is a citizen or resident of the United States, (2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any State or
the District of Columbia, (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (4) a trust (X) that is subject to the supervision of a court within the United States and the control
of one or more U.S. persons as described in Section 7701(a)(30) of the Code or (Y) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. Except where specifically described below,
this discussion assumes that we are not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes.

If a
partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds Embraer common shares or ADSs, the tax treatment of such partnership and each partner will generally depend upon the status of the partner and the
activities of the partnership. Partnerships that hold Embraer common shares or ADSs, and partners of a partnership holding such common shares or ADSs, are urged to consult their own tax advisors regarding the consequences of the purchase, ownership
and disposition of Embraer common shares or ADSs.

In general, for U.S. federal income tax purposes, a U.S. Holder who is a beneficial
owner of an ADS will be treated as the owner of the underlying Embraer common shares that are represented by such ADS. Deposits or withdrawals of underlying shares by U.S. Holders for ADSs will not be subject to U.S. federal income tax.

Distributions on Embraer Common Shares or ADSs

For U.S. federal income tax purposes, the gross amount of any distributions (including distributions of notional interest charges attributed to shareholders equity) paid to U.S. Holders of Embraer common shares or ADSs (including
Brazilian withholding taxes imposed on such distributions) will be treated as a dividend, to the extent paid out of current or accumulated earnings and profits of Embraer and its predecessor as determined under U.S. federal income tax principles.
Such a dividend will be includable in the gross income of a U.S. Holder as ordinary income on the date received by the U.S. Holder. To the extent that the amount of any distribution exceeds Embraers current and accumulated earnings and profits
for a taxable year (as determined under U.S. federal income tax



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principles), the distribution will first be treated as a tax-free return of capital to the extent of a U.S. Holders adjusted tax basis in the Embraer
common shares or ADSs, and thereafter as capital gain. Because we do not expect to maintain earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect that a distribution will be treated as a dividend for
U.S. federal income tax purposes.

Dividends paid by Embraer will not be eligible for the dividends received deduction allowed to
corporations under the Code.

The amount of any cash distribution paid in reais will be included in a U.S. Holders gross
income in an amount equal to the U.S. dollar value of the reais calculated by reference to the exchange rate in effect on the date the dividend is received by the U.S. Holder, in the case of Embraer common shares, and by the depository, in
the case of ADSs, regardless of whether the reais are converted into U.S. dollars. If the reais received as a dividend are not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the reais
equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the reais will be treated as U.S. source ordinary income or loss for U.S. federal income tax purposes.

A U.S. Holder will be entitled, subject to a number of complex limitations and conditions, to claim a U.S. foreign tax credit in respect
of any Brazilian withholding taxes imposed on dividends received on Embraers common shares or ADSs. U.S. Holders who do not elect to claim a credit for foreign taxes may instead claim a deduction in respect of such Brazilian withholding taxes.
Dividends received with respect to the Embraer common shares or ADSs will be treated as foreign source income for U.S. federal income tax purposes, and will be passive category income for purposes of calculating foreign tax credits in
most cases, subject to various limitations. The rules relating to computing foreign tax credits or deducting foreign income taxes are extremely complex, and U.S. Holders are urged to consult their own independent tax advisors regarding the
availability of foreign tax credits with respect to any Brazilian withholding taxes in regards of dividends paid on Embraers common shares or ADSs.

Subject to certain exceptions for short-term and hedged positions, the amount of dividends received by certain non-corporate U.S. holders (including individuals) prior to January 1, 2011 with respect to the
Embraer common shares or ADSs will be subject to taxation at a maximum rate of 15% if the dividends represent qualified dividend income. Dividends paid on the Embraer common shares or ADSs will be treated as qualified dividend income if
(1) the Embraer common shares or ADSs are readily tradable on an established securities market in the United States and (2) neither Embraer nor its predecessor was in the year prior to the year in which the dividend was paid, and is not in
the year in which the dividend is paid, a passive foreign investment company, or PFIC. Under guidance issued by the IRS, the ADSs of Embraer should qualify as readily tradable on an established securities market in the United States so long as they
are listed on the NYSE. In the case of Embraer common shares held directly by U.S. Holders and not underlying an ADS, it is not clear whether dividends paid with respect to such shares will represent qualified dividend income. U.S.
Holders holding Embraer common shares directly and not through an ADS are urged to consult their own independent tax advisors.

Based on
its audited financial statements as well as relevant market and shareholder data, Embraer believes that it was not a PFIC for U.S. federal income tax purposes with respect to its 2008 taxable year. In addition, based on Embraers audited or
projected financial statements and current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, Embraer does not anticipate becoming a PFIC for its 2009 taxable
year. However, because this determination is based on the nature of Embraers income and assets from time to time, involves the application of complex tax rules, and since Embraers view is not binding on the courts or the IRS, no
assurances can be provided that Embraer (or its predecessor) will not be considered a PFIC for the current, or any past or future tax year. The potential application of the PFIC rules is further discussed below.

Sale, Exchange or Other Taxable Disposition of Embraer Common Shares or ADSs

A U.S. Holder will recognize taxable gain or loss on any sale, exchange or other taxable disposition of Embraer common shares or ADSs in an amount equal to the difference between the amount realized on the sale,
exchange or other taxable disposition and the U.S. Holders adjusted tax basis (determined in U.S. dollars) in the Embraer common shares or ADSs. Such gain or loss will generally be capital gain or loss and will be long-term capital gain or
loss if the Embraer common shares or ADSs have a holding period of more than one year. Certain non-corporate U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital
gains. The deductibility of capital losses is subject to limitations under the Code.



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Any gain or loss recognized by a U.S. Holder from the sale, exchange or taxable disposition of Embraer
common shares or ADSs generally will be gain or loss from U.S. sources for U.S. foreign tax credit purposes. Consequently, if a Brazilian withholding tax or capital gains tax is imposed pursuant to a sale of Embraer common shares or ADSs, U.S.
Holders who do not have significant foreign source income might not be able to derive effective U.S. foreign tax credit benefit in respect of such Brazilian withholding tax or capital gains tax. The rules relating to foreign tax credits, including
the amount of foreign income taxes that may be claimed as a credit in any given year, are extremely complex and subject to limitations. U.S. Holders are urged to consult their own independent tax advisor regarding the application of the foreign tax
credit rules to their particular circumstances.

Deposits and withdrawals of Embraer common shares in exchange for ADSs will not result in
the realization of gain or loss for U.S. federal income tax purposes.

Passive Foreign Investment Company Rules

If, during any taxable year of a non-U.S. corporation, 75% or more of the corporations gross income consists of certain types of passive
income, or the average value during a taxable year of the passive assets of the corporation (generally assets that generate passive income) is 50% or more of the average value of all the corporations assets, the corporation will be
treated as a PFIC under U.S. federal income tax law. If a corporation is treated as a PFIC, a U.S. Holder may be subject to increased tax liability upon the sale of its stock, or upon the receipt of certain dividends, unless such U.S. Holder makes
an election to be taxed currently on its pro rata portion of the corporations income, whether or not such income is distributed in the form of dividends, or otherwise makes a mark-to-market election with respect to the
corporations stock as permitted by the Code. In addition, as discussed above, a U.S. Holder would not be entitled to (if otherwise eligible for) the preferential reduced rate of tax payable on certain dividend income. As stated above, although
no assurances can be given, based on Embraers operations, projections and business plans and the other items discussed above, Embraer does not believe that it (or its predecessor) was or currently is a PFIC, and does not expect to become a
PFIC for subsequent taxable years.

U.S. Holders are urged to consult their own independent tax advisors regarding the potential
application of the PFIC rules to the common shares or ADSs and the availability and advisability of making an election to avoid the adverse tax consequences of the PFIC rules should Embraer be considered a PFIC for any taxable year.

Information Reporting and Backup Withholding

In general, payments of dividends on Embraer common shares or ADSs, and payments of the proceeds of the sale, exchange or other disposition of Embraer common shares or ADSs, paid within the United States or through certain U.S.-related
financial intermediaries to a U.S. Holder may be subject to information reporting and backup withholding at a current maximum rate of 28% unless the U.S. Holder (1) is a corporation or other exempt recipient or (2) in the case of backup
withholding, provides an accurate taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S.
Holder will be allowed as a refund or a credit against the U.S. Holders U.S. federal income tax liability provided the required information is timely provided to the IRS. A U.S. Holder generally may obtain a refund of any amounts withheld
under the backup withholding rules that exceed its U.S. federal income tax liability by filing a timely refund claim with the IRS.



|10F. | Dividends and Paying Agents
|---- | ---------------------------

Not applicable.



|10G. | Statements by Experts
|---- | ---------------------

Not applicable.



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|10H. | Documents on Display
|---- | --------------------

We are subject to the
periodic reporting and other informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC. You may inspect and obtain copies, at prescribed rates, of reports and other information
filed by us with the SEC at its Public Reference Room maintained at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. You
may also inspect and copy this material at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

We
file our annual report on Form 20-F, including our financial statements, and other reports, including our reports on Form 6-K, electronically with the SEC. These filings are available at www.sec.gov. We also file financial statements and other
periodic reports electronically with the CVM at its website, www.cvm.gov.br. Copies of our annual reports on Form 20-F and documents referred to in this annual report and our bylaws will be available for inspection upon request at our headquarters
at Av. Brigadeiro Faria Lima, 2170, 12227-901 São José dos Campos, São Paulo State, Brazil.



|10I. | Subsidiary Information
|---- | ----------------------

Not required.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We are exposed to various market risks, primarily related to potential loss arising from adverse changes in interest rates and foreign currency exchange rates. We have established policies and procedures to manage sensitivity to interest
rate and foreign currency exchange rate risk. These procedures include the monitoring of our levels of exposure to each market risk, including an analysis based on forecast of future cash flows, the funding of variable rate assets with variable rate
liabilities, and limiting the amount of fixed rate assets which may be funded with floating rate liabilities. We may also use derivative financial instruments to mitigate the effects of interest rate fluctuations and to reduce our exposure to
exchange rate risk. The following sections address the significant market risks associated with our financial activities.

Interest Rate Risk

Our exposure to market risk for interest rate fluctuations principally relates to changes in the market interest rates of our U.S.
dollar-denominated and real-denominated monetary liabilities, principally our short- and long-term debt obligations. Increases and decreases in prevailing interest rates generally translate into increases and decreases in interest expense.
Additionally, the fair values of interest rate-sensitive instruments are also affected by general market conditions.

Our short- and
long-term debt obligations totaled US$1,825.4 million at December 31, 2008 and were denominated in U.S. dollars, Brazilian reais, Euro and Chinese Yuan. Of the total amount of debt denominated in U.S. dollars, US$1,140.4 million,
approximately US$923.4 million was fixed rate. The remaining floating rate U.S. dollar-denominated debt was indexed to six-month LIBOR. All of our US$616.4 million Brazilian real-denominated debt at December 31, 2008 bears interest at a
variable rate based on the TJLP, the long-term interest rate in Brazil. The TJLP was 6.25% per annum at December 31, 2008. Our Euro-denominated debt totals US$46.5 million, of which US$24.0 million was fixed rate and US$22.8 million was
indexed to a variable rate based on the Euribor. We also maintain US$22.0 million in debt denominated in Chinese Yuan, which bears interest at 4.32%.



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The table below provides information about our short term debt obligations as of December 31, 2008
that are sensitive to changes in interest rates and foreign currency exchange rates.



|                             |  |                                    |  |                         |  |                
|---------------------------- |  | ---------------------------------- |  | ----------------------- |  | ---------------
|                             |  | Weighted AverageInterest Rate 2008 |  | Total AmountOutstanding |  | Total FairValue
|                             |  | (%)                                |  | (in US$ millions)      
|Short Term Debt              |  |                                    |  |                         |  |                
|                             |  |                                    | 
|U.S. dollars (LIBOR indexed) |  | 3.93                               |  | 44.4                    |  | 62.4           
|U.S. dollars (fixed rate)    |  | 6.13                               |  | 407.4                   |  | 387.5          
|Reais (TJLP indexed)         |  | 7.91                               |  | 13.9                    |  | 13.9           
|Euro (fixed rate)            |  | 2.25                               |  | 24.0                    |  | 24.0           
|Euro (EURIBOR indexed)       |  | 5.51                               |  | 17.6                    |  | 17.9           
|Chinese Yuan                 |  | 4.32                               |  | 22.0                    |  | 22.1           
|                             |  |                                    |  |                         |  |                
|Total short-term debt        |  |                                    |  | 529.3                   |  | 527.8          
|                             |  |                                    |  |                         |  |                

The table below provides information about our long term debt obligations as of December 31,
2008 that are sensitive to changes in interest rates and foreign currency exchange rates.



|                             |  |                                  |  |                        |  |       |  |      |  |      |  |      |  |                    |  |                
|---------------------------- |  | -------------------------------- |  | ---------------------- |  | ----- |  | ---- |  | ---- |  | ---- |  | ------------------ |  | ---------------
|                             |  | WeightedAverageInterestRate 2008 |  | TotalAmountOutstanding |  | 2010  |  | 2011 |  | 2012 |  | 2013 |  | 2014 andthereafter |  | Total FairValue
|                             |  | (%)                              |  | (in US$ millions)     
|Long Term Debt               |  |                                  |  |                        |  |       |  |      |  |      |  |      |  |                    |  |                
|                             |  |                                  |  |                        |  |       |  |     
|U.S. dollars (LIBOR indexed) |  | 3.93                             |  | 172.3                  |  | 64.1  |  | 25.9 |  | 50.9 |  | 11.7 |  | 19.7               |  | 134.6          
|U.S. dollars (fixed rate)    |  | 6.13                             |  | 516.1                  |  | 83.7  |  | 8.3  |  |     |  |     |  | 424.1              |  | 418.6          
|Reais (TJLP indexed)         |  | 7.91                             |  | 602.5                  |  | 554.3 |  | 13.8 |  | 12.5 |  | 12.5 |  | 9.4                |  | 602.5          
|Euro (EURIBOR indexed)       |  | 5.51                             |  | 5.2                    |  | 3.5   |  | 1.7  |  |     |  |     |  |                   |  | 5.2            
|                             |  |                                  |  |                        |  |       |  |      |  |      |  |      |  |                    |  |                
|Total long-term debt         |  |                                  |  | 1,296.1                |  | 705.6 |  | 49.7 |  | 63.4 |  | 24.2 |  | 453.2              |  | 1,160.9        
|                             |  |                                  |  |                        |  |       |  |      |  |      |  |      |  |                    |  |                

In order to manage our interest rate risk on our monetary liabilities, we have entered into a
number of swaps, which effectively convert US$130.2 million of our floating interest rate U.S. dollar-denominated debt into U.S. dollar fixed interest rate denominated obligations. In addition, as of December 31, 2008, we had effectively
converted US$130.0 million of our U.S. dollar fixed interest rate debt into CDI-based reais denominated obligations. These swaps did not affect the maturity or amortization schedule of our existing debt.

These cross-currency interest rate swaps are not accounted for as hedging transactions under U.S. GAAP. Nevertheless, these swaps are recorded at fair
value on our balance sheet, and we recognized an unrealized loss of US$9.2 million as of December 31, 2008 as part of interest income (expense), net. For further information about the terms of these swap transactions, including notional amount,
maturity date and fair value gains and losses, see Notes 32 and 34 to our audited consolidated financial statements.

We do not currently
have any derivative instruments that limit our exposure to changes in the TJLP because we believe that the short term natures on this exposure, combined with the relatively low volatility of the TJLP, is unlikely to have a material effect on our
company.



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The table below provides information about our short term debt obligations as of December 31, 2008,
after considering the effects of the above mentioned derivative transactions.



|                             |  |                                    |  |                         |  |                
|---------------------------- |  | ---------------------------------- |  | ----------------------- |  | ---------------
|                             |  | Weighted AverageInterest Rate 2008 |  | Total AmountOutstanding |  | Total FairValue
|                             |  | (%)                                |  | (in US$ millions)      
|Short Term Debt              |  |                                    |  |                         |  |                
|                             |  |                                    | 
|U.S. dollars (LIBOR indexed) |  | 4.07                               |  | 18.0                    |  | 34.1           
|U.S. dollars (fixed rate)    |  | 6.23                               |  | 303.2                   |  | 284.4          
|Reais (TJLP indexed)         |  | 7.91                               |  | 13.9                    |  | 13.9           
|Reais (CDI indexed)          |  | 13.34                              |  | 130.6                   |  | 131.5          
|Euro (fixed rate)            |  | 2.25                               |  | 24.0                    |  | 24.0           
|Euro (EURIBOR indexed)       |  | 5.51                               |  | 17.6                    |  | 17.9           
|Chinese Yuan                 |  | 4.32                               |  | 22.0                    |  | 22.0           
|                             |  |                                    |  |                         |  |                
|Total short-term debt        |  |                                    |  | 529.3                   |  | 527.8          
|                             |  |                                    |  |                         |  |                

The table below provides information about our long term debt obligations as of December 31,
2008, after considering the effects of the above mentioned derivative transactions



|                             |  |                                   |  |                        |  |       |  |      |  |      |  |      |  |                     |  |                
|---------------------------- |  | --------------------------------- |  | ---------------------- |  | ----- |  | ---- |  | ---- |  | ---- |  | ------------------- |  | ---------------
|                             |  | WeightedAverage InterestRate 2008 |  | TotalOutstandingAmount |  | 2010  |  | 2011 |  | 2012 |  | 2013 |  | 2014 andthere-after |  | Total FairValue
|                             |  | (%)                               |  | (in US$ millions)     
|Long Term Debt               |  |                                   |  |                        |  |       |  |      |  |      |  |      |  |                     |  |                
|U.S. dollars (LIBOR indexed) |  | 4.07                              |  | 65.0                   |  | 38.6  |  | 0.3  |  | 25.3 |  | 0.3  |  | 0.5                 |  | 48.7           
|U.S. dollars (fixed rate)    |  | 6.23                              |  | 623.4                  |  | 109.2 |  | 33.9 |  | 25.6 |  | 11.4 |  | 443.3               |  | 504.5          
|Reais (TJLP indexed)         |  | 7.91                              |  | 602.5                  |  | 554.3 |  | 13.8 |  | 12.5 |  | 12.5 |  | 9.4                 |  | 602.5          
|Euro (EURIBOR indexed)       |  | 5.51                              |  | 5.2                    |  | 3.5   |  | 1.7  |  |     |  |     |  |                    |  | 5.2            
|                             |  |                                   |  |                        |  |       |  |      |  |      |  |      |  |                     |  |                
|Total long-term debt         |  |                                   |  | 1,296.1                |  | 705.6 |  | 49.7 |  | 63.4 |  | 24.2 |  | 453.2               |  | 1,160.9        
|                             |  |                                   |  |                        |  |       |  |      |  |      |  |      |  |                     |  |                

Foreign Currency Risk

In managing our foreign currency risk, we focus on balancing our non-U.S. dollar-denominated assets against our non-U.S. dollar-denominated liabilities plus shareholders equity in relation to our forecasts of
future cash flows. Beyond the foreign currency exposure related to our debt obligations as summarized above, we also have other assets and liabilities denominated in currencies other than the U.S. dollar. These monetary assets and liabilities are
primarily cash and cash equivalents, accounts receivable and payable, deferred income taxes, dividends and certain other assets and liabilities and are primarily denominated in Brazilian reais. The effects on such assets and liabilities of
the appreciation or devaluation of other foreign currencies against the U.S. dollar result in foreign exchange gains (losses) recognized as interest income (expense), net. The translation gains and losses arising from the remeasurement of our
financial statements to U.S. dollars are recognized on our Statement of Income as foreign exchange gain (loss), net.

As of
December 31, 2008, we have entered into non deliverable forwards, or NDFs, in the notional amount of US$575.0 million to protect our future cash flow against an appreciation of the Brazilian real. These NDFs are not accounted for as hedging
transactions under U.S. GAAP. Nevertheless, these NDFs are recorded at fair value on our balance sheet, and we have recognized an unrealized loss of US$156.1 million as of December 31, 2008, as part of interest income (expense), net. For
further information about the terms of these NDFs transactions, see Notes 32 and 34 to our audited consolidated financial statements.



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The table below provides information about our assets and liabilities exposed to foreign currency risk as
of December 31, 2008, as well as the derivative transactions outstanding at the same date:



|                                             |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|-------------------------------------------- |  | -------------------------------------- | - |  | ------- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ---------- | - |  | --------------- | -
|                                             |  | Outstanding Amount by Year of Maturity |  
|                                             |  | TotalOutstandingAmount                 |   |  | 2009    |   |  | 2010  |   |  | 2011  |   |  | 2012  |   |  | 2013  |   |  | Thereafter |   |  | Total FairValue |  
|                                             |  | (in US$ millions)                      |  
|ASSETS                                       |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Cash and cash equivalents                    |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 100.1                                  |   |  | 100.1   |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 100.1           |  
|In Euro                                      |  | 0.3                                    |   |  | 0.3     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 0.3             |  
|In Chinese Yuan                              |  | 4.4                                    |   |  | 4.4     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 4.4             |  
|Investments and temporary cash investments   |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 654.2                                  |   |  | 654.2   |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 654.2           |  
|Trade accounts receivable                    |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Inreais                                      |  | 181.1                                  |   |  | 181.1   |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 181.1           |  
|InEuro                                       |  | 169.8                                  |   |  | 169.8   |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 169.8           |  
|Deferred income tax assets                   |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 268.9                                  |   |  | 131.2   |   |  | 110.9 |   |  | 17.3  |   |  | 4.7   |   |  | 2.2   |   |  | 2.6        |   |  | 268.5           |  
|In Euro                                      |  | 1.1                                    |   |  | 1.1     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 1.1             |  
|In Chinese Yuan                              |  | 2.2                                    |   |  | 2.2     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 2.2             |  
|Other assets                                 |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 409.1                                  |   |  | 269.9   |   |  | 139.2 |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 409.1           |  
|In Euro                                      |  | 15.2                                   |   |  | 9.2     |   |  | 6.0   |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 15.2            |  
|In Chinese Yuan                              |  | 11.9                                   |   |  | 11.9    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 11.9            |  
|Total Assets in reais                        |  | 1,613.4                                |   |  | 1,336.5 |   |  | 250.1 |   |  | 17.3  |   |  | 4.7   |   |  | 2.2   |   |  | 2.6        |   |  | 1,613.4         |  
|Total Assets in Euro                         |  | 186.4                                  |   |  | 180.4   |   |  | 6.0   |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 186.4           |  
|Total Assets in Chinese Yuan                 |  | 18.5                                   |   |  | 18.5    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 18.5            |  
|LIABILITIES                                  |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Loans                                        |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 616.4                                  |   |  | 13.9    |   |  | 554.3 |   |  | 13.8  |   |  | 12.5  |   |  | 12.5  |   |  | 9.4        |   |  | 616.4           |  
|In Euro                                      |  | 46.8                                   |   |  | 41.6    |   |  | 3.5   |   |  | 1.7   |   |  |      |   |  |      |   |  |           |   |  | 46.9            |  
|In Chinese Yuan                              |  | 2.2                                    |   |  | 2.2     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 2.2             |  
|Accounts payable to suppliers                |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 31.5                                   |   |  | 31.5    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 31.5            |  
|In Euro                                      |  | 39.1                                   |   |  | 39.1    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 39.1            |  
|Customer advances                            |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 17.6                                   |   |  | 17.6    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 17.6            |  
|Other accounts payable & accrued liabilities |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 305.7                                  |   |  | 293.9   |   |  | 11.8  |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 305.7           |  
|In Euro                                      |  | 40.0                                   |   |  | 31.4    |   |  | 8.6   |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 40.0            |  
|In Chinese Yuan                              |  | 10.8                                   |   |  | 10.8    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 10.8            |  
|Taxes and payroll charges payable            |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 380.2                                  |   |  | 185.5   |   |  | 156.8 |   |  | 24.4  |   |  | 6.6   |   |  | 3.1   |   |  | 3.8        |   |  | 380.2           |  
|In Euro                                      |  | 6.5                                    |   |  | 6.5     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 6.5             |  
|In Chinese Yuan                              |  | 7.9                                    |   |  | 7.9     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 7.9             |  
|Accrued taxes on income                      |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 0.0                                    |   |  |        |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|In Euro                                      |  | 0.0                                    |   |  | 0.0     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 0.0             |  
|In Chinese Yuan                              |  |                                       |   |  |        |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Deferred income tax liabilities              |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 85.5                                   |   |  | 9.5     |   |  | 13.0  |   |  | 13.7  |   |  | 13.7  |   |  | 11.8  |   |  | 23.8       |   |  | 85.5            |  
|In Euro                                      |  | 4.1                                    |   |  | 4.1     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 4.1             |  
|Accrued dividends                            |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 0.9                                    |   |  | 0.9     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 0.9             |  
|Contingencies                                |  |                                        |   |  |         |   |  |       |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|In reais                                     |  | 48.1                                   |   |  | 23.5    |   |  | 19.8  |   |  | 3.1   |   |  | 0.8   |   |  | 0.4   |   |  | 0.5        |   |  | 48.1            |  
|In Euro                                      |  | 0.6                                    |   |  | 0.6     |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 0.6             |  
|Total liabilities in reais                   |  | 1,485.9                                |   |  | 576.3   |   |  | 755.7 |   |  | 55.0  |   |  | 33.6  |   |  | 27.8  |   |  | 37.5       |   |  | 1,485.9         |  
|Total liabilities in Euro                    |  | 136.5                                  |   |  | 122.7   |   |  | 12.1  |   |  | 1.7   |   |  | 1.8   |   |  |      |   |  |           |   |  | 136.5           |  
|Total liabilities in Chinese Yuan            |  | 40.7                                   |   |  | 40.7    |   |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 40.7            |  
|Total exposure in reais                      |  | 127.5                                  |   |  | 760.2   |   |  | 505.6 |   |  | (37.7 | ) |  | (28.9 | ) |  | (25.6 | ) |  | (34.9      | ) |  | 127.5           |  
|Total exposure in Euro                       |  | 49.9                                   |   |  | 57.7    |   |  | (6.1  | ) |  | (1.7  | ) |  |      |   |  |      |   |  |           |   |  | 49.8            |  
|Total exposure in Chinese Yuan               |  | (22.2                                  | ) |  | (22.2   | ) |  |      |   |  |      |   |  |      |   |  |      |   |  |           |   |  | (22.2           | )



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|                                                                      |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|--------------------------------------------------------------------- |  | ---------------------- | - |  | -------------------------------------- | - |  | ------ | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ---------- | - |  | --------------- | -
|                                                                      |  |                        |   |  | Outstanding Amount by Year of Maturity |  
|                                                                      |  | TotalOutstandingAmount |   |  | 2009                                   |   |  | 2010   |   |  | 2011  |   |  | 2012  |   |  | 2013  |   |  | Thereafter |   |  | Total FairValue |  
|                                                                      |  | (in US$ millions)      |  
|DERIVATIVE INSTRUMENTS                                                |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Cross-currency interest rate swap contracts (US$Floating v. US$Fixed) |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Notional amount                                                       |  | 130.2                  |   |  | 25.6                                   |   |  | 25.6   |   |  | 25.6  |   |  | 25.6  |   |  | 11.4  |   |  | 16.6       |   |  | (10.3           | )
|Average interest paid in US$                                          |  | 6.01                   | % |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Average interest received in US$                                      |  | Libor +1.2515          | % |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Cross-currency swap (US$ to R$ adjusted by the CDI)                   |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Notional amount                                                       |  | 130.0                  |   |  | 130.0                                  |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  | 1.1             |  
|Average interest paid in reais                                        |  | 99% of CDI             |   |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Average interest received in US$                                      |  | 5.26                   | % |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Swap (fixed interest into variable interest  US$)                    |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|Notional amount                                                       |  | 185.9                  |   |  | 8.3                                    |   |  | 8.7    |   |  | 9.3   |   |  | 9.8   |   |  | 10.4  |   |  | 139.4      |   |  | 28.8            |  
|Average interest paid in US$                                          |  | 6.0                    | % |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Not Deliverable Forward                                               |  |                        |   |  | 575.0                                  |   |  | 575.0  |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Accounts Receivable                                                   |  |                       |   |  |                                       |   |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  
|Net exposure in assets/liabilities                                    |  |                        |   |  |                                        |   |  |        |   |  |       |   |  |       |   |  |       |   |  |            |   |  |                 |  
|- In reais                                                            |  | (188.4                 | ) |  | 621.9                                  |   |  | (514.3 | ) |  | (47.0 | ) |  | (38.7 | ) |  | (36.0 | ) |  | (174.3     | ) |  |                |  
|- In Euro                                                             |  | 49.9                   |   |  | 57.7                                   |   |  | (6.1   | ) |  | (1.7  | ) |  |      |   |  |      |   |  |           |   |  |                |  
|- In Chinese Yuan                                                     |  | (22.2                  | ) |  | (22.2                                  | ) |  |       |   |  |      |   |  |      |   |  |      |   |  |           |   |  |                |  



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------

Not applicable.



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PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

No
matters to report.



|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------

Material Modifications to the Rights of Security Holders

Set forth below is a summary of the
modifications of the rights of the holders of former Embraer common and preferred shares as a result of the share exchange resulting from the merger of former Embraer with and into Embraer approved on March 31, 2006. As a result of the merger,
former Embraer ceased to exist and (1) each common share of former Embraer was exchanged for one common share of Embraer, (2) each preferred share of former Embraer was exchanged for one common share of Embraer, (3) each ADS of former
Embraer, each of which represented four preferred shares of former Embraer was exchanged for one ADS of Embraer, each of which represents four common shares of Embraer, and (4) the golden share, a special class of common share of former Embraer
held by the Federative Republic of Brazil, was exchanged for a special class of common share of Embraer.

This summary lists certain of the
material differences but is not meant to be relied upon as an exhaustive list of the differences between the former Embraer common and preferred shares, and our common shares or a detailed description of the provisions discussed, and is qualified in
its entirety by reference to the former Embraer bylaws, our bylaws, the Brazilian Corporate Law, the rules and regulations of the CVM, and the Novo Mercado Regulations.

Comparison of Rights of Holders of Former Embraer Common Shares and Embraer Common Shares



|                          |  |                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                          |  | Rights of Holders of Former Embraer Common Shares                                                                                                                                                                                                                                 |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                          |  |                                                                                                                                                                                                                                                                                  
|Voting                    |  | Each former Embraer common share entitled its holder to one vote in the resolutions of a general meeting.  Certain resolutions and acts of the shareholders and management of former Embraer were subject to the
veto of the Brazilian government, as holder of the golden share. |  | Each of our common shares entitles its holder to one vote in the resolutions of a general meeting.  In the resolutions of the general meeting:  (1) no shareholder or group of shareholders, whether Brazilian or non-Brazilian, including brokers
acting on behalf of one or more holders of ADSs, may exercise voting rights representing more than 5% of the number of shares into which the capital stock is divided; and (2) non-Brazilian shareholders and groups of non-Brazilian shareholders may
not exercise voting rights representing more than 2/3of the total of the votes conferred on the entirety of Brazilian
shareholders present.  Certain resolutions and acts of our shareholders and
management will be subject to the veto of the Brazilian government, as holder of the golden share.
|                          |  |                                                                                                                                                                                                                                                                                  
|Maximum Shareholder Votes |  | None.                                                                                                                                                                                                                                                                             |  | No shareholder or group of shareholders, whether Brazilian or non-Brazilian, may exercise voting rights representing more than 5% of our total capital stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



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|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                              |  | Rights of Holders of Former Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Non-Brazilian Shareholder Voting              |  | Ownership of former Embraer common shares by non-Brazilians was limited to 40% of all former Embraer common shares. Non-Brazilian shareholders holding former Embraer common shares, within the
40% limitation, had full voting rights.                                                                                                                                                                                                                                                                                                     |  | Non-Brazilian shareholders and groups of non-Brazilian shareholders may not exercise voting rights representing more than 2/3of the total of the votes conferred on the entirety of Brazilian shareholders present at the general meeting of our shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Dividends                                     |  | Shareholders were entitled to receive, in each fiscal year, a mandatory dividend corresponding to a percentage equivalent to 25% of the net income for the fiscal year, subject to certain
adjustments.                                                                                                                                                                                                                                                                                                                                     |  | Shareholders are entitled to receive, in each fiscal year, a mandatory dividend corresponding to a percentage equivalent to 25% of the net income for the fiscal year, subject to certain
adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Number of Directors; Qualifications           |  | The Board of Directors consisted of at least nine and no more than 18 directors and their respective alternates, all of whom had to be shareholders.                                                                                                                                                                                                                                                                                                                                                                                        |  | The Board of Directors consists of 11 members and their respective alternates, all of whom must be shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Term of Directors                             |  | The directors were elected at a general meeting for a term of three years, reelection being permitted.                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | The Board of Directors has a term of office of two years, reelection being allowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Removal of Directors and Filling of Vacancies |  | In the event of impairment or a vacancy in the office of a member of the Board of Directors, his alternate assumed office until such impairment ceased or, in the event of a vacancy, until the
first general meeting subsequent thereto was held, which general meeting established a definitive alternate for the remaining term of office. In case of simultaneous or successive vacancies in the offices of an effective director and his respective
alternate, the Board of Directors convened a general meeting to fill such offices. |  | As already provided by the Brazilian Corporate Law and, therefore, applicable to holders of our common shares, whenever the election is conducted
under the cumulative voting process, the dismissal of any member of the Board of Directors at a general meeting will immediately result in the dismissal of all the other members, thus requiring a new election; in other cases of vacancy, if there is
no alternate, the entire Board of Directors will stand for election at the next general meeting.  Any vacant offices that have not been filled, due to a tie, will be subject to a new voting, under the same process, after adjustment is made to the number of votes entitled to each shareholder based on the number of seats to be filled.
|                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Election of Directors                         |  | In the election of the directors, the general meeting first established, by a majority vote, the number of directors to be elected that were not otherwise allocated as representatives of a
certain person or group. If the process of cumulative voting had not been requested, the general meeting voted by means of a candidates roll previously registered with the presiding board, which candidates roll assured the shareholders that held,
whether individually or in block, 20% or more of the former Embraer common              |  | Unless a 5% shareholder invokes the cumulative voting provision, the election of directors will be conducted under a system of slate voting, whereby
voting on individual candidates will not be allowed; provided, however, that any shareholder who wishes to do so must appoint candidates at least ten days prior to the general meeting of shareholders at which the members of the Board of Directors
will be elected.  As already provided by the Brazilian Corporate Law and, therefore, applicable                                                                                                                                                                                                                                              



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|                                                 |  |                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                 |  | Rights of Holders of Former Embraer Common Shares                                                                                                                                                                     |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                 |  | shares had the right to appoint two effective directors and their respective alternates.                                                                                                                              |  | to holders of our common shares, shareholders representing at least 5% of the corporate capital may request the election of directors by cumulative
voting if notice is given to the company no later than 48 hours prior to the date for which the general meeting has been called.  Each shareholder will have the right to cumulate their votes for one candidate and the respective alternate, or to distribute them among several candidates. The
candidate(s) and respective alternate(s) that receive the higher number of votes will be declared elected.                                                                                                         
|                                                 |  |                                                                                                                                                                                                                      
|Quorum of Shareholders for a General Meeting     |  | The quorum for convening a general meeting on first call was the presence of shareholders representing at least 25% of the voting capital; on second call, it was convened with the presence of
any number of shares. |  | The quorum for convening a general meeting on first call is the presence of shareholders representing at least 35% of the capital stock, except if the law requires a higher quorum; on second
call is the presence of shareholders representing at least 25% of the capital stock; and, on third call, the presence of any number of shareholders.                                                                                                                                                                                                                                                                                                                       
|                                                 |  |                                                                                                                                                                                                                      
|Notice of Shareholders Meetings                 |  | The first call of a general meeting was made 15 days in advance, and the second call was eight days in advance of the general meeting.                                                                                |  | A general meeting is called by the Board of Directors or, as provided by law, by shareholders or by the Conselho Fiscal, the first call being published at least 30 days in advance of the
general meeting counting from the date of the first publication of the notice; if the meeting is not held because of a lack of quorum, a notice of second call will be published at least 15 days in advance of the general meeting; and, if again the
meeting is not held, the third call will be published at least eight days in advance of the general meeting.                                                                                                            
|                                                 |  |                                                                                                                                                                                                                      
|Compulsory Acquisition of a Majority Shareholder |  | None.                                                                                                                                                                                                                 |  | Any shareholder or group of shareholders that acquires or becomes the holder, for any reason of: (1) 35% or more or the total shares issued by us; or (2) other rights, including beneficial
ownership and trust, over shares issued by us that represent more than 35% of our capital, or an Acquiring Shareholder, will submit to the Brazilian government, as holder of the Golden share, through the Brazilian Ministry of Finance, a request to
make a public tender offer for acquisition of all shares issued by us. If the request is denied, the Acquiring Shareholder, within a period of 30 days as of communication of the denial, must sell all of the shares



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| |  |                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | ------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Rights of Holders of Former Embraer Common Shares |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |                                                   |  | that exceed the 35% limit. During the period between the request to make the public tender offer and the reply from the Brazilian government, the
Acquiring Shareholder may not acquire or sell any shares or convertible securities issued by us.  The price to be paid for each of our common shares in the public tender offer must be equal to or greater than the amount obtained by the following formula:  Acquisition Price = Value of the Share + 50% Premium.  Value of the Share = the greater value between: (1) the highest unit quotation of the shares issued by us during the 12-month period prior to conducting
the public tender offer recorded on any stock exchange in which the shares were traded; (2) the highest price paid by the Acquiring Shareholder during the 36-month period prior to the public tender offer for a share or tranche of shares issued
by us; (3) the amount equivalent to 14.5 times our consolidated average EBITDA (determined in accordance with the bylaws), reduced by our net consolidated indebtedness, divided by the total number of shares issued; and (4) the amount
equivalent to 0.6 times the amount of our firm backlog orders, according to the last information disclosed by us, reduced by our net consolidated indebtedness, divided by the total number of shares issued by us.

Comparison of Rights of Holders of Former Embraer Preferred Shares and Embraer Common Shares

Below is a summary comparison of the material changes in the rights that resulted from holders of former Embraer preferred shares
becoming holders of Embraer common shares.



|       |  |                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                   
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Rights of Holders of Former EmbraerPreferred Shares                                                                                                                                         |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                        
|Voting |  | Preferred shares were not entitled to vote at a general meeting. Preferred shareholders could attend a general meeting and take part in the discussion of matters presented at the
meeting. |  | Each of our common shares entitles its holder to one vote in the resolutions of a general meeting.  In the resolutions of the general meeting: (1) no shareholder or group of shareholders, whether
Brazilian or non-Brazilian, including brokers acting on behalf of one or more holders of ADSs,



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|                                         |  |                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                         |  | Rights of Holders of Former EmbraerPreferred Shares                                                                                                                                                                                                                                                                                         |  | Rights of Holders of Embraer Common Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                         |  |                                                                                                                                                                                                                                                                                                                                             |  | may exercise voting rights representing more than 5% of the number of shares into which the capital stock is divided; and (2) the set of
non-Brazilian shareholders and groups of shareholders may not exercise voting rights representing more than two-thirds of the total of the votes conferred on the entirety of Brazilian shareholders present.  Certain resolutions and acts of our shareholders and management are subject to the veto of the
Brazilian government, as holder of the golden share.
|                                         |  |                                                                                                                                                                                                                                                                                                                                            
|Dividends                                |  | Preferred shares were entitled to the receipt of dividends per share at least 10% higher than those conferred to each common share. Shareholders were entitled to receive, in each fiscal year, a
mandatory dividend corresponding to a percentage equivalent to 25% of the net income for the fiscal year, subject to certain adjustments. |  | There is no dividend preference among shareholders. The shareholders will be entitled to receive, in each fiscal year, a mandatory dividend corresponding to a percentage equivalent to 25% of the
net income for the fiscal year, subject to certain adjustments.                                                                                                                                                                                                                                         
|                                         |  |                                                                                                                                                                                                                                                                                                                                            
|Priority in Capital Stock Reimbursements |  | Preferred shares were entitled to at least a 10% premium over that received by common shares in the event of a reimbursement of capital.                                                                                                                                                                                                    |  | There is no preference among shareholders in the event of a reimbursement of capital.                                                                                                                                                                                                                                                                                                                                                                                                                      

Use of Proceeds

Not applicable.



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures

Disclosure controls and procedures refers to the controls and other procedures adopted by us that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and that such information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosures.

Our President and CEO, Frederico Pinheiro Fleury Curado, and our
executive vice-president for finance and chief financial officer, Luiz Carlos Siqueira Aguiar, after evaluating, together with management, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008, the end of the period covered by this annual report, concluded that, as of such date, our disclosure control and procedures were effective to ensure information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and were effective in ensuring that such information is
accumulated and communicated to our management, including our CEO and chief financial officer, as appropriate to allow timely decisions regarding required disclosures.



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Managements Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and Board of Directors regarding the reliability of financial reporting and the preparation
of our financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Effective internal control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In
making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework. Based on this assessment, our management concluded that,
as of December 31, 2008, our internal control over financial reporting was effective based on those criteria.

Attestation Report of the Registered
Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited
by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their attestation report which appears herein on page F-2.

Changes in Internal Control over Financial Reporting

Our internal audit department periodically
evaluates our internal controls for the main cycles, documenting by flow charts the processes used in each cycle, identifying opportunities and suggesting improvements for the existing control mechanisms. There was no change in our internal control
over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------

Our Board of Directors has
determined that Taiki Hirashima, a member of our Conselho Fiscal, is an audit committee financial expert as defined by current SEC rules. Furthermore, Mr. Hirashima is an independent member of our Conselho Fiscal as
required by the NYSE rules and regulations. For a discussion of the role of our Conselho Fiscal, see Item 6C. Board PracticesConselho Fiscal.



|ITEM 16B. | CODE OF ETHICS
|--------- | --------------

Our Board of Directors has adopted
a Code of Ethics and Conduct applicable to our directors, officers and employees worldwide, including our principal executive officer, principal financial officer and controller. A copy of our Code of Ethics and Conduct has been filed as Exhibit
11.1 to this annual report.



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|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

The
following table sets forth by category of service the total fees for services performed by Deloitte Touche Tohmatsu Auditores Independentes during the first quarter of 2007, and PricewaterhouseCoopers Auditores Independentes during the fiscal years
ended December 31, 2007 and 2008:



|                   |  |                                                  |  |                                                    |  |                                                      |  |          
|------------------ |  | ------------------------------------------------ |  | -------------------------------------------------- |  | ---------------------------------------------------- |  | ---------
|                   |  | 2008PricewaterhouseCoopersAuditoresIndependentes |  | 2007Pricewaterhouse CoopersAuditores Independentes |  | 2007Deloitte Touche TohmatsuAuditores
Independentes* |  | 2007Total
|                   |  | (in US$ thousands)                              
|Audit Fees         |  | 2,086                                            |  | 2,172                                              |  | 169                                                  |  | 2,341    
|Audit-Related Fees |  | 120                                              |  | 231                                                |  |                                                     |  | 231      
|All Other Fees     |  | 7                                                |  | 16                                                 |  |                                                     |  | 16       
|                   |  |                                                  |  |                                                    |  |                                                      |  |          
|Total              |  | 2,213                                            |  | 2,419                                              |  | 169                                                  |  | 2,588    
|                   |  |                                                  |  |                                                    |  |                                                      |  |          



|* | Amounts in connection with the first quarter of 2007.
|- | -----------------------------------------------------

Audit Fees

Audit fees consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes for 2008 and the second, third and
fourth quarter of 2007 and Deloitte Touche Tohmatsu Auditores Independentes for the first quarter of 2007 in connection with the audits of our annual financial statements under Brazilian GAAP, which are published in Brazil, and our annual financial
statements under U.S. GAAP and statutory audits of our subsidiaries.

Audit-Related Fees

Audit-related fees in 2007 and 2008 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with
additional analysis of our compliance with provisions of the Sarbanes-Oxley Act.

All Other Fees

All other audit fees refers to miscellaneous permitted services rendered by Deloitte Touche Tohmatsu and PricewaterhouseCoopers Auditores Independentes in
2007 and 2008.

Pre-Approval Policies and Procedures

Our Board of Directors approves all audit, audit-related services, tax services and other services provided by Deloitte Touche Tohmatsu. Any services provided by PricewaterhouseCoopers or Deloitte Touche Tohmatsu that
are not specifically included within the scope of the audit must be pre-approved by our Board of Directors in advance of any engagement. Pursuant to Rule 2-01 of Regulation S-X, audit committees are permitted to approve certain fees for
audit-related services, tax services and other services pursuant to a de minimis exception prior to the completion of an audit engagement. In 2005, 2006 and 2007, none of the fees paid to Deloitte Touche Tohmatsu were approved pursuant to the
de minimis exception. In 2007 and 2008, none of the fees paid to PricewaterhouseCoopers Auditores Independentes were approved pursuant to the de minimis exception.



|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------

We are in full compliance with the listing standards for audit committee pursuant to Exchange Act Rule 10A-3. For a further discussion of our Conselho Fiscal and the audit committee exemption, see Item 6C. Board
PracticesConselho Fiscal.



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|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ----------------------------------------------------------------------

The following table shows the results of our last share buyback program which was completed on March 31, 2008 for a total purchase price of US$183.7 million.



|                     |  |                                     |  |                                 |  |                                                                        |  |                                                                 
|-------------------- |  | ----------------------------------- |  | ------------------------------- |  | ---------------------------------------------------------------------- |  | ----------------------------------------------------------------
|                     |  | Total Number ofShares Purchased (1) |  | Average PricePaid per Share (2) |  | Total Number ofShares Purchasedas Part of PubliclyAnnouncedProgram (3) |  | MaximumNumber of Sharesthat May Yet BePurchased Underthe Program
|                     |  | (in R$)                            
|December 19-20, 2007 |  | 70,000                              |  | 11.21                           |  | 70,000                                                                 |  | 16,730,000                                                      
|January 2-31, 2008   |  | 7,602,100                           |  | 9.93                            |  | 7,602,100                                                              |  | 9,127,900                                                       
|February 1-29, 2008  |  | 5,604,500                           |  | 11.98                           |  | 5,604,500                                                              |  | 3,523,400                                                       
|March 3-31, 2008     |  | 3,523,400                           |  | 11.44                           |  | 3,523,400                                                              |  |                                                                



|(1) | All shares were purchased through a publicly announced program, in open-market transactions on the São Paulo Stock Exchange.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(2) | Translated from nominal reais into U.S. dollars at the commercial selling rate in effect on each date on which purchases were made.
|--- | -----------------------------------------------------------------------------------------------------------------------------------

|(3) | The share buyback program was approved by our Board of Directors on December 7, 2007, in compliance with Instrução CVM No. 10/80. We were authorized to buy
back up to an aggregate of 16,800,000 common shares, representing approximately 2.3% of our outstanding capital, which totaled 740,465,044 common shares outstanding. The program was terminated on March 31, 2008. A total of 16,800,000 shares
were purchased at an average price of U$10.93 per share.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------

Not applicable.



|ITEM 16G. | CORPORATE GOVERNANCE
|--------- | --------------------

We are subject to NYSE
corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (1) have an audit
committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (2) provide prompt certification by our CEO of any material non-compliance with any
corporate governance rules and (3) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion
of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of
Independent Directors

The NYSE rules require that a majority of the board must consist of independent directors. Independence is
defined by various criteria, including the absence of a material relationship between the director and the listed company, which independence must be affirmatively determined by the Board of Directors. Likewise, the Novo Mercado Regulations
requires that at least 20% of the members of the Board of Directors of a company listed on the Novo Mercado segment of the São Paulo Stock Exchange be independent. Independence of board members in accordance with the Novo
Mercado Regulations is defined by criteria similar to those set forth in the NYSE rules. However, under the Novo Mercado Regulations and Brazilian law, neither our Board of Directors nor our management is required to test the independence
of directors before their election to the board.

With the exception of Mr. Neimar Dieguez Barreiro (the representative of the
Brazilian government, through the governments ownership of the golden share), Messrs. Paulo Cesar de Souza Lucas and Claudemir Marques de Almeida (both representatives of our employees) and Mr. Maurício Novis Botelho,
all the current members of our Board of Directors elected at the shareholders meeting held on April 29, 2009 have declared that they are independent for purposes of the Novo Mercado Regulations. While our directors meet the
qualification requirements of the Brazilian Corporate Law, the CVM requirements and the Novo Mercado Regulations, our Board of Directors has not determined whether our directors are considered independent under the NYSE test for director
independence.



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The Brazilian Corporate Law and our bylaws require that our directors be elected by our shareholders at a
general shareholders meeting. The election of members of our Board of Directors, absent a request to adopt a cumulative voting system, will be conducted under a system of slate voting whereby voting will be based on a slate of directors and no
voting will be allowed on individual candidates. According to our bylaws, the current members of the board at the time of the election will always be candidates as a slate for a new term of office. Our Board of Directors is appointed by our
shareholders for a two-year term, having three reserved seats as follows: (1) one to be appointed by the Brazilian government, as holder of the golden share and (2) two to be appointed by our employees. The remaining eight
directors are elected in accordance with the slate voting or cumulative voting rules contained in our bylaws. A person may participate in two or more different slates. Each shareholder may only vote on one slate and the slate that receives the
highest number of votes shall be declared elected. See Item 10B. Memorandum and Articles of AssociationBoard of DirectorsElection of Board of Directors.

Executive Sessions

NYSE rules require that the non-management directors must meet at
regularly scheduled executive sessions without management. The Brazilian Corporate Law does not have a similar provision. According to the Brazilian Corporate Law, up to one-third of the members of the Board of Directors can be elected from
management. The remaining non-management directors are not expressly empowered to serve as a check on management and there is no requirement that those directors meet regularly without management. As a result, the non-management directors on our
board do not typically meet in executive session.

Nominating/Corporate Governance Committee

NYSE rules require that listed companies have a Nominating/Corporate Governance Committee composed entirely of independent directors and governed by a
written charter addressing the committees required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance
principles applicable to the company. We are not required under applicable Brazilian law to have a Nominating Committee/Corporate Governance Committee, and accordingly, to date, have not established such a committee. The directors are elected by our
shareholders at a general shareholders meeting. Our corporate governance practices are adopted by the entire board.

Compensation Committee

NYSE rules require that listed companies have a Compensation Committee composed entirely of independent directors and governed by a
written charter addressing the committees required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to CEO compensation, evaluating CEO performance and approving CEO
compensation levels and recommending to the board non-CEO compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have a Compensation Committee. Under the Brazilian Corporate Law, the total
amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual general meeting. The Board of Directors is then responsible for
determining the individual compensation and profit sharing of each executive officer, as well as the compensation of our board and committee members. In making such determinations, the board reviews the performance of the executive officers,
including the performance of our CEO.

Audit Committee

NYSE rules require that listed companies have an audit committee that (1) is composed of a minimum of three independent directors who are all financially literate, (2) meets the SEC rules regarding audit
committees for listed companies, (3) has at least one member who has accounting or financial management expertise and (4) is governed by a written charter addressing the committees required purpose and detailing its required
responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee or audit board in our case, meet the SEC rules regarding audit committees for listed companies. The Brazilian Corporate Law
requires companies to have a non-permanent Conselho Fiscal composed of three to five members who are elected at the general shareholders meeting. The Conselho Fiscal operates independently from management and from a
companys external auditors. Its main function is to monitor the activities of management, examine the financial statements of each fiscal year and provide a formal report to our shareholders.



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We have a permanent Conselho Fiscal that consists of five members and five alternates and which
has ordinary meetings at least every two months. The members of our Conselho Fiscal are all financially literate and one member has accounting expertise that qualifies him as an audit committee financial expert. In order to comply with the
exemption requirements that allow our Conselho Fiscal to act as an audit committee pursuant to SEC rules, our Board of Directors approved the delegation to the Conselho Fiscal of certain additional responsibilities and the Conselho
Fiscal and the Board of Directors adopted an additional charter that delegates to the Conselho Fiscal the duties and responsibilities of a U.S audit committee to the extent permitted under the Brazilian Corporate Law. For a further
discussion of our Conselho Fiscal , see Item 6C. Board PracticesConselho Fiscal.

Shareholder Approval of Equity
Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and
material revisions thereto, with limited exceptions. Under the Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder
approval.

Corporate Governance Guidelines

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. In addition to being subject to the Novo Mercado Regulations that include rules on corporate governance, we have not
adopted any formal corporate governance guidelines. We have adopted and observe a disclosure policy, our Policy on Publicizing Acts or Relevant Facts, which requires the public disclosure of all relevant information pursuant to guidelines set forth
by the CVM, as well as an insider trading policy, our Policy on Securities Transactions, which, among other things, establishes black-out periods and requires insiders to inform management of all transactions involving our securities.

Code of Business Conduct and Ethics

NYSE
rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not
have a similar requirement. However, in April 2004, we adopted a Code of Ethics and Conduct applicable to our officers, directors and employees worldwide, including at the subsidiary level. We believe this code substantially addresses the matters
required to be addressed pursuant to the NYSE rules. A copy of our Code of Ethics and Conduct has been filed as Exhibit 11.1 to this annual report. For a further discussion of our Code of Ethics and Conduct, see Item 16B. Code of Ethics.

Internal Audit Function

NYSE rules require
that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the companys risk management processes and system of internal control. Our internal audit function is the
responsibility of our risk and internal controls office, under the supervision of the Chief Financial Officer, assuring the necessary independence and competence to assess the design of our internal control over financial reporting, as well as to
test its effectiveness as required by Section 404 of the Sarbanes-Oxley Act of 2002.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

We have responded to
Item 18 in lieu of responding to this item.



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

Our audited consolidated
financial statements, together with the Independent Registered Public Accounting Firm thereon, are filed as part of this annual report and are located following the signature page hereof.



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|ITEM 19. | EXHIBITS
|-------- | --------



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                       
|1.1           |  | Bylaws of Embraer (English translation), incorporated herein by reference to Exhibit 1.1 to Embraers Annual Report on Form 20-F for the fiscal year ended December 31,
2007.                                                                                                                                                                                                                                     
|              | 
|2.1           |  | Form of Amended and Restated Deposit Agreement among Embraer, Morgan Guaranty Trust Company of New York, as depositary, and the Holders from time to time of American Depositary Shares issued
thereunder, including the Form of American Depositary Receipts, incorporated herein by reference to Exhibit 99(a) to Embraers Registration Statement No. 333-133162.                                              
|              | 
|2.2           |  | Indenture, dated as of October 25, 2006, among Embraer Overseas Limited, Embraer-Empresa Brasileira de Aeronáutica S.A., The Bank of New York, as Trustee, Registrar, Transfer Agent,
and Principal Paying Agent, and The Bank of New York (Luxembourg) S.A., as Luxembourg Paying Agent and Transfer Agent, incorporated herein by reference from Exhibit 4.1 to Embraers Registration Statement No. 333-141629.
|              | 
|2.3           |  | The registrant hereby agrees to furnish to the SEC, upon request, copies of certain instruments defining the rights of holders of long-term debt of the kind described in Item 2(b)(i) of the
Instructions as to Exhibits in Form 20-F.                                                                                                                                                                           
|              | 
|4.1           |  | Protocol of Merger and Justification of Embraer-Empresa Brasileira de Aeronáutica S.A. with and into Rio Han Empreendimentos e Participações S.A., dated as of January 19,
2006, and exhibits thereto, or Merger Agreement (English translation), incorporated herein by reference from Exhibit 2.1 to Embraers Registration Statement No. 333-132289.                                                           
|              | 
|4.2           |  | Lease Agreement, as amended, between Howard County and Embraer Aircraft Corporation, dated as of April 21, 1998, incorporated herein by reference from Exhibit 10.6 to Embraers
Registration Statement No. 333-12220.                                                                                                                                                                                            
|              | 
|4.3           |  | Lease Agreement, as amended, between the Paris Airport and Embraer, dated as of January 1, 1999, together with an English translation, incorporated herein by reference from Exhibit
10.6 to Embraers Registration Statement No. 333-12220.                                                                                                                                                                      
|              | 
|8.1           |  | List of Embraers subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|11.1          |  | Code of Ethics and Conduct, incorporated herein by reference from Exhibit 11.1 to Embraers Annual Report on Form 20-F for the fiscal year ended December 31, 2003.                                                                                                                                                                                                                                               
|              | 
|12.1          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                
|              | 
|12.2          |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                
|              | 
|13.1          |  | Section 1350 Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                            
|              | 
|13.2          |  | Section 1350 Certification of Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                            



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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



|                  |  |                                                  |  |                                                               
|----------------- |  | ------------------------------------------------ |  | --------------------------------------------------------------
|                  |  | EMBRAER  EMPRESA BRASILEIRA DE AERONÁUTICA S.A.
|                  |  |                                                 
|Date: May 1, 2009 |  | By:                                              |  | /s/ FREDERICO PINHEIRO FLEURY CURADO                          
|                  |  | Name:                                            |  | Frederico Pinheiro Fleury Curado                              
|                  |  | Title:                                           |  | President and Chief Executive Officer                         
|                  |  |                                                 
|Date: May 1, 2009 |  | By:                                              |  | /s/ LUIZ CARLOS SIQUEIRA AGUIAR                               
|                  |  | Name:                                            |  | Luiz Carlos Siqueira Aguiar                                   
|                  |  | Title:                                           |  | Executive Vice - President Finance and Chief Financial
Officer



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Embraer - Empresa Brasileira

de Aeronáutica S.A.

Consolidated Financial Statements at

December 31, 2008 and 2007

and Report of Independent Registered

Public Accounting Firm



---

##### Table of Contents

Index to Financial Statements



|                                                                                                                 |  |     
|---------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                 |  | Page
|Index to Financial Statements                                                                                    |  | F-1 
|Reports of Independent Registered Public Accounting Firms                                                        |  | F-2 
|Consolidated Balance Sheets at December 31, 2008 and 2007                                                        |  | F-5 
|Consolidated Statements of Income and Comprehensive Income for the Years Ended December 
31, 2008, 2007 and 2006 |  | F-7 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006                       |  | F-8 
|Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2008, 2007 and
2006             |  | F-9 
|Notes to Consolidated Financial Statements for the Years Ended December 31, 2008, 2007 and 2006                  |  | F-10



F-1



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##### Table of Contents

Report of Independent Registered

Public Accounting Firm

To the Board of Directors and Shareholders

Embraer - Empresa Brasileira de

Aeronáutica S.A.



|1 | In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and comprehensive income, of shareholders equity and of cash
flows present fairly, in all material respects, the financial position of EmbraerEmpresa Brasileira de Aeronáutica S.A. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Managements Report on Internal Control over Financial Reporting appearing under Item 15 of the Companys Form 20-F. Our responsibility is to express opinions on these financial statements and on the Companys
internal control over financial reporting based on our integrated audits.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2 | We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements
included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-2



---

##### Table of Contents

EmbraerEmpresa Brasileira de

Aeronáutica S.A.



|3 | A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4 | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                            
|----------------------------
|São José dos Campos - Brazil
|April 30, 2009              
|                            
|/s/ PricewaterhouseCoopers  
|Auditores Independentes     



F-3



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##### Table of Contents

Report of Independent Registered

Public Accounting Firm

To the Board of Directors and Shareholders of

EmbraerEmpresa Brasileira

de Aeronáutica S.A.



|1 | We have audited the accompanying consolidated balance sheets of EmbraerEmpresa Brasileira de Aeronáutica S.A. (a Brazilian Corporation) and subsidiaries as of
December 31, 2006, and the related consolidated statements of income, change in shareholders equity and cash flows for the period ended December 31, 2006. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2 | We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3 | In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of EmbraerEmpresa Brasileira de
Aeronáutica S.A. and subsidiaries as of December 31, 2006, and the consolidated results of their operations, change in shareholders equity and their cash flows, in conformity with accounting principles generally accepted in the
United States of America.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                       
|-------------------------------------------------------
|São Paulo, April 18, 2007 (October 5, 2007 as restated)
|                                                       
|/s/ Deloitte Touche Tohmatsu                           
|Auditores Independentes                                



F-4



---

##### Table of Contents

EmbraerEmpresa Brasileira

de Aeronáutica S.A.

Consolidated Balance Sheets as of December 31

In millions of U.S. dollars





|                                   |  |      |  |         |  |        
|---------------------------------- |  | ---- |  | ------- |  | -------
|                                   |  | Note |  | 2008    |  | 2007   
|Assets                             |  |      |  |         |  |        
|                                   |  |      | 
|Current assets                     |  |      |  |         |  |        
|Cash and cash equivalents          |  | 5    |  | 1,391.4 |  | 1,307.4
|Temporary cash investments         |  | 6    |  | 810.1   |  | 1,185.7
|Trade accounts receivable, net     |  | 7    |  | 438.1   |  | 354.7  
|Customer and commercial financing  |  | 8    |  | 8.6     |  | 4.3    
|Collateralized accounts receivable |  | 9    |  | 11.5    |  | 12.4   
|Inventories                        |  | 10   |  | 2,829.0 |  | 2,481.1
|Deferred income taxes              |  | 28   |  | 154.3   |  | 87.1   
|Other assets                       |  | 11   |  | 273.5   |  | 217.0  
|                                   |  |      |  |         |  |        
|                                   |  |      |  | 5,916.5 |  | 5,649.7
|                                   |  |      |  |         |  |        
|                                   |  |      | 
|Non-current assets                 |  |      |  |         |  |        
|Inventories                        |  | 10   |  | 8.0     |  | 10.1   
|Trade accounts receivable          |  | 7    |  | 5.9     |  | 39.7   
|Customer and commercial financing  |  | 8    |  | 510.4   |  | 410.4  
|Collateralized accounts receivable |  | 9    |  | 467.1   |  | 465.3  
|Guarantee deposits                 |  | 11   |  | 493.2   |  | 469.6  
|Property, plant and equipment, net |  | 13   |  | 737.9   |  | 566.0  
|Goodwill                           |  |      |  | 14.5    |  |       
|Investments                        |  | 12   |  | 68.7    |  | 42.5   
|Deferred income taxes              |  | 28   |  | 173.2   |  | 175.9  
|Other assets                       |  | 11   |  | 248.5   |  | 236.7  
|                                   |  |      |  |         |  |        
|                                   |  |      |  | 2,727.4 |  | 2,416.2
|                                   |  |      | 
|Total assets                       |  |      |  | 8,643.9 |  | 8,065.9
|                                   |  |      |  |         |  |        



F-5



---

##### Table of Contents

EmbraerEmpresa Brasileira

de Aeronáutica S.A.

Consolidated Balance Sheets as of
December 31

In millions of U.S. dollars (continued)





|                                                                                                               |  |      |  |         |   |  |         |  
|-------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------- | - |  | ------- | -
|                                                                                                               |  | Note |  | 2008    |   |  | 2007    |  
|Liabilities and shareholders equity                                                                           |  |      |  |         |   |  |         |  
|                                                                                                               |  |      | 
|Current liabilities                                                                                            |  |      |  |         |   |  |         |  
|Loans and financing                                                                                            |  | 20   |  | 529.3   |   |  | 932.7   |  
|Non-recourse and recourse debt                                                                                 |  | 9    |  | 137.7   |   |  | 114.0   |  
|Capital lease obligation                                                                                       |  | 21   |  | 5.5     |   |  | 4.4     |  
|Trade accounts payable                                                                                         |  |      |  | 1,078.1 |   |  | 912.5   |  
|Advances from customers                                                                                        |  | 16   |  | 1,151.5 |   |  | 801.6   |  
|Taxes and payroll charges payable                                                                              |  | 17   |  | 57.5    |   |  | 98.2    |  
|Deferred income taxes                                                                                          |  | 28   |  | 4.1     |   |  |        |  
|Accrued taxes on income                                                                                        |  |      |  | 5.8     |   |  | 1.9     |  
|Contingencies                                                                                                  |  | 19   |  | 9.5     |   |  | 7.0     |  
|Interest on capital and dividends                                                                              |  | 25   |  | 0.9     |   |  | 0.5     |  
|Other payables and accrued liabilities                                                                         |  | 15   |  | 565.4   |   |  | 466.6   |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      |  | 3,545.3 |   |  | 3,339.4 |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      | 
|Non-current liabilities                                                                                        |  |      |  |         |   |  |         |  
|Loans and financing                                                                                            |  | 20   |  | 1,296.1 |   |  | 820.3   |  
|Non-recourse and recourse debt                                                                                 |  | 9    |  | 366.9   |   |  | 371.7   |  
|Capital lease obligation                                                                                       |  | 21   |  | 13.9    |   |  | 12.0    |  
|Trade accounts payable                                                                                         |  |      |  |        |   |  | 0.3     |  
|Advances from customers                                                                                        |  | 16   |  | 449.2   |   |  | 368.0   |  
|Contribution from suppliers                                                                                    |  | 14   |  | 44.3    |   |  | 112.2   |  
|Taxes and payroll charges payable                                                                              |  | 17   |  | 343.9   |   |  | 466.8   |  
|Deferred income taxes                                                                                          |  | 28   |  | 95.5    |   |  | 5.6     |  
|Contingencies                                                                                                  |  | 19   |  | 39.6    |   |  | 52.4    |  
|Other payables and accrued liabilities                                                                         |  | 15   |  | 169.9   |   |  | 199.0   |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      |  | 2,819.3 |   |  | 2,408.3 |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      | 
|Minority interest                                                                                              |  |      |  | 70.0    |   |  | 68.7    |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      | 
|Shareholders equity                                                                                           |  | 24   |  |         |   |  |         |  
|Statutory capital                                                                                              |  |      |  |         |   |  |         |  
|Common shares (1,000,000,000 shares authorized and 740,465,043 shares issued and outstanding)                  |  |      |  | 1,438.0 |   |  | 1,438.0 |  
|Special common share (R$1 par value, 1 share authorized, issued and outstanding at December 31, 2008 and 2007) |  |      |  |        |   |  |        |  
|Treasury shares, at cost16,800,000 shares (2007 -70,000)                                                      |  |      |  | (183.8  | ) |  | (0.8    | )
|Appropriated retained earnings                                                                                 |  |      |  | 80.4    |   |  | 53.6    |  
|Unappropriated retained earnings                                                                               |  |      |  | 862.6   |   |  | 743.7   |  
|Accumulated other comprehensive income                                                                         |  |      |  | 12.1    |   |  | 15.0    |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      |  | 2,209.3 |   |  | 2,249.5 |  
|                                                                                                               |  |      |  |         |   |  |         |  
|                                                                                                               |  |      | 
|Total liabilities and shareholders equity                                                                     |  |      |  | 8,643.9 |   |  | 8,065.9 |  
|                                                                                                               |  |      |  |         |   |  |         |  

The accompanying notes are an integral part of these consolidated financial statements.



F-6



---

##### Table of Contents

EmbraerEmpresa Brasileira

de Aeronáutica S.A.

Consolidated Statements of Income and
Comprehensive

Income For the Years Ended December 31

In millions of U.S. dollars, except earnings per share





|                                                          |  |      |  |          |   |  |          |   |  |          |  
|--------------------------------------------------------- |  | ---- |  | -------- | - |  | -------- | - |  | -------- | -
|                                                          |  | Note |  | 2008     |   |  | 2007     |   |  | 2006     |  
|Gross sales                                               |  |      |  |          |   |  |          |   |  |          |  
|Foreign market                                            |  |      |  | 6,130.1  |   |  | 5,176.1  |   |  | 3,682.8  |  
|Domestic market                                           |  |      |  | 282.1    |   |  | 209.2    |   |  | 146.1    |  
|Sales deductions                                          |  | 3(a) |  | (77.0    | ) |  | (140.1   | ) |  | (69.4    | )
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|Net sales                                                 |  |      |  | 6,335.2  |   |  | 5,245.2  |   |  | 3,759.5  |  
|Cost of sales and services                                |  |      |  | (4,991.7 | ) |  | (4,093.5 | ) |  | (2,806.8 | )
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Gross profit                                              |  |      |  | 1,343.5  |   |  | 1,151.7  |   |  | 952.7    |  
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Operating income (expenses)                               |  |      |  |          |   |  |          |   |  |          |  
|Selling                                                   |  |      |  | (393.1   | ) |  | (361.3   | ) |  | (220.6   | )
|Research and development                                  |  |      |  | (197.0   | ) |  | (259.7   | ) |  | (112.7   | )
|General and administrative                                |  |      |  | (232.4   | ) |  | (234.8   | ) |  | (235.5   | )
|Employee profit sharing                                   |  | 3(p) |  |         |   |  |         |   |  | (42.7    | )
|Other operating income, net                               |  | 29   |  | 16.0     |   |  | 78.3     |   |  | 1.6      |  
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Income from operations                                    |  |      |  | 537.0    |   |  | 374.2    |   |  | 342.8    |  
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Interest (expenses) income, net                           |  | 22   |  | (171.4   | ) |  | 163.4    |   |  | 105.4    |  
|Foreign exchange gain (loss ), net                        |  | 30   |  | 71.7     |   |  | (37.7    | ) |  | (4.0     | )
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Income before income taxes                                |  |      |  | 437.3    |   |  | 499.9    |   |  | 444.2    |  
|Income tax expense                                        |  | 28   |  | (41.1    | ) |  | (2.7     | ) |  | (44.4    | )
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Income before minority interest and results of affiliates |  |      |  | 396.2    |   |  | 497.2    |   |  | 399.8    |  
|Minority interest                                         |  |      |  | (7.5     | ) |  | (8.2     | ) |  | (9.6     | )
|Equity in earnings (losses) of affiliates                 |  |      |  | 0.0      |   |  | 0.3      |   |  | (0.1     | )
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Net income                                                |  |      |  | 388.7    |   |  | 489.3    |   |  | 390.1    |  
|Other comprehensive (loss) income                         |  |      |  | (2.9     | ) |  | 11.2     |   |  | 9.3      |  
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Comprehensive income                                      |  |      |  | 385.8    |   |  | 500.5    |   |  | 399.4    |  
|                                                          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Earnings per share                                        |  | 26   |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Basic                                                     |  |      |  | 0.5354   |   |  | 0.6611   |   |  | 0.5273   |  
|Diluted                                                   |  |      |  | 0.5354   |   |  | 0.6603   |   |  | 0.5250   |  
|                                                          |  |      |  |         
|Weighted average number of shares (in thousands)          |  |      |  |          |   |  |          |   |  |          |  
|                                                          |  |      |  |         
|Basic                                                     |  |      |  | 726,084  |   |  | 740,142  |   |  | 739,904  |  
|Diluted                                                   |  |      |  | 726,084  |   |  | 741,047  |   |  | 742,903  |  

The accompanying notes are an integral part of these consolidated financial statements.



F-7



---

##### Table of Contents

EmbraerEmpresa Brasileira

de Aeronáutica S.A.

Consolidated Statements of Cash Flows

Years Ended December 31

In millions of U.S.
dollars





|                                                                          |  |          |   |  |          |   |  |          |  
|------------------------------------------------------------------------- |  | -------- | - |  | -------- | - |  | -------- | -
|                                                                          |  | 2008     |   |  | 2007     |   |  | 2006     |  
|Cash flows from operating activities                                      |  |          |   |  |          |   |  |          |  
|Net income                                                                |  | 388.7    |   |  | 489.3    |   |  | 390.1    |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Adjustments to reconcile net income to net cash from operating activities |  |          |   |  |          |   |  |          |  
|Depreciation                                                              |  | 70.5     |   |  | 58.8     |   |  | 63.9     |  
|Allowance for doubtful accounts                                           |  | 2.1      |   |  | 1.5      |   |  | 4.2      |  
|Allowance (reversal) for inventory obsolescence                           |  | 12.7     |   |  | (9.9     | ) |  | 10.6     |  
|Loss on property, plant and equipment disposals                           |  | 0.5      |   |  | 0.7      |   |  | 0.9      |  
|Accrued interest                                                          |  | (19.8    | ) |  | 4.5      |   |  | 0.6      |  
|Minority interest                                                         |  | 7.5      |   |  | 8.2      |   |  | 9.6      |  
|Foreign exchange gain (loss), net                                         |  | (71.7    | ) |  | 37.7     |   |  | 4.0      |  
|Deferred income taxes                                                     |  | 29.5     |   |  | (30.8    | ) |  | (1.3     | )
|Unrealized losses (gains) on trading securities, net                      |  | (62.8    | ) |  | (101.2   | ) |  |         |  
|Other                                                                     |  | (1.8     | ) |  | 1.2      |   |  | (1.5     | )
|Changes in assets and liabilities                                         |  |          |   |  |          |   |  |          |  
|Temporary cash investments                                                |  |         |   |  |         |   |  | 18.6     |  
|Trade accounts receivable and customer and commercial financing, net      |  | (156.3   | ) |  | (274.9   | ) |  | 155.3    |  
|Collateralized accounts receivable                                        |  | (1.0     | ) |  | 342.0    |   |  | 34.5     |  
|Inventories                                                               |  | (357.1   | ) |  | (434.0   | ) |  | (577.3   | )
|Other assets                                                              |  | (116.9   | ) |  | 91.9     |   |  | 34.3     |  
|Trade accounts payable                                                    |  | 179.9    |   |  | (6.3     | ) |  | 181.6    |  
|Other payables and accrued liabilities                                    |  | 106.5    |   |  | (22.3    | ) |  | (24.7    | )
|Accrued taxes on income                                                   |  | 122.0    |   |  | (5.0     | ) |  | (32.3    | )
|Contribution from suppliers                                               |  | (67.9    | ) |  | 20.0     |   |  | (5.6     | )
|Taxes and payroll charges payable                                         |  | (163.5   | ) |  | (27.0    | ) |  | (35.1    | )
|Advances from customers                                                   |  | 431.1    |   |  | 441.1    |   |  | 145.5    |  
|Contingencies                                                             |  | (10.4    | ) |  | (5.1     | ) |  | 11.0     |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Net cash provided by operating activities                                 |  | 321.8    |   |  | 580.4    |   |  | 386.9    |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Cash flows from investing activities                                      |  |          |   |  |          |   |  |          |  
|Additions to property, plant and equipment                                |  | (235.1   | ) |  | (208.9   | ) |  | (90.8    | )
|Proceeds from sale of property, plant and equipment                       |  | 2.0      |   |  | 4.1      |   |  | 0.7      |  
|Court-mandated escrow deposits, net of withdrawals                        |  | (3.3     | ) |  | (37.1    | ) |  | (88.5    | )
|Purchases and sales of temporary cash investments, net                    |  | 410.7    |   |  | (528.4   | ) |  |         |  
|Acquisition of investments                                                |  |         |   |  |         |   |  | (0.8     | )
|Restricted cash                                                           |  | 12.1     |   |  | (14.6    | ) |  |         |  
|Acquisition of non-controlling interest                                   |  | (20.0    | ) |  |         |   |  |         |  
|Others                                                                    |  | 2.5      |   |  | 0.6      |   |  | (0.1     | )
|                                                                          |  |          |   |  |          |   |  |          |  
|Net cash provided by (used in) investing activities                       |  | 168.9    |   |  | (784.3   | ) |  | (179.5   | )
|                                                                          |  |          |   |  |          |   |  |          |  
|Cash flows from financing activities                                      |  |          |   |  |          |   |  |          |  
|Proceeds from borrowings                                                  |  | 1,886.2  |   |  | 1,772.0  |   |  | 1,258.2  |  
|Repayment of borrowings                                                   |  | (1,770.4 | ) |  | (1,471.9 | ) |  | (1,497.7 | )
|Payments of capital lease obligations                                     |  | (4.6     | ) |  | (2.4     | ) |  | (2.9     | )
|Proceeds from issuance of shares                                          |  |         |   |  | 3.6      |   |  | 5.1      |  
|Dividends and/or interest on capital paid                                 |  | (242.7   | ) |  | (163.5   | ) |  | (157.8   | )
|Acquisition of own shares for treasury                                    |  | (183.0   | ) |  | (0.8     | ) |  |         |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Net cash provided by (used in) financing activities                       |  | (314.5   | ) |  | 137.0    |   |  | (395.1   | )
|                                                                          |  |          |   |  |          |   |  |          |  
|Effect of exchange rate changes on cash and cash equivalents              |  | (92.2    | ) |  | 164.9    |   |  | 57.9     |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Increase (decrease) in cash and cash equivalents                          |  | 84.0     |   |  | 98.0     |   |  | (129.8   | )
|Cash and cash equivalents, at beginning of year                           |  | 1,307.4  |   |  | 1,209.4  |   |  | 1,339.2  |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Cash and cash equivalents, at end of year                                 |  | 1,391.4  |   |  | 1,307.4  |   |  | 1,209.4  |  
|                                                                          |  |          |   |  |          |   |  |          |  
|Supplemental disclosure of cash flow information (Note 37)                |  |          |   |  |          |   |  |          |  

The accompanying notes are an integral part of these consolidated financial statements.



F-8



---

##### Table of Contents

EmbraerEmpresa Brasileira

de Aeronáutica S.A.

Consolidated Statements of
Shareholders Equity

In millions of U.S. dollars, except number of shares (in thousands)





|                                                                   |  |                 |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   |  |                                            |   |  |         |  
|------------------------------------------------------------------ |  | --------------- | - |  | ------ | - |  | -------------- |  | ------- |  | ------------------------ | - |  | -------------- | - |  | ---------------------------- | - |  | ------------------------------ | - |  | ------------------------------------------ | - |  | ------- | -
|                                                                   |  | Capital         |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   | 
|                                                                   |  | Preferred       |   |  | Common |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   | 
|                                                                   |  | Numberof shares |   |  | Amount |   |  | Numberofshares |  | Amount  |  | Additionalpaid-incapital |   |  | Treasuryshares |   |  | Appropriatedretainedearnings |   |  | Unappropriatedretainedearnings |   |  | Accumulatedothercomprehensive(loss) income |   |  | Total   |  
|At December 31, 2005                                               |  | 479,288         |   |  | 882.6  |   |  | 242,544        |  | 298.4   |  | 8.4                      |   |  |               |   |  | 126.7                        |   |  | 305.9                          |   |  | (1.7                                       | ) |  | 1,620.3 |  
|Capital increase                                                   |  |                |   |  |       |   |  | 1,292          |  | 5.1     |  |                         |   |  |               |   |  |                             |   |  |                               |   |  |                                           |   |  | 5.1     |  
|Restructuring adjustments                                          |  |                |   |  |       |   |  | 16,780         |  | 248.3   |  | (8.4                     | ) |  |               |   |  | (126.7                       | ) |  | (109.4                         | ) |  | (3.8                                       | ) |  |        |  
|Conversion of preferred shares into common shares                  |  | (479,288        | ) |  | (882.6 | ) |  | 479,288        |  | 882.6   |  |                         |   |  |               |   |  |                             |   |  |                               |   |  |                                           |   |  |        |  
|Net income                                                         |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 390.1                          |   |  |                                           |   |  | 390.1   |  
|Legal reserve                                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  | 13.8                         |   |  | (13.8                          | ) |  |                                           |   |  |        |  
|Dividends/interest on capital                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | (150.5                         | ) |  |                                           |   |  | (150.5  | )
|Cumulative translation adjustment                                  |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  |                               |   |  | 8.5                                        |   |  | 8.5     |  
|Post-retirement benefitsadoption SFAS 158 (net of tax of US$ 0.5) |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  |                               |   |  | 0.8                                        |   |  | 0.8     |  
|                                                                   |  |                 |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   |  |                                            |   |  |         |  
|At December 31, 2006                                               |  |                |   |  |       |   |  | 739,904        |  | 1,434.4 |  |                         |   |  |               |   |  | 13.8                         |   |  | 422.3                          |   |  | 3.8                                        |   |  | 1,874.3 |  
|Capital increasestock options exercised                           |  |                |   |  |       |   |  | 561            |  | 3.6     |  |                         |   |  |               |   |  |                             |   |  |                               |   |  |                                           |   |  | 3.6     |  
|Net income                                                         |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 489.3                          |   |  |                                           |   |  | 489.3   |  
|Legal reserve                                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  | 16.8                         |   |  | (16.8                          | ) |  |                                           |   |  |        |  
|Treasury shares acquired                                           |  |                |   |  |       |   |  |               |  |        |  |                         |   |  | (0.8           | ) |  |                             |   |  |                               |   |  |                                           |   |  | (0.8    | )
|Dividends/interest on capital                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | (128.5                         | ) |  |                                           |   |  | (128.5  | )
|Dividends forfeited                                                |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 0.1                            |   |  |                                           |   |  | 0.1     |  
|Cumulative translation adjustment                                  |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 0.3                            |   |  | 10.5                                       |   |  | 10.8    |  
|Transfer between reserves                                          |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  | 23.0                         |   |  | (23.0                          | ) |  |                                           |   |  |        |  
|Post-retirement benefits (net of tax of US $ 0.5)                  |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  |                               |   |  | 0.7                                        |   |  | 0.7     |  
|                                                                   |  |                 |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   |  |                                            |   |  |         |  
|At December 31, 2007                                               |  |                |   |  |       |   |  | 740,465        |  | 1,438.0 |  |                         |   |  | (0.8           | ) |  | 53.6                         |   |  | 743.7                          |   |  | 15.0                                       |   |  | 2,249.5 |  
|Net income                                                         |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 388.7                          |   |  |                                           |   |  | 388.7   |  
|Legal reserve                                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  | 26.8                         |   |  | (26.8                          | ) |  |                                           |   |  |        |  
|Treasury shares acquired                                           |  |                |   |  |       |   |  |               |  |        |  |                         |   |  | (183.0         | ) |  |                             |   |  |                               |   |  |                                           |   |  | (183.0  | )
|Dividends/interest on capital                                      |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | (243.0                         | ) |  |                                           |   |  | (243.0  | )
|Dividends forfeited                                                |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  | 0.0                            |   |  |                                           |   |  | 0.0     |  
|Cumulative translation adjustment                                  |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  |                               |   |  | (2.4                                       | ) |  | (2.4    | )
|Post-retirement benefits (net of tax of US$ 0.3)                   |  |                |   |  |       |   |  |               |  |        |  |                         |   |  |               |   |  |                             |   |  |                               |   |  | (0.5                                       | ) |  | (0.5    | )
|                                                                   |  |                 |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   |  |                                            |   |  |         |  
|At December 31, 2008                                               |  |                |   |  |       |   |  | 740,465        |  | 1,438.0 |  |                         |   |  | (183.8         | ) |  | 80.4                         |   |  | 862.6                          |   |  | 12.1                                       |   |  | 2,209.3 |  
|                                                                   |  |                 |   |  |        |   |  |                |  |         |  |                          |   |  |                |   |  |                              |   |  |                                |   |  |                                            |   |  |         |  

The accompanying notes are an integral part of these consolidated financial statements.



F-9



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##### Table of Contents

|1 | The Company and its Operations
|- | ------------------------------

EmbraerEmpresa Brasileira de Aeronáutica S.A. (the Company) is a publicly-held company incorporated under the laws of the Federative Republic of Brazil. Formed in 1969 by the Brazilian government, the Company was
privatized in 1994. The corporate purpose of the Company is the development, production and sale of jet and turboprop aircraft for civil and defense aviation, aircraft for agricultural use, structural components, mechanical and hydraulic systems and
technical activities related to the production and maintenance of aerospace material.

The Company has grown from a government-controlled
company established to develop and produce aircraft for the Brazilian Air Force into a public company that produces aircraft for commercial, executive aviation and defense purposes. The Company has developed and enhanced its engineering and
technological capabilities through its development of products for the Brazilian Air Force and through joint development projects with foreign partners. The Company has applied the capabilities it has gained from its defense business to develop its
commercial and executive aviation aircraft businesses.

At the Extraordinary General Shareholders Meeting held on March 31, 2006,
the shareholders approved the proposal for a corporate restructuring of the Company presented by the Board of Directors on January 19, 2006, resulting in the merger of the Company formerly know as EmbraerEmpresa Brasileira de
Aeronáutica S.A. into its parent company, Rio Han Empreendimentos e Participações S.A. (the Parent Company), which had no operations up to the date of the merger, changed its corporate name to EmbraerEmpresa
Brasileira de Aeronáutica S.A.

The objective of this restructuring was to improve access to the capital markets to sustain the
growth of the Companys businesses. This restructuring enabled the Company to register in a special listing segment of the São Paulo Stock Exchange (BOVESPA), called the New Market (Novo Mercado). Furthermore, the Company no
longer has a defined controlling group, and the capital now comprises only common stock, assuring voting rights to all shareholders. The Company notified the market of this transaction on January 20, 2006.



The accompanying notes are an integral part of these consolidated financial statements.

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##### Table of Contents

The Company has wholly-owned consolidated subsidiaries and/or commercial representative offices, which
are located in Brazil, the United States, France, Spain, China, Portugal and Singapore and are mainly engaged in sales marketing and post sales/maintenance services.



|2 | Presentation and Consolidation of Financial Statements
|- | ------------------------------------------------------



|(a) | Presentation
|--- | ------------



|(i) | The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP), which differ in
certain respects from accounting principles applied by the Company in its statutory financial statements prepared in accordance with accounting practices adopted in Brazil (BR GAAP).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | A substantial portion of the Companys sales is destined to export markets and a substantial level of financing,
manufacturing and other costs is denominated in U.S. dollars (US$). The Company presents its financial statements in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards no(SFAS) 52, Foreign Currency Translation. The Companys Board of Directors
and management have historically considered that the U.S. dollar has been, and remains in their opinion, the currency in which the Company principally operates. Accordingly, the Companys management has concluded that its functional currency is
the U.S. dollar.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) | For US GAAP purposes, the Company has elected to use the U.S. dollar as its reporting currency, as it believes such presentation is more meaningful to readers. Translation
gains and losses are recorded in Foreign exchange (gain) loss, net in the statement of income.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | For subsidiaries whose functional currency is a currency other than the U.S. dollar, asset and liability accounts are translated into the Companys reporting currency using
exchange rates in effect at the date of the balance sheet, and income and expense items are translated using weighted average exchange rates. Resulting translation adjustments are reported in a separate component of shareholders equity, in
Cumulative Translation Adjustment. The official exchange rate reported by the Brazilian Central Bank at the balance sheet date were December 31, 2008 - US$ 1.00 : R$ 2.3370; December 31, 2007 - US$ 1.00 : R$ 1.7713 ;
December 31, 2006 - US$ 1.00 : R$ 2.1380.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(v) | SFAS 159 The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statements 115, effective as of the
beginning of the first fiscal year that begins after November 15, 2007. This statements standard amends, among other things, SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, relating to the cash
flows for purchases, sales and maturities of trading securities. The Company retroactively applied the provisions of SFAS 159 to the
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-11



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##### Table of Contents

| | presentation of the cash flow statements for the year ended December 31, 2007. Consequently, the balances of net cash provided by operating
activities and net cash from investing activities were reclassified for the year ended December 31, 2007, to increase the former and decrease the latter by US$ 528.4. The corresponding reclassification was not considered to be
significant in 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Consolidation
|--- | -------------

The consolidated financial
statements include the accounts of (i) the Company and all majority-owned subsidiaries in which the Company, directly or indirectly, has either a majority of the equity of the subsidiary or otherwise has management control and (ii) special
purpose entities - SPEs - for which the Company was considered to be the primary beneficiary according to FASB Interpretation 46-R (FIN 46-R), Consolidation of Variable Interest Entities. All intercompany accounts and
transactions arising from consolidated entities have been eliminated.



|(c) | Acquisition of non-controlling interest
|--- | ---------------------------------------

In July
2008, Embraer acquired a 40% interest in ELEB - Embraer Liebherr Equipamentos do Brasil S.A. from Liebherr Aerospace S.A.S., concluding the transaction announced on December 21, 2007. Embraer now holds 99.99% of ELEBs equity interest, and
the company name was changed to ELEB - Equipamentos Ltda. (ELEB).The acquisition was accounted for as a business combination according to SFAS 141, Business Combinations.



|3 | Summary of Significant Accounting Policies
|- | ------------------------------------------



|(a) | Revenue recognition
|--- | -------------------

The Company recognizes
revenues from sales by the commercial, executive aircraft, aviation services and defense and government segments when title and risk of loss is transferred to customers, which, in the case of aircraft, occurs when delivery is made, and in the case
of aviation services, when the service is provided to the customer.

The Company also recognizes rental revenue for lease aircrafts under
operating lease ratably over the lease term and records such revenue as Net sales - others when presenting income information by operating segment.

In the defense and government segments, a significant portion of revenues is derived from long-term development contracts with the Brazilian and foreign governments, for which the Company recognizes revenues under the Percentage of
Completion (POC) method. Such contracts contain provisions for price escalation based on a mix of indices related to raw material and labor cost. From time to time, the Company reassesses the expected margins of certain long-term
contracts, adjusting revenue recognition based upon projected costs to completion.

Revenues under exchange pool programs are recognized
monthly over the contract term and consist partly of a fixed fee and partly of a variable fee directly related to actual flight hours of the covered aircraft.



The accompanying notes are an integral part of these consolidated financial statements.

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##### Table of Contents

The Company enters into transactions that represent multiple-element arrangements, such as training,
technical assistance, spare parts and others concessions, which are included in the aircraft purchase price. Multiple-element arrangements are assessed to determine whether they can be separated into more than one unit of accounting if all of the
following criteria are met: (i) the delivered item has value to the client on a stand-alone basis; (ii) there is objective and reliable evidence of the fair value of the undelivered item; and (iii) if the arrangement includes a
general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the Company.

If these criteria are not met, the arrangement is accounted for as one unit of accounting, which results in revenue being deferred until the earlier of
when such criteria are met or when the last undelivered element is delivered. If these criteria are met for each element and there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement
consideration is allocated to the separate units of accounting based on each units relative fair value.

Sales deductions comprise
indirect sales taxes and contractual concessions.

The Company offers contractual concessions that provide its customers with a reduction in
the amount paid for its aircraft. The concessions are recorded as Sales deductions in accordance with EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer, because the concessions represent a reduction of the
sales price. In addition, the recovery of the concessions through the export incentive program is recognized as revenue associated with the sale and exportation of the aircraft, and, therefore, is recorded as Net sales.



|(b) | Cost of sales and services
|--- | --------------------------

Cost of sales and
services consist of the cost of the aircraft, spare parts and services rendered, comprising:



| | (i) | Material - substantially all materials costs are covered by contracts with suppliers. Prices under these contracts are generally adjusted based on an escalation formula which
reflects, in part, inflation in the United States.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Labor - these costs are primarily real-denominated.
| | ---- | ---------------------------------------------------



| | (iii) | Depreciation - property, plant and equipment is depreciated over the useful lives, ranging from five to 48 years, on a straight-line basis. On average, property, plant and equipment
is depreciated over 16 years.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation of aircraft under operating leases is recorded in cost of sales and services, from
the beginning of the lease term using the straight-line method over the estimated useful life and considering a residual value at the end of the lease term.



The accompanying notes are an integral part of these consolidated financial statements.

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##### Table of Contents

In accordance with SFAS 5, Accounting for Contingencies, the Company accrues a
liability for the obligations associated with product warranties at the aircraft delivery date which is estimated based on historical experience and recorded in Cost of sales and services.

The Company enters into transactions that represent multiple-element arrangements, such as training, technical assistance, spare parts and other
concessions. These costs are recognized when the product or service is provided to the customer.



|(c) | Cash and cash equivalents
|--- | -------------------------

Cash and cash
equivalents consist of cash on hand in banks and highly liquid investments, such as certificates of deposit, time deposits and other money market investments with original maturities of 90 days or less.



|(d) | Temporary cash investments
|--- | --------------------------

Securities with
original maturities greater than 90 days, which are held through exclusive investment funds, are classified as temporary cash investments.



|(e) | Allowance for doubtful accounts
|--- | -------------------------------

The allowance for
doubtful accounts is based on an analysis of accounts receivable and is recorded in an amount considered sufficient to cover expected losses on uncollectible accounts receivable.



|(f) | Inventories
|--- | -----------

Inventories are stated at the lower of
average production cost or acquisition cost or market value. Inventories of work in process and finished goods are reduced, when applicable, to net realizable value after deduction for costs, taxes and selling expenses. The Company records a
valuation allowance when items are determined to be obsolete or are held in quantities that are in excess of projected usage based on managements estimate of net realizable values. Allowances are utilized if inventories are sold or
written-off.



|(g) | Spare part exchange pools
|--- | -------------------------

Based on formal
contractual arrangements with customers, certain spare parts are segregated and placed in exchange pools for the exclusive use of customers participating in such programs, from which they may withdraw for their use an equivalent functioning part, as
defined, for an unserviceable part, as needed. Parts placed in exchange pools are recorded as other assets and are depreciated using the straight-line method over estimated useful lives of seven to ten years and considering estimated residual values
of 20% to 50% of original cost, which management believes approximate the usage and change in value of the items. Costs to refurbish parts placed in exchange pools are expensed as incurred. Items in exchange pools are classified as other long-term
assets on the consolidated balance.



The accompanying notes are an integral part of these consolidated financial statements.

F-14



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##### Table of Contents

During 2008, 2007 and 2006, the Company recognized revenues of US$ 60.8, US$ 49.8 and
US$ 39.3 respectively, under exchange pool arrangements, which are reported as Net sales in the statements of income and comprehensive income in the aviation services segment.



|(h) | Customer and commercial financing
|--- | ---------------------------------

Customer and
commercial financing consists of notes receivable originated from financed aircraft sales, and used aircraft assets either under operating leases or available for lease and/or sale.

Notes receivable are stated at cost plus accrued interest and reduced by valuation allowances, when necessary, which are determined by the Company upon
considering the customer credit rating and related collateral, if any, attached to the respective notes receivable.

Aircraft under
operating leases are recorded at cost, net of accumulated depreciation (Note 8).

The Company reviews aircraft under operating leases for
impairment when events or changes in circumstances indicate that the expected undiscounted cash flows from the asset may be less than its carrying value. An asset under an operating lease is considered to be impaired when events or chances in
circumstances indicated that the expected undiscounted cash flows from the asset may be less than its carrying value. Various assumptions are used to determine the expected undiscounted cash flow. These assumptions include lease rates, lease terms,
periods over which the asset may be held in preparation for a follow-on lease, maintenance costs, remarketing costs and the expected useful life of the asset. The determination of expected lease rates is generally based on independent reference
values obtained from publications and similar aircraft sales in the secondary market. The Company uses historical information and current economic trends to develop the remaining assumptions. When there is an indication that an asset is impaired,
the impairment loss recorded represents the excess of the carrying value over the estimated fair value.

Used aircraft available for lease
or sale are stated at their acquisition cost. The Company compares the cost of the individual aircraft with is estimated market value, based on third-party appraisal estimates for the cost of each aircraft. Any resulting deficiencies are recorded as
a reduction of the carrying value of the aircraft and charged to cost of sales and services. Losses recorded totaled US$ 28.1, US$ 6.8 for the years ended December 31, 2008, 2007, respectively. No impairments losses were recorded in 2006.



|(i) | Collateralized accounts receivable and non-recourse and recourse debt
|--- | ---------------------------------------------------------------------

Some of the Companys sales transactions are structured financings through which an SPE purchases the aircraft, pays the Company the purchase price on delivery or at the conclusion of the sales financing
arrangement, and then leases the related aircraft to the ultimate customer. A third party financial institution facilitates the financing of the aircraft purchase through an SPE, and a portion of the credit risk remains with the third party.



The accompanying notes are an integral part of these consolidated financial statements.

F-15



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##### Table of Contents

The Company may provide financial guarantees and/or residual value guarantees in favor of the financial institution, as well as act as the equity participant
in such financial structuring process.

The Company applies FIN 46-R - Consolidation of Variable Interest Entities and
consolidates variable interest entities in which it has a variable interest that will absorb a majority of the entitys expected losses if they occur, receive a majority of the entitys expected residual returns if they occur, or both.
Accordingly, SPEs owned by third parties where the Company is the primary beneficiary are consolidated. When the Company is no longer the primary beneficiary, the assets and liabilities related to the aircraft are deconsolidated from the balance
sheet.

The Company primarily determines whether it is the primary beneficiary or a significant interest holder based on a qualitative
assessment of the VIE. This includes a review of the VIEs capital structure, contractual relationships and terms, nature of the VIEs operations and purpose, nature of the VIEs interests issued, and the Company ́s interests in
the entity which either create or absorb variability. The Company evaluates the design of the VIE and the related risks the entity was designed to expose the variable interest holders to in evaluating consolidation. In limited cases, when it may be
unclear from a qualitative standpoint if the Company is the primary beneficiary, the Company uses a quantitative analysis to calculate the probability weighted expected losses and probability weighted expected residual returns using the cash flow
and statistical risk measurement modeling.

As of December 31, 2008 total assets and total liabilities amounted US$318.9 (2007 
US$ 294.2) and US$317.5 (2007  US$292.7), respectively, associated with its significant variable interests in consolidated VIEs.

Generally, the underlying lease transactions qualify as sales-type leases and, as a result, the consolidation of these SPEs results in recording investments in minimum lease payments receivable and residual value, gross of unearned income
and corresponding non-recourse debt (Note 9).

The residual value of the sales-type lease assets is estimated at the lease inception based
on a number of factors, including the estimated future market value of the aircraft on the basis of third party appraisals, including information developed from similar aircraft remarketing in the secondary market. The Company reassess annually the
sales-type lease investment amount for impairment based on third-party appraisals and credit rating for customers.



|(j) | Property, plant and equipment
|--- | -----------------------------

Property, plant and
equipment are stated at cost, including applicable construction-period interest. Materials allocated to specific projects are added to construction in progress and, in accordance with the provisions of SFAS 34, Capitalization of Interest
Costs, interest incurred on borrowings is capitalized to the extent that borrowings do not exceed construction in progress.



The accompanying notes are an integral part of these consolidated financial statements.

F-16



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##### Table of Contents

Assets acquired through capital lease arrangements are capitalized and depreciated over the expected
useful lives of the assets, in accordance with SFAS 13, Accounting for Leases.

Costs incurred for the development of
computer software for internal use are capitalized in accordance with Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets (Note 13). Improvements to existing property that
significantly extend the useful life or the utility of the asset are capitalized, while maintenance and repair costs are charged to expense as incurred.

Long-lived assets held for sale are stated at the lower of cost or fair value. Long-lived assets held for use are subject to an impairment assessment if facts and circumstances indicate that the carrying value is no
longer recoverable based upon the undiscounted future cash flows of the asset. The amount of the impairment is the difference between the carrying amount and the estimated fair value of the asset. No impairment losses on fixed assets were recorded
in 2008, 2007 or 2006.



|(k) | Marketing and advertising expenses
|--- | ----------------------------------

The Company
records marketing and advertising expenses as incurred which totaled US$ 18.2, US$ 13.4 and US$ 13.3 for 2008, 2007 and 2006, respectively, included in Selling expenses. The Company participates in air shows to promote its products
and develop customer relationships. The amounts expensed in relation to such show fairs totaled US$ 10.7, US$ 14.3 and US$ 13.8 for 2008, 2007 and 2006, respectively.



|(l) | Investments
|--- | -----------

Marketable debt and equity securities
are accounted for in accordance with SFAS 115, Accounting for Certain Investments in Debt and Equity Securities. Investments in marketable securities which the Company has the ability and intent to hold to maturity are classified
as held-to-maturity and are reported at amortized cost, while securities that are purchased for trading purposes are classified as trading securities and marked-to-market with the effects of changes in fair value recorded in the statement of income
and comprehensive income in interest income (expense) net. Declines in the fair value of held-to-maturity securities below their cost that are deemed to be other-than-temporary are recorded as permanent write-downs with a charge to Interest income
(expense), net.

The Company uses the equity method to account for its investees in which it holds less than 50% and more than 20% of the
investees voting stock and has the ability to exercise significant influence over the operating and financial policies of the investee. Under the equity method, the Company records its proportionate share in the investees earnings,
reduced by dividends received.



|(m) | Product warranties
|--- | ------------------

Warranty costs related to sales
of aircraft and parts are recognized as a cost of sales and services at the time of sale based on estimated amounts of warranty costs anticipated to be incurred. These estimates are based on factors that consider, among



The accompanying notes are an integral part of these consolidated financial statements.

F-17



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##### Table of Contents

others, historical warranty claims and cost experience, warranty coverage available from suppliers, type and duration of warranty coverage, and the volume
and mix of aircraft sold and in service. The warranty period typically ranges from two years for spare parts up to five years for aircraft components.

Provisions for warranties are included in Other payables and accrued liabilities (Note 15).



|(n) | Contingencies and guarantees
|--- | ----------------------------

Losses for
contingencies related to labor, tax and civil litigation are recorded when they are determined to be probable and can be reasonably estimated. These estimates are based on the positions of legal counsel and managements estimate as to the
likely outcome of the outstanding matters and the estimated amount of loss at the balance sheet dates.

In accordance with FIN 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others, certain guarantees that are issued or modified after December 31, 2002, including
third-party guarantees, are initially recorded on the balance sheet at fair value. Liabilities for guarantees issued on or before December 31, 2002 are recorded when and if payments become probable and estimable. FIN 45 has the general effect
of delaying recognition of a portion of the revenue for product sales that are accompanied by certain third-party guarantees. During 2008, 2007 and 2006, the fair value of guarantees recorded by the Company generated Sales deductions of US$ 2.9
and US$ 2.5 and credit in Sales deductions of US$ 1.6, respectively.



|(o) | Post-retirement benefits
|--- | ------------------------

The Company participates
in a defined contribution pension plan that provides pension benefits for its employees (Note 23). Expense is recognized as the amount of the required contribution for the period and is recorded on the accrual basis.

Certain wholly-owned subsidiaries in the United States sponsored a defined benefit pension plan, which was terminated and liquidated during 2006, and a
post-retirement medical benefit plan. The Company accounted for such benefits in accordance with SFAS 158, Employers Accounting for Defined Benefit Pension and Other Post-retirement Plansan amendment of FASB Statements 87, 88,
106 and 132(R)which requires an entity to recognize in its balance sheet the over or underfunded status of its defined benefit postretirement plans, measured as the difference between the fair value of the plan assets and the benefit
obligation. SFAS 158 also requires an entity to recognize changes in the funded status of defined benefit post-retirement plans within other comprehensive income, net of tax, to the extent such changes are not recognized in earnings as components of
periodic net benefit cost.

The funded status of the defined benefit pension and post-retirement medical benefit plans is recorded by the
Company based on the funded status of each plan as of the balance sheet dates. The net periodic cost of the Companys post-retirement medical benefit plan and the terminated defined benefit pension was determined using the projected unit credit
method and several actuarial assumptions, the most significant of which are the discount rate, the long-term rate of return on plan assets and the medical cost trend rate.



The accompanying notes are an integral part of these consolidated financial statements.

F-18



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##### Table of Contents

|(p) | Employee profit sharing plan
|--- | ----------------------------

In December 2008, the
Board of Directors approved changes to the methodology for calculating the employee profit-sharing program which is now linked to the Companys net income, calculated in accordance with US GAAP and to individual and business unit
performance targets. Of the total, 30% is distributed equally to all employees and 70% proportionally to salary. The Company recorded an expense of US$ 50.1 in 2008 and US$ 71.0 in 2007.

For 2008, the total profit sharing expense of US$ 50.1 (2007 - US$ 71.0), was allocated to Cost of sales and services - US$ 28.8 (2007 -
US$ 28.7), Selling expenses - US$ 5.7 (2007 - US$ 14.2), Research and development expenses - US$ 13.6 (2007 - US$ 20.9), General and administrative expenses - US$ 2.1 (2007 - US$ 7.2). For 2006, the full amount was
presented in operating expenses as employee profit sharing.



|(q) | Research and development
|--- | ------------------------

Research and development
costs are expensed when incurred and are recorded net of amounts contributed by risk-sharing suppliers. Amounts received from risk-sharing suppliers as contributions for research and development activities are classified as contributions from
suppliers and recognized as research and development only when the Company has met its obligations under the provisions of the related supply agreements (Note 14). Net research and development expenses were US$ 197.0, US$ 259.7 and
US$ 112.7, for 2008, 2007 and 2006, respectively. In 2008, 2007 and 2006, the Company recognized as a reductions of research and development expenditures of US$ 134.8, US$ 23.7 and US$ 36.0, respectively, for payments previously
received from risk-sharing suppliers related to the certification of the EMBRAER 170/190 family and Executive family of aircraft and the fulfillment of other contractual milestones.



|(r) | Stock compensation
|--- | ------------------

On January 1, 2006, the
Company adopted SFAS 123R Share-Based Payment, using the modified prospective application transition method without material impact to the financial statements. Prior to the adoption of SFAS 123R Share-Based Payment,
the Company applied Accounting Principles Board Opinion (APB) 25, Accounting for Stock Issued to Employees in accounting for its employee stock compensation plan.



|(s) | Income taxes
|--- | ------------

Income taxes in Brazil are comprised
of federal income tax and social contribution tax. There are no state or local income taxes in Brazil. The enacted income tax rates applicable for the years ended December 31, 2008, 2007 and 2006 are as follows:



|                             |  |           
|---------------------------- |  | ----------
|                             |  | Percentage
|Federal income tax rate      |  | 25        
|Social contribution tax rate |  | 9         
|                             |  |           
|                             | 
|Combined tax rate            |  | 34        
|                             |  |           



The accompanying notes are an integral part of these consolidated financial statements.

F-19



---

##### Table of Contents

The Company records income taxes in accordance with SFAS 109 - Accounting for Income
Taxes. The effects of book adjustments in relation to the underlying tax basis, have been recognized as temporary differences for the purpose of recording deferred income taxes, except that, in accordance with paragraph 9(f) of SFAS 109
-Accounting for Income Taxes., deferred taxes have not been recorded for differences relating to certain assets and liabilities that are remeasured from Brazilian reais to U.S. dollars at historical exchange rates and that result
from changes in exchange rates or inflation indexation adjustments in local currency for tax purposes.

Effective January 1, 2007, the
Company adopted FIN 48, Accounting for Uncertainty in Income Taxes, which requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. The effects of adoption had an insignificant impact on the financial statements.

The Company records interest and penalties on
uncertain tax positions under interest expense.



|(t) | Derivative financial instruments
|--- | --------------------------------

The Company
accounts for derivative financial instruments pursuant to SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This standard requires that all derivative instruments be recognized in the financial
statements and measured at fair value regardless of the purpose or intent for holding them. The Companys derivative financial instruments have not qualified for hedge accounting designation for purposes of SFAS133 - Accounting for
Derivative Instruments and Hedging Activities.

Accordingly, changes in the fair value of these derivative financial instruments
are recorded in income and classified as a component of Interest income (expense) (Note 22).



|(u) | Comprehensive income
|--- | --------------------

SFAS 130, Reporting
Comprehensive Income, establishes standards for reporting and display of comprehensive income and its components in financial statements. It requires that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income of the Company consists of net income, the effects of foreign currency translation
adjustments on subsidiaries and commencing in 2006, the effects of recording the funded status of post-employment benefit plans in accordance with SFAS 158.



The accompanying notes are an integral part of these consolidated financial statements.

F-20



---

##### Table of Contents

|(v) | Compensated absences
|--- | --------------------

The liability for future
compensation of employee vacations is fully accrued as benefits are earned.



|(w) | Use of estimates
|--- | ----------------

The preparation of the financial
statements in conformity with generally accepted accounting principles requires management to make estimates and adopt assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the
fair value of financial instruments on the balance sheet dates and the reported amounts of revenues and expenses during the reporting period. Significant estimates for which changes in the near term are considered reasonably possible and that may
have a material impact on the financial statements are disclosed. Actual results may differ from such estimates.



|(x) | Goodwill
|--- | --------

Goodwill is not amortized, but tested for
impairment annually and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.

Goodwill is tested for impairment by first comparing the carrying value of net assets to the fair value of the related operations. If the fair value is determined to be less than carrying value, a second step is performed to compute the
amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations, and is compared to its carrying value.

The acquisition of a 40% interest in ELEB for US$ 20.0, generated goodwill of US$ 14.5. The amount of US$ 5.5 was allocated as fair value adjustment of
the assets acquired and liabilities assumed. Fair value of assets acquired and liabilities assumed were based on managements studies. The excess purchase price was fully allocated to goodwill which was tested for impairment.



The accompanying notes are an integral part of these consolidated financial statements.

F-21



---

##### Table of Contents

|4 | Recently Issued Accounting Pronouncements
|- | -----------------------------------------

The FASB
recently issued a number of SFAS and interpretations.



|(a) | Accounting pronouncements adopted
|--- | ---------------------------------

In September
2006, the FASB issued SFAS 157, Fair value measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not
require any new fair value measurements. The adoption of SFAS 157 did not generate a material impact on the Companys financial position, except for certain required disclosures about fair value measurements (Note 34).

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of SFAS
no. 115. SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value in order to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. The adoption of SFAS 159 did not generate a material impact on the Companys financial position, as it did not elect to adopt the fair value option for any of its financial assets or
liabilities at January 1, 2008. In connection with the amendment in SFAS 159 to SFAS 115, the Company changed its statement of cash flows classification policy for trading securities and classified purchase (sales) of trading securities under
investing activities (Note 2 (a) (v)).

On September 12, 2008, the FASB issued a FASB Staff Position (FSP) that
introduces new disclosure requirements for credit derivatives and guarantees and clarifies the effective date of SFAS 161, Disclosures about Derivative Instruments and Hedging Activities. The new disclosure
requirements are designed to result in similar disclosures for financial instruments with similar risks and rewards relating to credit risk, regardless of their legal form. For some companies, the additional disclosures may be significant,
particularly given the increased use in recent years of credit default swaps to manage and gain exposure to particular credit risks. This FSP is effective for fiscal years (and interim periods within those fiscal years) ending after
December 15, 2008. The adoption of this FSP did not generate a material impact on the Companys financial disclosures.



The accompanying notes are an integral part of these consolidated financial statements.

F-22



---

##### Table of Contents

|(b) | Accounting pronouncements not yet adopted
|--- | -----------------------------------------

In
December 2007, the FASB issued SFAS 141 (revised 2007), Business Combination, which replaces SFAS 141, (issued 2001) Business Combinations. This Statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement defines the acquirer as the
entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141 did not define the acquirer, although it included guidance on identifying
the acquirer, as does this Statement. This Statements scope is broader than that of SFAS 141, which applied only to business combinations in which control was obtained by transferring consideration.

The result of applying SFAS 141s guidance on recognizing and measuring assets and liabilities in a step acquisition was to measure them at a blend
of historical costs and fair values, a practice that provided less relevant, representationally faithful, and comparable information than will result from applying this Statement. In addition, this Statements requirement to measure the
noncontrolling interest in the acquiree at fair value will result in recognizing the goodwill attributable to the noncontrolling interest in addition to that attributable to the acquirer, which improves the completeness of the resulting information
and makes it more comparable across entities. By applying the same method of accounting, the acquisition method, to all transactions and other events in which one entity obtains control over one or more other businesses, this Statement improves the
comparability of the information about business combinations provided in financial reports. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this Statement is the same as that of the related SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements. The Company will apply such pronouncement on a prospective basis for each new business combination.

In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51, which clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008
(that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related SFAS 141(R).

This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented.



The accompanying notes are an integral part of these consolidated financial statements.

F-23



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##### Table of Contents

In March 2008, the FASB issued SFAS161, Disclosures about Derivative Instruments and Hedging
Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys
financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and early application is encouraged.

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles, which identifies the sources of
accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This Statement shall be effective 60 days following the
SECs approval of the Public Company Accounting Oversight Board - PCAOB amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.



|5 | Cash and Cash Equivalents
|- | -------------------------



|                                |  |         |  |        
|------------------------------- |  | ------- |  | -------
|                                |  | 2008    |  | 2007   
|Cash equivalents                |  |         |  |        
|Denominated in U.S. dollars (i) |  | 1,005.1 |  | 1,122.9
|Denominated in reais (ii)       |  | 100.1   |  | 59.0   
|Denominated in other currencies |  | 4.7     |  | 12.8   
|Cash and bank balances          |  |         |  |        
|Denominated in U.S. dollars     |  | 14.3    |  | 27.9   
|Denominated in reais            |  | 217.7   |  | 12.0   
|Denominated in other currencies |  | 49.4    |  | 72.8   
|                                |  |         |  |        
|                                |  | 1,391.4 |  | 1,307.4
|                                |  |         |  |        

| | 
| | 

| | (i) | Represents time deposits, money market funds and overnight funds deposited overseas by consolidated subsidiaries.
| | --- | -----------------------------------------------------------------------------------------------------------------

| | (ii) | Mainly represented by money market funds with several financial institutions. These funds are exclusively for the benefit of the Company and managed by third parties and accrue
monthly commission fees. The funds are comprised of investments that have daily liquidity and are marked-to-market on a daily basis with changes in fair value reflected in results of operations. The target returns are specified with each financial
institution based on a percentage of the CDI (Brazilian Interbank Deposit Rate).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-24



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##### Table of Contents

|6 | Temporary Cash Investments
|- | --------------------------



|                   |  |       |  |        
|------------------ |  | ----- |  | -------
|                   |  | 2008  |  | 2007   
|Trading securities |  | 800.4 |  | 1,183.0
|Held-to-maturity   |  | 9.7   |  | 2.7    
|                   |  |       |  |        
|                   |  | 810.1 |  | 1,185.7
|                   |  |       |  |        

At December 31, 2008 and 2007, the Company held investments in private investment money
market funds, the assets of which primarily comprise of notes issued by the Brazilian Federal Government, banks certificates of deposits and debentures issued by public companies in Brazil. These funds are exclusively for the benefit of the Company
and managed by third parties who charge a monthly commission fee. The investments have daily liquidity and are marked-to-market on a daily basis with changes in fair value reflected in results of operations. The Company considers these investments
as securities held for trading purposes, with changes in the fair value reflected in results of operations.

These private investment funds
do not have significant financial obligations. Any financial obligations are limited to asset management and custodial fees, audit fees and similar expenses. No assets of the Company are offered as collateral for these obligations and the creditors
of the funds have no recourse against the general credit of the Company.



|7 | Trade Accounts Receivable
|- | -------------------------



|                                       |  |       |   |  |       |  
|-------------------------------------- |  | ----- | - |  | ----- | -
|                                       |  | 2008  |   |  | 2007  |  
|Aviation services                      |  | 315.5 |   |  | 206.0 |  
|Defense and government                 |  |       |   |  |       |  
|Brazilian Air Force                    |  | 95.4  |   |  | 68.9  |  
|Other                                  |  | 3.3   |   |  | 23.5  |  
|Commercial aviation                    |  | 0.1   |   |  | 34.7  |  
|Others                                 |  | 61.6  |   |  | 92.2  |  
|                                       |  |       |   |  |       |  
|                                       |  | 475.9 |   |  | 425.3 |  
|Less - allowance for doubtful accounts |  | (31.9 | ) |  | (30.9 | )
|                                       |  |       |   |  |       |  
|                                       |  | 444.0 |   |  | 394.4 |  
|Less - current portion                 |  | 438.1 |   |  | 354.7 |  
|                                       |  |       |   |  |       |  
|Long-term portion                      |  | 5.9   |   |  | 39.7  |  
|                                       |  |       |   |  |       |  



The accompanying notes are an integral part of these consolidated financial statements.

F-25



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##### Table of Contents

Unbilled accounts receivables relating to revenues from long-term defense contracts recognized under the
POC method totaled US$ 10.8 at December 31, 2008 (2007 - US$ 2.8). The changes to the allowance for doubtful accounts are summarized as follows:



|                  |  |      |   |  |      |   |  |      |  
|----------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                  |  | 2008 |   |  | 2007 |   |  | 2006 |  
|Beginning balance |  | 30.9 |   |  | 29.4 |   |  | 25.2 |  
|Additions         |  | 5.3  |   |  | 6.4  |   |  | 5.7  |  
|Write-offs        |  | (4.3 | ) |  | (4.9 | ) |  | (1.5 | )
|                  |  |      |   |  |      |   |  |      |  
|Ending balance    |  | 31.9 |   |  | 30.9 |   |  | 29.4 |  
|                  |  |      |   |  |      |   |  |      |  

Sales to customers in excess of 10% of the Companys net sales were as follows:



|                    |  |               |  |      |  |     
|------------------- |  | ------------- |  | ---- |  | ----
|                    |  | Net sales - %
|                    |  | 2008          |  | 2007 |  | 2006
|Commercial Aviation |  |               |  |      |  |     
|Northwest Airlines  |  | 10.5          |  |     |  |    
|Air Canada          |  |              |  | 13.1 |  | 11.5
|Republic/Chautauqua |  |              |  | 12.6 |  |    
|Jet Blue            |  |              |  |     |  | 11.1



|8 | Customer and Commercial Financing
|- | ---------------------------------



|                                                                                                    |  |       |  |      
|--------------------------------------------------------------------------------------------------- |  | ----- |  | -----
|                                                                                                    |  | 2008  |  | 2007 
|Operating lease equipment, at cost, less accumulated depreciation of US$ 63.2 (2007 - US$ 48.3) (i) |  | 430.2 |  | 377.8
|Notes receivable (ii)                                                                               |  | 88.8  |  | 36.9 
|                                                                                                    |  |       |  |      
|                                                                                                    |  | 519.0 |  | 414.7
|Less - current portion                                                                              |  | 8.6   |  | 4.3  
|                                                                                                    |  |       |  |      
|Long-term portion                                                                                   |  | 510.4 |  | 410.4
|                                                                                                    |  |       |  |      



| | (i) | Rental income for leased aircraft amounted to US$ 39.9, US$ 44.2 and US$ 34.8 for 2008, 2007 and 2006, respectively. Minimum future rentals on non-cancelable operating leases for
each of the five succeeding years are as follows at December 31, 2008:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|          |  |     
|--------- |  | ----
|Year      |  |     
|2009      |  | 31.9
|2010      |  | 27.7
|2011      |  | 13.7
|2012      |  | 6.7 
|2013      |  | 7.1 
|Threafter |  | 18.3



The accompanying notes are an integral part of these consolidated financial statements.

F-26



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##### Table of Contents

| | (ii) | Notes receivable represent sales financing, indexed at average interest rates of 4.6% per annum, with maturities through 2021.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------

The maturity schedule for notes receivables is as follows at December 31, 2008:



|           |  |     
|---------- |  | ----
|Year       |  |     
|2009       |  | 8.6 
|2010       |  | 8.6 
|2011       |  | 9.1 
|2012       |  | 8.3 
|2013       |  | 8.8 
|2014       |  | 8.3 
|Thereafter |  | 37.1
|           |  |     
|           |  | 88.8
|           |  |     



|9 | Collateralized Accounts Receivable and Non-Recourse and Recourse Debt
|- | ---------------------------------------------------------------------

Underlying lease transactions which, qualify as sales-type leases, result in the consolidation of the corresponding SPEs and in the recording of investments in minimum payments receivable and in the residual value,
gross of unearned income which totaled US$ 893.5 and US$ 938.2, (net amount of US$ 478.7 and US$ 477.7) as of December 31, 2008 and 2007, respectively, and are presented as collateralized accounts receivable.

These transactions also resulted in the recording of non-recourse debt of US$ 58.5 and US$ 44.5, and recourse debt of US$ 446.1 and US$ 441.2 as of
December 31, 2008 and 2007, respectively.

The components of investment in sales-type leases at December 31, 2008 and 2007, were
as follows:



|                                          |  |        |   |  |        |  
|----------------------------------------- |  | ------ | - |  | ------ | -
|                                          |  | 2008   |   |  | 2007   |  
|Minimum lease payments receivable         |  | 430.3  |   |  | 465.1  |  
|Unearned income                           |  | (414.8 | ) |  | (460.5 | )
|Estimated residual value of leased assets |  | 463.1  |   |  | 473.1  |  
|                                          |  |        |   |  |        |  
|Investments in sales-type lease           |  | 478.6  |   |  | 477.7  |  
|Less - current portion                    |  | 11.5   |   |  | 12.4   |  
|                                          |  |        |   |  |        |  
|Long-term portion                         |  | 467.1  |   |  | 465.3  |  
|                                          |  |        |   |  |        |  

The Company reassessed the residual value of the aircraft and did not have any other than
temporary differences between carrying values and fair value.



The accompanying notes are an integral part of these consolidated financial statements.

F-27



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##### Table of Contents

Maturities of minimum payments receivable at December 31, 2008 are summarized as follows:



|           |  |      
|---------- |  | -----
|Year       |  |      
|2009       |  | 19.3 
|2010       |  | 20.6 
|2011       |  | 21.1 
|2012       |  | 24.8 
|2013       |  | 22.9 
|2014       |  | 19.9 
|Thereafter |  | 301.7
|           |  |      
|           |  | 430.3



|10 | Inventories
|-- | -----------



|                       |  |         |  |        
|---------------------- |  | ------- |  | -------
|                       |  | 2008    |  | 2007   
|Finished goods (i)     |  | 472.1   |  | 281.9  
|Work-in-process (ii)   |  | 1,070.6 |  | 965.3  
|Raw materials          |  | 894.2   |  | 970.0  
|Inventory in transit   |  | 364.7   |  | 240.2  
|Advances to suppliers  |  | 35.4    |  | 33.8   
|                       |  |         |  |        
|                       |  | 2,837.0 |  | 2,491.2
|                       |  |        
|Less - current portion |  | 2,829.0 |  | 2,481.1
|                       |  |         |  |        
|Long-term portion      |  | 8.0     |  | 10.1   
|                       |  |         |  |        



| | (i) | Including one Legacy 600, two EMBRAER 170s, four EMBRAER 190s and one EMBRAER 195. Of these, the two EMBRAER 170s, the three EMBRAER 190s and the one EMBRAER 195 were delivered in
2009.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Includes US$ 13.6 related to four pre-production series Phenom 100 and 300 aircraft (2007 - US$ 73.9 related to eight aircraft), which were in construction or in use under the
certification campaign.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The amounts presented above are net of an obsolescence allowance. Changes to the valuation allowance
were as follows:



|                             |  |       |   |  |       |   |  |       |  
|---------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                             |  | 2008  |   |  | 2007  |   |  | 2006  |  
|Beginning balance            |  | 116.7 |   |  | 123.8 |   |  | 112.0 |  
|Additions                    |  | 31.9  |   |  | 7.0   |   |  | 16.7  |  
|Write-off                    |  | (19.3 | ) |  | (16.9 | ) |  | (6.1  | )
|Foreign exchange (gain) loss |  | (1.6  | ) |  | 2.8   |   |  | 1.2   |  
|                             |  |       |   |  |       |   |  |       |  
|                             |  |       |  
|Ending balance               |  | 127.7 |   |  | 116.7 |   |  | 123.8 |  
|                             |  |       |   |  |       |   |  |       |  



The accompanying notes are an integral part of these consolidated financial statements.

F-28



---

##### Table of Contents

|11 | Guarantee Deposits and Other Assets
|-- | -----------------------------------



|                                             |  |         |  |      
|-------------------------------------------- |  | ------- |  | -----
|                                             |  | 2008    |  | 2007 
|Guarantee deposits (i)                       |  | 493.2   |  | 469.6
|Court-mandated escrow deposits (ii)          |  | 123.4   |  | 146.0
|Taxes recoverable (iii)                      |  | 138.0   |  | 100.0
|Spare part exchange pools (Note 3(g))        |  | 75.4    |  | 60.6 
|Unrealized gains on derivatives (Note 32)    |  | 29.9    |  | 8.1  
|Restricted cash from sales-type leases       |  | 27.7    |  | 23.9 
|Contribution from suppliers credit           |  | 20.0    |  |     
|Prepaid expenses                             |  | 22.9    |  | 9.8  
|Credits with suppliers (iv)                  |  | 15.6    |  | 32.2 
|Prepaid insurance                            |  | 11.9    |  | 12.7 
|Advances to employees                        |  | 10.9    |  | 12.4 
|Commission advances                          |  | 10.1    |  | 10.5 
|Compulsory loans and bank guarantee deposits |  | 8.0     |  | 12.2 
|Other                                        |  | 28.2    |  | 25.3 
|                                             |  |         |  |      
|                                             |  | 1,015.2 |  | 923.3
|                                             |  |        
|Less - current portion                       |  | 273.5   |  | 217.0
|                                             |  |         |  |      
|Long-term portion                            |  | 741.7   |  | 706.3
|                                             |  |         |  |      



| | (i) | Guarantee deposits comprise, principally:
| | --- | -----------------------------------------



| | (a) | US$ 299.7 relates to collateral for financing arrangements and residual value guarantees of certain aircraft sold (Note 35) (2007 - US$ 287.5). In the event the guarantor of the
debt (an unrelated third party) is required to pay the creditors under such financing arrangement or the residual value guarantee, the guarantor has the right to withdraw the escrow account. The deposited amounts will be released when the financing
contracts mature (between 2013 and 2021) if no default by the buyers of the aircraft occurs or the aircraft market price is above the residual value guarantee. The interest earned on the escrow funds is added to the balance in escrow and is recorded
as Interest income by the Company under interest income (expenses) net. In order to enhance returns on such guarantee deposits the Company bought in 2004 structured notes in the face amount of US$ 123.4 with the depositary bank which generated
interest of US$ 7.6 in 2008 (2007 - US$ 7.6), which interest was added to the principal amount. This yield enhancement was obtained through a credit default swap transaction which provides the right of early redemption of the note in case of a
credit event by the Company. Upon such credit event, notes may be redeemed by the holder at the greater of the note's market value or its original face amount, which would result in the loss of all interest accrued on such note to date. The interest
accrued as of December 31, 2008 was US$ 30.4.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | US$ 185.4 (2007 - US$ 169.7) remunerated deposits with third party financial institutions as a pledge under a specific sale financing structure.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Court-mandated escrow deposits relate to amounts deposited in connection with pending legal actions, primarily taxes and contributions which are being contested through the courts
(Notes 17 and 19).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-29



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##### Table of Contents

| | (iii) | Taxes recoverable refer mainly to PIS (Social Integration Program), COFINS (Contribution for Social Security) and ICMS (Value-added State Tax) credits recoverable on purchases of
production inputs.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Credits with suppliers represent rework performed by the Company, reimbursable by the suppliers.
| | ---- | ------------------------------------------------------------------------------------------------



|12 | Investments
|-- | -----------



|                                |  |      |  |     
|------------------------------- |  | ---- |  | ----
|                                |  | 2008 |  | 2007
|Held-to-maturity securities (i) |  | 32.6 |  | 40.8
|Trading securities (ii)         |  | 34.9 |  |    
|Other                           |  | 1.2  |  | 1.7 
|                                |  |      |  |     
|                                |  | 68.7 |  | 42.5
|                                |  |      |  |     



| | (i) | Held to maturity securities refer to Brazilian Federal Government National Treasury Notes (NTNs) acquired by the Company from customers, related to the equalization of
interest rates to be paid under the Export Financing ProgramPROEX between the 11th and 15th year after the sale of the related aircraft, recorded at present value. The interest earned is added to the balance and recorded as Interest income, as
the Company intents to hold these securities until maturity.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Brazilian government bonds, denominated in U.S. dollar, recorded at fair value with changes in fair value recorded in Interest income.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------



|13 | Property, Plant and Equipment, Net
|-- | ----------------------------------



|                           |  |         |  |                         |  |       |  |         |  |                         |  |       |  |                   
|-------------------------- |  | ------- |  | ----------------------- |  | ----- |  | ------- |  | ----------------------- |  | ----- |  | ------------------
|                           |  | 2008    |  | 2007                    |  |      
|                           |  | Cost    |  | Accumulateddepreciation |  | Net   |  | Cost    |  | Accumulateddepreciation |  | Net   |  | Useful life- years
|Buildings and improvements |  | 338.6   |  | 94.1                    |  | 244.5 |  | 268.7   |  | 82.2                    |  | 186.5 |  | 10 to 48          
|Machinery and equipment    |  | 411.7   |  | 257.6                   |  | 154.1 |  | 364.0   |  | 244.1                   |  | 119.9 |  | 5 to 17           
|Tooling                    |  | 255.0   |  | 94.0                    |  | 161.0 |  | 224.5   |  | 81.4                    |  | 143.1 |  | 10                
|Construction in progress   |  | 74.4    |  | 0.0                     |  | 74.4  |  | 30.2    |  | 0.0                     |  | 30.2  |  |                  
|Software                   |  | 107.5   |  | 85.7                    |  | 21.8  |  | 99.0    |  | 78.5                    |  | 20.5  |  | 5                 
|Installations              |  | 103.0   |  | 72.8                    |  | 30.2  |  | 93.0    |  | 67.2                    |  | 25.8  |  | 10 to 31          
|Furniture and fixtures     |  | 40.5    |  | 22.4                    |  | 18.1  |  | 33.2    |  | 21.1                    |  | 12.1  |  | 5 to 10           
|Computers and peripherals  |  | 57.3    |  | 43.9                    |  | 13.4  |  | 55.5    |  | 44.3                    |  | 11.2  |  | 5                 
|Land                       |  | 9.2     |  | 0.0                     |  | 9.2   |  | 3.4     |  | 0.0                     |  | 3.4   |  |                  
|Vehicles                   |  | 12.6    |  | 9.2                     |  | 3.4   |  | 12.2    |  | 9.1                     |  | 3.1   |  | 5 to 14           
|Capital lease              |  | 47.9    |  | 44.3                    |  | 3.6   |  | 47.1    |  | 44.2                    |  | 2.9   |  | 5                 
|Aircraft (*)               |  | 23.3    |  | 21.9                    |  | 1.4   |  | 15.8    |  | 11.6                    |  | 4.2   |  | 5 to 20           
|Other                      |  | 3.3     |  | 0.5                     |  | 2.8   |  | 4.2     |  | 1.1                     |  | 3.1   |  | 5                 
|                           |  |         |  |                         |  |       |  |         |  |                         |  |       |  |                   
|                           |  | 1,484.3 |  | 746.4                   |  | 737.9 |  | 1,250.8 |  | 684.8                   |  | 566.0 |  |                   
|                           |  |         |  |                         |  |       |  |         |  |                         |  |       |  |                   
|                          

| | (*) | These aircraft are used for demonstration and internal purposes.
| | --- | ----------------------------------------------------------------

Interest charges capitalized in 2008, 2007 and 2006 were US$ 3.0, US$ 1.6 and US$ 0.9, respectively.



The accompanying notes are an integral part of these consolidated financial statements.

F-30



---

##### Table of Contents

|14 | Contribution from Suppliers
|-- | ---------------------------

The Company has
agreements with key suppliers to assure their participation in Research and development activities in exchange for cash contributions payable to the Company. The related supply agreements condition the Company's right to such contributions to its
meeting certain performance milestones, including successful certification of the aircraft, first delivery and minimum number of aircraft deliveries. The Company records such contributions as a liability when received and as a reduction to Research
and development expenses when contractual milestones are achieved, and no ongoing obligation by the Company exists.



|15 | Other Payables and Accrued Liabilities
|-- | --------------------------------------



|                                                   |  |       |  |      
|-------------------------------------------------- |  | ----- |  | -----
|                                                   |  | 2008  |  | 2007 
|Unrealized losses on derivatives (Note 32)         |  | 166.5 |  | 10.9 
|Unearned income (i)                                |  | 116.5 |  | 113.7
|Accrued payroll and related charges                |  | 111.2 |  | 140.1
|Product warranties (ii)                            |  | 96.1  |  | 104.9
|Sundry creditors                                   |  | 56.3  |  | 79.5 
|Accrued employee profit sharing (Note 3(p))        |  | 44.4  |  | 61.9 
|Deferred income (iii)                              |  | 44.1  |  | 47.6 
|Provision related to financial guarantee (Note 35) |  | 27.4  |  | 24.5 
|Product improvement accruals (ii)                  |  | 21.5  |  | 21.4 
|Accrued materials                                  |  | 3.8   |  | 15.1 
|Security deposit                                   |  | 4.9   |  | 5.6  
|Insurance                                          |  | 4.2   |  | 4.4  
|Financial credits                                  |  | 3.3   |  | 4.0  
|Post-retirement benefits (Note 23)                 |  | 2.8   |  | 2.0  
|Other                                              |  | 32.3  |  | 30.0 
|                                                   |  |       |  |      
|                                                   |  | 735.3 |  | 665.6
|                                                   |  |      
|Less - current portion                             |  | 565.4 |  | 466.6
|                                                   |  |       |  |      
|Long-term portion                                  |  | 169.9 |  | 199.0
|                                                   |  |       |  |      



| | (i) | Represent unearned income from sales of spare parts, services related to technical assistance and training of mechanics and crews which will be recognized when the product or
service is provided to the customer.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Includes warranty and contractual obligations to implement improvements to aircraft sold (Note 35).
| | ---- | ---------------------------------------------------------------------------------------------------



| | (iii) | Refers to certain aircraft sales that, due to contractual obligations are accounted for as operating leases.
| | ----- | ------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-31



---

##### Table of Contents

|16 | Advances from Customers
|-- | -----------------------



|                            |  |         |  |        
|--------------------------- |  | ------- |  | -------
|                            |  | 2008    |  | 2007   
|Denominated in U.S. dollars |  | 1,583.1 |  | 1,137.1
|Denominated in reais        |  | 17.6    |  | 32.5   
|                            |  |         |  |        
|                            |  |        
|                            |  | 1,600.7 |  | 1,169.6
|                            |  |        
|Less - current portion      |  | 1,151.5 |  | 801.6  
|                            |  |         |  |        
|                            |  |        
|Long-term portion           |  | 449.2   |  | 368.0  
|                            |  |         |  |        

The advances denominated in Brazilian reais are translated to U.S. dollars at the exchange rates
prevailing at the respective balance sheet dates. The allocation between current and long-term portions is based on the contractual terms for delivery of the related aircraft.



|17 | Taxes and Payroll Charges Payable
|-- | ---------------------------------



|                                                                              |  |       |  |      
|----------------------------------------------------------------------------- |  | ----- |  | -----
|                                                                              |  | 2008  |  | 2007 
|Disputed taxes and social charges (*)                                         |  | 332.1 |  | 485.2
|Current taxes (other than taxes on income)                                    |  | 54.4  |  | 57.0 
|                                                                              |  |      
|Refinanced INSS (social security contribution on rural workers compensation) |  | 14.9  |  | 22.8 
|                                                                              |  |       |  |      
|                                                                              |  |      
|                                                                              |  | 401.4 |  | 565.0
|                                                                              |  |      
|Less - current portion                                                        |  | 57.5  |  | 98.2 
|                                                                              |  |       |  |      
|                                                                              |  |      
|Long-term portion                                                             |  | 343.9 |  | 466.8
|                                                                              |  |       |  |      
|                                                                              |  |       |  |      

| | (*) | As described more fully below, the Company is challenging through legal proceedings the merit and constitutionality of certain taxes and has obtained writs of mandamus or
injunctions to avoid payment of such taxes. Pending a final decision on such cases, the Company is recognizing as expenses the total amount of the legal obligations and accruing interest calculated based on the SELIC (Central Bank overnight rate) on
those liabilities, as it would be required to do were the Companys position in these lawsuits not prevail. The SELIC rate was 13.66% as at December 31, 2008 (2007 - 11.18%).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A brief description of the Companys legal challenges is set forth below:

| | (i) | The Company is challenging the basis for calculating COFINS and PIS and the incidence of this tax in certain periods. As a result of favorable unappealable
decisions of the Supreme Court of Justice on September 6, 2007 and October 5, 2007, respectively, the Company reversed US$ 194.7 in 2007 of which US$ 163.6 related to the COFINS tax and US$ 31.1 to
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-32



---

##### Table of Contents

| | the PIS tax. The reversal was recorded as follows: (i) US$ 104.8 in other operating income (expenses), net (Note 29) and (ii) US$ 89.9 in Interest
income (expenses), net. The remaining balance relates to PIS and COFINS taxes of US$ 57.6 for which the Company has a corresponding escrow deposit which is being challenged in the lower courts.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | The Company is challenging the payment of the Social Contribution tax on export sales revenue and is claiming the right to offset part of these credits against IPI (Tax on
Industrialized Products) credits on the acquisition of non-taxable or zero-rated raw material inputs. Since 2007, the Company obtained a favorable decision from the Supreme Court of Justice to avoid the payments until a final decision. The
administrative proceeding of IPI (Tax on Industrialized Products) resulted in partial final decision against the Companys interests and was paid. Only the penalties were deposited judicially. The amounts of taxes accrued but not paid related
to this claim was US$ 192.4 as of December 31, 2008 (2007  US$236.6.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company is challenging the right to
offset IPI (Federal Excise Tax) credits on the acquisition of non-taxable or zero-rated raw material inputs against income and Social Contribution taxes. The amount of taxes accrued but not paid related to this claim as of December 31, 2008 was
US$11.8 (2007  US$49.7).

| | (iii) | The Company is required to pay to the government an SAT levy (Workers Compensation Insurance) at a rate of 3% of wages. In June 2008, the Company obtained a court order to reduce
the tax rate to 1% and the difference has been accrued. In 2008 the Company reversed US$ 4.1, relating to the differences in rates. Additionally, the Company reversed US$ 31.0 related to INSS Trimestralidade due to the decadence (lapsing
of the right of action) of the Governments right to constitute credits on social security claimed judicially.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Court-mandated escrow deposits are made as required (Note 11).



|18 | Liabilities Associated With Unrecognized Tax Benefits
|-- | -----------------------------------------------------

The Company adopted the provisions of FIN 48 from 2007, recording the financial statement effects of an income tax and social contribution tax position when it is more likely than not, based on the technical merits, that it will be
sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured and recorded as the largest amount of tax benefit that has greater than 50% likelihood of being realized upon ultimate settlement with a
taxing authority. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position will be sustained. The benefit associated with previously unrecognized tax positions are
generally recognized in the first period in which the more-likely-than-not threshold is met at the reporting date, the tax matter is ultimately settled through negotiation or litigation or when the related statute of limitations for the relevant
taxing authority to examine and challenge the tax position has expired. The recognition, reversing and measurement of tax positions are based on managements best judgment given the facts, circumstance and information available at the reporting
date. As of December 31, 2008 and 2007, the Company has recorded an insignificant amount for any uncertainty in income taxes. The Company and its subsidiaries file income tax returns in Brazil and other foreign federal and state jurisdictions.
Brazilian income tax returns are normally open to audit for five years.



The accompanying notes are an integral part of these consolidated financial statements.

F-33



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##### Table of Contents

|19 | Contingencies
|-- | -------------

The Company is party to certain
legal proceedings arising in the normal course of business and has made provisions when management believes that it can reasonably estimate probable losses. In connection with some of these proceedings, court-mandated escrow deposits, recorded in
other assets, are made which will only be released to the Company upon a final judgment in its favor. The provisions for tax contingencies and other litigation and the corresponding deposits are as follows:



|                       |  |                                        |  |            |  |                                        |  |           
|---------------------- |  | -------------------------------------- |  | ---------- |  | -------------------------------------- |  | ----------
|                       |  | 2008                                   |  | 2007      
|                       |  | Court-mandatedescrow deposits(Note 11) |  | Provisions |  | Court-mandatedescrow deposits(Note 11) |  | Provisions
|Labor related (i)      |  |                                       |  | 22.6       |  |                                       |  | 27.3      
|Tax related (ii)       |  | 5.6                                    |  | 20.3       |  | 7.1                                    |  | 25.7      
|Civil related          |  |                                       |  | 6.2        |  |                                       |  | 6.4       
|                       |  |                                        |  |            |  |                                        |  |           
|                       |  | 5.6                                    |  | 49.1       |  | 7.1                                    |  | 59.4      
|                       |  |                                        |  |           
|Less - current portion |  |                                       |  | 9.5        |  |                                       |  | 7.0       
|                       |  |                                        |  |            |  |                                        |  |           
|                       |  |                                        |  |           
|Long-term portion      |  | 5.6                                    |  | 39.6       |  | 7.1                                    |  | 52.4      
|                       |  |                                        |  |            |  |                                        |  |           
|                       |  |                                        |  |            |  |                                        |  |           

| | (i) | The labor lawsuits relate to claims brought by trade unions on behalf of employees or by individuals, in which former employees are individually claiming overtime, productivity
premiums, reinstatement, allowances and retroactive salary increases and adjustments.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | This provision relates primarily to income tax and social contribution contingencies arising from tax assessments which are being challenged and for which a final decision is
pending.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The activity in the provision account was as follows:



|                        |  |                    |   |  |                  |   |  |               |   |  |       |  
|----------------------- |  | ------------------ | - |  | ---------------- | - |  | ------------- | - |  | ----- | -
|                        |  | Laborcontingencies |   |  | Taxcontingencies |   |  | Civildisputes |   |  | Other |  
|At December 31, 2006    |  | 32.2               |   |  | 21.7             |   |  | 2.6           |   |  | 8.1   |  
|Additions               |  | 4.0                |   |  | 2.9              |   |  | 3.3           |   |  |      |  
|Interest                |  | 4.0                |   |  | 1.3              |   |  |              |   |  |      |  
|Payments/reversals      |  | (18.0              | ) |  | (4.7             | ) |  |              |   |  | (8.1  | )
|Translation adjustments |  | 5.1                |   |  | 4.5              |   |  | 0.6           |   |  |      |  
|                        |  |                    |   |  |                  |   |  |               |   |  |       |  
|                        |  |                    |   | 
|At December 31, 2007    |  | 27.3               |   |  | 25.7             |   |  | 6.5           |   |  |      |  
|                        |  |                    |   |  |                  |   |  |               |   |  |       |  
|                        |  |                    |   | 
|Additions               |  | 1.0                |   |  |                 |   |  | 0.8           |   |  |      |  
|Interest                |  | 2.7                |   |  | 0.7              |   |  | 0.5           |   |  |      |  
|Payments/reversals      |  | (1.9               | ) |  |                 |   |  |              |   |  |      |  
|Translation adjustments |  | (6.5               | ) |  | (6.1             | ) |  | (1.6          | ) |  |      |  
|                        |  |                    |   |  |                  |   |  |               |   |  |       |  
|                        |  |                    |   | 
|At December 31, 2008    |  | 22.6               |   |  | 20.3             |   |  | 6.2           |   |  |      |  
|                        |  |                    |   |  |                  |   |  |               |   |  |       |  



The accompanying notes are an integral part of these consolidated financial statements.

F-34



---

##### Table of Contents

In addition, management does not believe that the lawsuits and administrative proceedings discussed above
will, individually or in the aggregate, have a material adverse effect on the Companys business nor does management expect such lawsuits or proceedings to materially impact cash flows of the Company, results of operations or financial
condition. Other matters involving possible loss contingencies were not significant at the balance sheet dates.



The accompanying notes are an integral part of these consolidated financial statements.

F-35



---

##### Table of Contents

|20 | Loans and Financing
|-- | -------------------



|                                       |  |               |  |              |  |                               |  |         |  |        
|-------------------------------------- |  | ------------- |  | ------------ |  | ----------------------------- |  | ------- |  | -------
|Description                            |  | Finalmaturity |  | Currency     |  | Annual interest rate - %      |  | 2008    |  | 2007   
|Foreign currency                       |  |               |  |              |  |                               |  |         |  |        
|Working capital                        |  | 2017          |  | U.S. dollar  |  | 2.55 to 8.69                  |  | 545.7   |  | 543.0  
|                                       |  |               |  |              |  | LIBOR 6M and 12M + 0.55       |  |         |  |        
|                                       |  |               |  |              | 
|                                       |  | 2011          |  | Euro         |  | EURIBOR plus 0.45 to 1.12     |  |         |  |        
|                                       |  |               |  |              |  | 4.48                          |  | 46.5    |  | 42.8   
|                                       |  |               |  |              | 
|                                       |  | 2009          |  | Sterling     |  | 6.20                          |  | 0.1     |  | 1.3    
|                                       |  | 2009          |  | Chinese yuan |  | 2.53                          |  | 22.0    |  | 4.1    
|Advances on foreign exchange contracts |  | 2009          |  | U.S. dollar  |  | 4,20% à 8,50%                 |  | 341.2   |  | 13.8   
|                                       |  |               |  |              | 
|Project development                    |  | 2016          |  | U.S. dollar  |  | LIBOR plus 0.875 to 1.75      |  | 135.0   |  | 160.7  
|                                       |  |               |  |              | 
|Export financing                       |  | 2010          |  | U.S. dollar  |  | 6.30 to 7.81                  |  | 55.9    |  | 55.9   
|                                       |  |               |  |              | 
|Acquisition of materials               |  | 2012          |  | U.S. dollar  |  | 4.12 to 5.95; LIBOR plus 1.10 |  | 36.9    |  | 123.8  
|                                       |  |               |  |              | 
|Property and equipment                 |  | 2035          |  | U.S. dollar  |  | 3.53 to 5.35                  |  | 25.7    |  | 26.8   
|                                       |  |               |  |              |  |                               |  |         |  |        
|                                       |  |               |  |              | 
|                                       |  |               |  |              |  |                               |  | 1,209.0 |  | 972.2  
|                                       |  |               |  |              |  |                               |  |         |  |        
|Brazilian reais                        |  |               |  |              |  |                               |  |         |  |        
|Export financing                       |  | 2010          |  | Reais        |  | TJLP plus 2.09 to 2.10        |  | 545.2   |  | 715.8  
|                                       |  |               |  |              | 
|Project development                    |  | 2015          |  | Reais        |  | TJLP plus 5.0                 |  | 71.2    |  | 64.0   
|                                       |  |               |  |              | 
|Working capital                        |  | 2008          |  | Reais        |  | 13.84                         |  |        |  | 1.0    
|                                       |  |               |  |              |  |                               |  |         |  |        
|                                       |  |               |  |              | 
|                                       |  |               |  |              |  |                               |  | 616.4   |  | 780.8  
|                                       |  |               |  |              |  |                               |  |         |  |        
|                                       |  |               |  |              | 
|Total debt                             |  |               |  |              |  |                               |  | 1,825.4 |  | 1,753.0
|                                       |  |               |  |              | 
|Less - current portion                 |  |               |  |              |  |                               |  | 529.3   |  | 932.7  
|                                       |  |               |  |              |  |                               |  |         |  |        
|                                       |  |               |  |              | 
|Long-term portion                      |  |               |  |              |  |                               |  | 1,296.1 |  | 820.3  
|                                       |  |               |  |              |  |                               |  |         |  |        

Definitions:



| |  |  | LIBOR means London Interbank Offered Rate, fixed semiannually or annually, varying in accordance with the related loan agreement, and was 1.75% to 2.00% p.a. at
December 31, 2008 (2007- 4.60% to 4.22% p.a.).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Euribor means Euro Interbank Offered Rate fixed semiannually, and was 2.97% p.a. at December 31, 2008 (2007 - 4.71% p.a.).
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | TJLP means the Brazilian Federal Government nominal Long-term Interest Rate, fixed quarterly and was 6.25% p.a. at December 31, 2008 (2007 - 6.25% p.a.).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | CDI means the Brazilian Interbank Deposit Rate, compounded daily and was 13.62% p.a. at December 31, 2008 (2007 - 11.12% p.a.).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-36



---

##### Table of Contents

As of December 31, 2008 the Company had a banking standby facility of US$ 500.0, the maintenance
cost for which is recorded as an expense. No draw-downs were made in 2008 or 2007. From March, 6 to April, 3, 2009 the Company had drew-down the total amount of US$ 182.6 under the banking standby facility and the remaining US$317.4 is available for
the Companys usage.

The foreign currency exchange rates (expressed in units per US$ 1.00) related to the Company's main debt
instruments were as follows at December 31, 2008:



|                |  |       |  |      
|--------------- |  | ----- |  | -----
|                |  | 2008  |  | 2007 
|Brazilian reais |  | 2.337 |  | 1.771
|Euro            |  | 0.722 |  | 0.679
|Chinese yuan    |  | 6.823 |  | 7.304
|Libra sterling  |  | 0.684 |  | 0.497

Maturities of long-term debt as of December 31, 2008, including accrued interest,are
as follows:



|           |  |        
|---------- |  | -------
|Year       |  |        
|2010       |  | 705.7  
|2011       |  | 49.6   
|2012       |  | 63.4   
|2013       |  | 24.2   
|2014       |  | 17.5   
|Thereafter |  | 435.7  
|           |  |        
|           | 
|           |  | 1,296.1
|           |  |        

The table below shows of the weighted average interest rates on loans by currency as of
December 31, 2008:



|                |  |            |  |     
|--------------- |  | ---------- |  | ----
|                |  | Percentage
|                |  | 2008       |  | 2007
|U.S. dollars    |  | 6.02       |  | 6.24
|Brazilian reais |  | 8.94       |  | 7.99
|Chinese yuan    |  | 4.32       |  | 6.48
|Euro            |  | 3.83       |  | 5.13
|Sterling        |  | 6.20       |  | 6.30

At December 31, 2007, US$ 169.7 of debt is secured by a combination of mortgages on real
estate, mortgages on machinery and equipment and by an escrow account.

Restrictive covenants

Loan agreements with certain financial institutions, representing US$ 201.4 at December 31, 2008 (2007 - US$ 318.4), US$ 139.1 of which is classified
as long-term (2007 - US$ 213.2), contain certain restrictive covenants. These require that the Company maintain a maximum leverage ratio of 3.5:1 (debt to EBITDA - earnings before interest, taxes, depreciation and



The accompanying notes are an integral part of these consolidated financial statements.

F-37



---

##### Table of Contents

amortization (based on U.S. GAAP figures) and a minimum debt service coverage ratio of 3.0:1 (EBITDA to financial expenses based on U.S. GAAP figures) and
that the Company's shareholders' equity be higher than R$ 2.3 billion. In addition, there are other general restrictions related to new pledges of assets, significant changes in control, disposition of assets, dividend payments during an event of
default and transactions with affiliates. As of December 31, 2008, the Company was in compliance with all restrictive covenants, except for its subsidiary OGMA, whose financial debt to EBITDA ratio was in excess of contractually agreed levels
(2.74:1 versus 1.80:1). The subsidiary obtained a waiver from the creditor after December 31, 2008, and, as a result, there was no cross-default that was triggered under clauses of any of our other contracts.



|21 | Operating and Capital Lease Obligations
|-- | ---------------------------------------

The
Company leases land, equipment, computers and peripherals under non-cancelable agreements which are classified as operating leases. Rental expense for leased properties under operating leases was US$ 7.9, US$ 6.1 and US$ 5.4 for 2008, 2007 and 2006,
respectively.

Future minimum operating lease payments as at December 31, 2008 under non-cancelable lease agreements are as follows:



|           |  |     
|---------- |  | ----
|Year       |  |     
|2009       |  | 6.5 
|2010       |  | 4.5 
|2011       |  | 1.8 
|2012       |  | 0.8 
|2013       |  | 0.8 
|Thereafter |  | 12.8
|           |  |     
|           |  | 27.2
|           |  |     

Obligations under capital leases mainly relate to the lease of software and equipment with terms
through 2014 with implicit interest rates which range from 5.7% to 8.3% per annum. The software and equipment are being depreciated over five years.



The accompanying notes are an integral part of these consolidated financial statements.

F-38



---

##### Table of Contents

Future minimum lease payments as at December 31, 2008, including implicit interest, are as follows:



|                          |  |      |  
|------------------------- |  | ---- | -
|Year                      |  |      |  
|2009                      |  | 5.4  |  
|2010                      |  | 4.0  |  
|2011                      |  | 3.4  |  
|2012                      |  | 2.6  |  
|2013                      |  | 2.3  |  
|Thereafter                |  | 1.8  |  
|                          |  |      |  
|                          | 
|                          |  | 19.5 |  
|Less - implicit interest  |  | (0.1 | )
|                          |  |      |  
|                          | 
|Capital lease obligations |  | 19.4 |  
|                          | 
|Less - current portion    |  | 5.5  |  
|                          |  |      |  
|                          | 
|Long-term portion         |  | 13.9 |  
|                          |  |      |  



|22 | Interest Income (Expense), Net
|-- | ------------------------------



|                                                                                                 |  |        |   |  |        |   |  |        |  
|------------------------------------------------------------------------------------------------ |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                                                 |  | 2008   |   |  | 2007   |   |  | 2006   |  
|Interest income                                                                                  |  |        |   |  |        |   |  |        |  
|Temporary cash investments and cash and cash equivalents                                         |  | 72.8   |   |  | 165.7  |   |  | 162.0  |  
|Interest on NTN, collateralized accounts receivable and guarantee deposits (Notes 9, 11 and 12)  |  | 35.7   |   |  | 47.9   |   |  | 58.3   |  
|Gain on early repayment of loans                                                                 |  |       |   |  |       |   |  | 47.0   |  
|Other                                                                                            |  | 1.9    |   |  | 15.4   |   |  | 2.4    |  
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|                                                                                                 |  | 110.4  |   |  | 229.0  |   |  | 269.7  |  
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|Interest expense                                                                                 |  |        |   |  |        |   |  |        |  
|Interest and commissions on loans                                                                |  | (101.8 | ) |  | (112.6 | ) |  | (87.6  | )
|Interest on taxes and payroll charges under litigation (Notes 17 and 19) and on refinanced taxes |  | (9.7   | ) |  | 46.8   |   |  | (40.9  | )
|CPMF (Tax on Bank Account Trans actions )                                                        |  |       |   |  | (23.7  | ) |  | (23.6  | )
|Structured financing costs                                                                       |  | (1.7   | ) |  | (6.4   | ) |  | (4.7   | )
|Other                                                                                            |  | (11.8  | ) |  | (10.1  | ) |  | (4.8   | )
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|                                                                                                 |  | (125.0 | ) |  | (106.0 | ) |  | (161.6 | )
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|Gain (loss ) on derivatives (*)                                                                  |  | (148.3 | ) |  | 38.5   |   |  | 7.6    |  
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|Indexation charges and foreign exchange gains (losses), net                                      |  | (8.5   | ) |  | 1.9    |   |  | (10.3  | )
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 |  |        |  
|Interest (expenses ) income , net                                                                |  | (171.4 | ) |  | 163.4  |   |  | 105.4  |  
|                                                                                                 |  |        |   |  |        |   |  |        |  
|                                                                                                 | 

| | (*) | In 2008 Embraer holds derivative positions, mostly Non-Deliverable Forward (NDF), to mitigate the effects of foreign currency volatility from its exposure to the
Brazilian currency (Note 32).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|23 | Post-Retirement Benefits
|-- | ------------------------



|(a) | Defined contribution pension plan
|--- | ---------------------------------

The Company and
certain subsidiaries sponsor a defined contribution pension plan for their employees, in which participation is optional. The plan is managed by a Brazilian pension fund controlled by Banco do Brasil, a related party. Contributions by the Company to
the plan in 2008, 2007 and 2006 were US$ 18.2, US$ 15.9 and US$ 12.9, respectively.



The accompanying notes are an integral part of these consolidated financial statements.

F-39



---

##### Table of Contents

|(b) | Defined benefit plan
|--- | --------------------

Embraer Aircraft Holding
Inc., a wholly-owned subsidiary, sponsored a defined benefit pension plan and a post-retirement medical care plan. In September 2005, termination of the defined benefit pension plan was approved for which regulatory consent was obtained in March
2006. As a result, the participants became fully vested and the plan's net assets were distributed to participants during 2006.

During
2007, the Company made changes to the postretirement medical plan. Certain employees were terminated from the postretirement medical plan and enrolled in a non-qualified deferred compensation plan. This resulted in the reduction of the projected
benefit obligation as of December 31, 2007, of US$ 2.5, which was recognized as a curtailment gain. Certain employees and existing retirees currently receiving benefits under the current plan, remain in the postretirement medical plan at
December 31, 2007. The projected benefit obligation under the new non-qualified deferred compensation plan is included in other noncurrent liabilities as of December 31, 2008.

Expected costs of providing post-retirement medical benefits to employees and their beneficiaries and covered dependents are accrued during the years that
employees render the service. The change in the benefit obligations for the years ended December 31, 2008 and 2007 is summarized as follows:



|                                       |  |                                |   |  |      |  
|-------------------------------------- |  | ------------------------------ | - |  | ---- | -
|                                       |  | Other post-retirement benefits |  
|                                       |  | 2008                           |   |  | 2007 |  
|Benefit obligation - beginning of year |  | 3.9                            |   |  | 7.0  |  
|Amendments                             |  |                               |   |  | (3.7 | )
|Service cost                           |  |                               |   |  | 0.7  |  
|Interest cost                          |  | 0.2                            |   |  | 0.4  |  
|Actuarial (gain) loss                  |  | 0.1                            |   |  | (0.2 | )
|Benefits paid to participants          |  | (0.1                           | ) |  | (0.3 | )
|                                       |  |                                |   |  |      |  
|                                       |  |                               
|Benefit obligations - end of year      |  | 4.1                            |   |  | 3.9  |  
|                                       |  |                                |   |  |      |  



The accompanying notes are an integral part of these consolidated financial statements.

F-40



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##### Table of Contents

The changes in plan assets for the years ended December 31, 2008 and 2007 are as follows:



|                                                  |  |                       |   |  |      |  
|------------------------------------------------- |  | --------------------- | - |  | ---- | -
|                                                  |  | Other post-retirement |  
|                                                  |  | 2008                  |   |  | 2007 |  
|Fair value of plan assets - beginning of the year |  | 1.9                   |   |  | 2.0  |  
|Actual return on plan assets                      |  | (0.4                  | ) |  | 0.1  |  
|Benefits paid to participants                     |  | (0.2                  | ) |  | (0.2 | )
|                                                  |  |                       |   |  |      |  
|Fair value of plan assets - end of the year       |  | 1.3                   |   |  | 1.9  |  
|                                                  |  |                       |   |  |      |  

The net prepaid (accrued) benefit cost as of December 31, 2008 and 2007 is included in Other
payables and accrued liabilities (Note 15) and its components are summarized as follows:



|                             |  |                               |   |  |      |  
|---------------------------- |  | ----------------------------- | - |  | ---- | -
|                             |  | Other post-retirementbenefits |  
|                             |  | 2008                          |   |  | 2007 |  
|Accrued cost - Funded status |  | (2.8                          | ) |  | (2.0 | )
|                             |  |                               |   |  |      |  

The principal actuarial assumptions utilized at December 31, 2008 and 2007 are as follows:



|                               |  |                                   |  |     
|------------------------------ |  | --------------------------------- |  | ----
|                               |  | Other post-retirementbenefits -
%
|                               |  | 2008                              |  | 2007
|Average discount rate          |  | 5.75                              |  | 5.75
|Net periodic benefit cost      |  | 6.25                              |  | 5.75
|Expected return on plan assets |  | 7.75                              |  | 7.75
|Rate of compensation increase  |  | 5.50                              |  | 5.50

The Company does not expect to make any contribution during 2009 to the post-retirement medical
care plan. The following benefit payments, which reflect expected future service, are expected to be paid to participants under the post-retirement medical plan:



|            |  |                              
|----------- |  | -----------------------------
|Year        |  | Other post-retirementbenefits
|2009        |  | 0.3                          
|2010        |  | 0.3                          
|2011        |  | 0.3                          
|2012        |  | 0.3                          
|2013        |  | 0.3                          
|2014 - 2018 |  | 1.3                          
|            |  |                              
|            |  | 2.8                          
|            |  |                              



The accompanying notes are an integral part of these consolidated financial statements.

F-41



---

##### Table of Contents

The components of net periodic benefit cost as of December 31, 2008, 2007 and 2006 are as follows:



|                                    |  |                 |   |  |                       |   |  |      |   |  |      |  
|----------------------------------- |  | --------------- | - |  | --------------------- | - |  | ---- | - |  | ---- | -
|                                    |  | Pensionbenefits |   |  | Other post-retirement |  
|                                    |  | 2006            |   |  | 2008                  |   |  | 2007 |   |  | 2006 |  
|Service cost                        |  |                |   |  |                      |   |  | 0.7  |   |  | 0.8  |  
|Interest cost                       |  | 0.1             |   |  | 0.2                   |   |  | 0.4  |   |  | 0.4  |  
|Expected return on plan assets      |  | (0.1            | ) |  | (0.1                  | ) |  | (0.1 | ) |  | (0.1 | )
|Amortization of prior service cost  |  |                |   |  | (0.2                  | ) |  | (0.3 | ) |  | (0.2 | )
|Amortization of loss                |  |                |   |  | 0.1                   |   |  | 0.1  |   |  | 0.1  |  
|                                    |  |                 |   |  |                       |   |  |      |   |  |      |  
|Net periodic benefit cost (benefit) |  |                |   |  |                      |   |  | 0.8  |   |  | 1.0  |  
|                                    |  |                 |   |  |                       |   |  |      |   |  |      |  
|Curtailment credit                  |  |                |   |  |                      |   |  | (2.6 | ) |  |     |  
|                                    |  |                 |   |  |                       |   |  |      |   |  |      |  
|Net cost (benefit)                  |  |                |   |  |                      |   |  | (1.8 | ) |  | 1.0  |  
|                                    |  |                 |   |  |                       |   |  |      |   |  |      |  

The net benefit cost (benefit) is included in Selling expenses and General and administrative
expenses.

For measurement purposes, an annual rate of increase in the per capita cost of covered health and dental care benefits of 7%, 8%
and 8%, was assumed for 2008, 2007 and 2006, respectively. The rate is expected to decrease gradually to 5% by 2010. Assumed health care cost trend rates have a significant effect on the amounts reported for the post-retirement health care plan. A
one percentage point change in assumed health care cost trend rates would have the following effects:



|                                                        |  |          |   |  |                           
|------------------------------------------------------- |  | -------- | - |  | --------------------------
|                                                        |  | Decrease |   |  | OnepercentagepointIncrease
|Effect on total of service and interest cost components |  |         |   |  |                          
|Effect on the post-retirement benefit obligation        |  | (0.4     | ) |  | 0.5                       



|24 | Shareholders Equity
|-- | --------------------

Each common share is
entitled to one vote at General and Special Shareholders Meetings, subject to certain limitations specified in the bylaws. Preferred shares, which were in issue through March 2006, were non-voting. Pursuant to the Companys bylaws and the
São Paulo Stock Exchange listing agreement in connection with the listing of the Companys shares on the Novo Mercado of the BOVESPA, the Company can no longer issue shares without voting rights or with restricted voting rights.



|(a) | Brazilian Government Golden share
|--- | ---------------------------------

The Brazilian
Government holds one special common share, with the same voting rights as other holders of common shares but which grants it certain additional rights as established in article 9 of the Companys bylaws, including veto rights over decisions
pertaining to the following matters:



| | (i) | Change of the Companys name or its corporate objective.
| | --- | --------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-42



---

##### Table of Contents

| | (ii) | Alteration and/or application of the Companys logo.
| | ---- | ----------------------------------------------------



| | (iii) | Creation and/or modification of any military programs (whether or not the Federal Republic of Brazil is involved).
| | ----- | ------------------------------------------------------------------------------------------------------------------



| | (iv) | Training third parties in technology for military programs.
| | ---- | -----------------------------------------------------------



| | (v) | Interruption of the supply of maintenance and spare parts for military aircraft.
| | --- | --------------------------------------------------------------------------------



| | (vi) | Transfer of the Companys stock control.
| | ---- | ----------------------------------------



| | (vii) | Any changes in (i) the provisions of the above-mentioned article or of article 4, the main clause of art. 11, arts 12, 15 and 16, sub-item III of art. 19, paragraphs 1 and 2 of
art. 28, sub-item X of art. 34, sub-item XII of art. 40 or Chapter VII of the Company ́s bylaws, or (ii) the rights attributed by the bylaws to the special class share.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Purchase of shares for treasury
|--- | -------------------------------

On
December 7, 2007, the Board of Directors approved a share buyback program of up to 16,800,000 shares to be effected within 120 days on the BOVESPA stock exchange.

At December 31, 2008, 16,800,000 shares had been acquired and were held in treasury totaling US$ 183.7 (2007  70,000 shares for US$ 0.8).



|(c) | Appropriated retained earnings
|--- | ------------------------------

In accordance with
the Brazilian Corporate Law and the Companys by laws, the Company is required to make appropriations to certain reserves (Appropriated retained earnings). These comprise (i) an allocation of 5% of annual net income determined
under BR GAAP to a legal reserve until that reserve equals 20% of capital, or that reserve plus other capital reserve equals 30% of capital; thereafter, allocations to this reserve are not mandatory. This reserve can only be used to increase share
capital or to offset accumulated losses; and (ii) appropriation to an investment incentive reserve of an amount equal to income tax abatements related to research and development. The legal and investment incentives reserves cannot be used to
distribute dividends to the shareholders.



|(d) | Unappropriated retained earnings
|--- | --------------------------------

Retained earnings
under BR GAAP are statutorily restricted by a reserve for discretionary appropriations (Reserve for Investments and Working Capital), which allocation to such reserve was ratified by the Companys shareholders for plant



The accompanying notes are an integral part of these consolidated financial statements.

F-43



---

##### Table of Contents

expansion and other capital projects. The amount restricted is based on an approved capital budget presented by management. After completion of such
projects, the Company may elect to retain the amounts in this reserve until the shareholders vote to transfer all or a portion of the reserve to capital or to distributable retained earnings.

The Companys Board of Directors will submit for approval at the 2009 General Shareholders Meeting the appropriation of 100% of net income for
2008, after allocation to the legal reserve appropriations for dividend distributions and after a reserve for investments and working capital, the latter to be mainly designated for:



| | (i) | Research and development for the EMBRAER 170/190 family of aircraft and a new family of executive jets;
| | --- | -------------------------------------------------------------------------------------------------------



| | (ii) | New technologies, processes and management models to improve the Companys results, competencies and productivity, and investments in subsidiaries.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|25 | Dividends
|-- | ---------

Brazilian legislation permits the
payment of cash dividends only from BR GAAP unappropriated retained earnings and certain reserves determined as per the Companys statutory accounting records. At December 31, 2008, unappropriated retained earnings of R$ 1,173.3 (2007
- R$ 464.6 as previously reported), 2007  R$ 1,283.1 after law 11.638/07 adjustments, were recorded in the statutory books. In conformity with the Companys bylaws, shareholders are entitled to minimum mandatory dividends equivalent
to 25% of annual net income determined in accordance with BR GAAP.

Brazilian companies are permitted to pay interest on capital to
shareholders based on shareholders equity, and treat such payments as a tax deductible expense for Brazilian income and social contribution tax purposes. This notional interest distribution is treated for accounting purposes as a deduction
from shareholders equity in a manner similar to a dividend. A withholding tax is due and paid upon payments of interest on capital to shareholders. Interest on capital is treated as a dividend for purposes of the mandatory dividend
payable if so approved by the shareholders.



The accompanying notes are an integral part of these consolidated financial statements.

F-44



---

##### Table of Contents

Dividends and interest on capital distributions were paid are as follows:



|                                         |  |              |  |       |  |                     |  |       
|---------------------------------------- |  | ------------ |  | ----- |  | ------------------- |  | ------
|                                         |  |              |  |       |  | Dividends per share
|Date of declaration                      |  | U.S. dollars |  | Reais |  | U.S. dollars        |  | Reais 
|June 12, 2006 - interest on capital      |  | 51.8         |  | 114.4 |  | 0.0702              |  | 0.1549
|September 15, 2006 - interest on capital |  | 42.4         |  | 92.3  |  | 0.0574              |  | 0.1250
|September 15, 2006 - dividends           |  | 16.3         |  | 35.6  |  | 0.0221              |  | 0.0481
|December 15, 2006 - interest on capital  |  | 40.0         |  | 85.0  |  | 0.0537              |  | 0.1149
|                                         |  |              |  |       |  |                     |  |       
|                                         |  |              |  |      
|Total distribution in 2006               |  | 150.5        |  | 327.3 |  |                     |  |       
|                                         |  |              |  |       |  |                     |  |       
|                                         |  |              |  |      
|March 9, 2007 - interest on capital      |  | 21.1         |  | 43.4  |  | 0.0286              |  | 0.0587
|June 11, 2007 - interest on capital      |  | 26.0         |  | 50.0  |  | 0.0351              |  | 0.0676
|September 14, 2007 - interest on capital |  | 81.4         |  | 149.6 |  | 0.1099              |  | 0.2022
|                                         |  |              |  |       |  |                     |  |       
|                                         |  |              |  |      
|Total distribution in 2007               |  | 128.5        |  | 243.0 |  |                     |  |       
|                                         |  |              |  |       |  |                     |  |       
|                                         |  |              |  |      
|December 7, 2007 - interest on capital   |  | 46.7         |  | 82.8  |  | 0.0631              |  | 0.1118
|March 7, 2008 - dividends                |  | 69.4         |  | 123.0 |  | 0.0958              |  | 0.1696
|March 7, 2008 - interest on capital      |  | 37.7         |  | 65.9  |  | 0.0520              |  | 0.0909
|June 13, 2008 interest on capital        |  | 40.7         |  | 65.4  |  | 0.0562              |  | 0.0903
|September 12, 2008 - interest on capital |  | 48.5         |  | 92.9  |  | 0.0671              |  | 0.1284
|                                         |  |              |  |       |  |                     |  |       
|                                         |  |              |  |      
|Total distribution in 2008               |  | 243.0        |  | 430.0 |  |                     |  |       
|                                         |  |              |  |       |  |                     |  |       



|26 | Earnings per Share
|-- | ------------------

Basic earnings per common share
was computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.

Undistributed net income is computed by deducting total dividends from net income.

As a result of the Companys restructuring
in March 2006, its capital stock is composed of common shares only. Accordingly, all undistributed earnings are allocated to common shares.

Diluted earnings per share is computed similarly to basic earnings per share except that the outstanding shares are increased to include the number of additional shares that would have been outstanding had the potentially dilutive shares
attributable to stock options been issued during the respective periods, utilizing the treasury stock method.



The accompanying notes are an integral part of these consolidated financial statements.

F-45



---

##### Table of Contents

The computation of basic and diluted earnings per share for the years ended December 31, 2008, 2007
and 2006 is as follows:



|                                                          |  |         |  |         |  |        
|--------------------------------------------------------- |  | ------- |  | ------- |  | -------
|                                                          |  | Common 
|                                                          |  | 2008    |  | 2007    |  | 2006   
|Basic numerator                                           |  |         |  |         |  |        
|Actual dividends declared/paid                            |  | 243.0   |  | 128.5   |  | 150.5  
|Basic allocated undistributed earnings                    |  | 145.7   |  | 360.8   |  | 239.6  
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Net income available to common shareholders               |  | 388.7   |  | 489.3   |  | 390.1  
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Basic denominator                                         |  |         |  |         |  |        
|Weighted average number of shares (thousands)             |  | 726,084 |  | 740,142 |  | 739,904
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Basic earnings per share - U.S. dollars                   |  | 0.5354  |  | 0.6611  |  | 0.5273 
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Diluted numerator                                         |  |         |  |         |  |        
|Actual dividends declared/paid                            |  | 243.0   |  | 128.5   |  | 150.5  
|Diluted allocated undistributed earnings                  |  | 145.7   |  | 360.8   |  | 239.6  
|                                                          |  |         |  |         |  |        
|                                                          |  | 388.7   |  | 489.3   |  | 390.1  
|                                                          |  |         | 
|Diluted net income available to common shareholders       |  | 388.7   |  | 489.3   |  | 390.1  
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Diluted denominator                                       |  |         |  |         |  |        
|Weighted average number of shares outstanding (thousands) |  | 726,084 |  | 740,142 |  | 739,904
|Dilutive effects of stock options                         |  |        |  | 0,905   |  | 2,999  
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Diluted weighted average shares                           |  | 726,084 |  | 741,047 |  | 742,903
|                                                          |  |         |  |         |  |        
|                                                          |  |         | 
|Diluted earnings per share - U.S. dollars                 |  | 0.5354  |  | 0.6603  |  | 0.5250 
|                                                          |  |         |  |         |  |        



|27 | Stock Compensation
|-- | ------------------

In 1998 the Companys
shareholders approved a stock option plan for management and employees, under continuous employment for at least two years. The Administration Committee is responsible for managing the plan.

Under the terms of the plan, options for 25,000,000 common shares were authorized to be granted through May 2003. Options were granted with an exercise
price in realequal to the weighted average price of the Companys preferred shares traded on the BOVESPA in the 60 trading days prior to the grant date, increased or decreased by 30%, as determined by the Administration Committee. Such
percentage is deemed to offset unusual fluctuations in the market price during this 60-day-period. These options generally vest as follows: 30% after three years, 30% after four years, and 40% after five years, if the employee is still employed by
the Company on each date. The options expire seven years from the date of grant. The right to grant options under the plan terminated five years after the date of the first grant.



The accompanying notes are an integral part of these consolidated financial statements.

F-46



---

##### Table of Contents

As of December 31, 2007, the Administration Committee had made seven grants, equivalent to 400 lots
of 50,000 shares each, totaling 18,666,578 preferred shares, net of 1,333,422 shares which were forfeited, as the grantees are no longer employees of the Company (2006 - 400 lots of 50,000 shares each, totaling 18,941,578 preferred shares, net of
1,058,422 shares which were forfeited).

Following the Corporate Restructuring, all the preferred shares were converted into common shares.

During 2006 and 2007, 1,292,094 and 561,130 options were exercised, in the total amount of US$ 5.1 and US$ 3.6 respectively.
During 2008 no options were exercised and the sock option plan was closed. No compensation expense was recorded for the years presented. On March 1, 2002, the Administration Committee granted an additional 25,576 options to purchase preferred
shares to holders of vested options as of the record date. The total number of additional options granted was 637,318, with an exercise price of R$ 14.99 (which was higher than the market price of the preferred shares on the date of grant).

Information regarding options granted to management and employees is presented below (options in thousands):



|                                 |  |                     |   |  |                                   |   |      |                     |   |  |                                   |  |                     |   |  |                                  
|-------------------------------- |  | ------------------- | - |  | --------------------------------- | - | ---- | ------------------- | - |  | --------------------------------- |  | ------------------- | - |  | ---------------------------------
|                                 |  | 2008                |   |  | 2007                              |   | 2006
|                                 |  | Thousandsof options |   |  | Weightedaverageexerciseprice (R$) |   |      | Thousandsof options |   |  | Weightedaverageexerciseprice (R$) |  | Thousandsof options |   |  | Weightedaverageexerciseprice (R$)
|Outstanding at beginning of year |  | 1,353               |   |  | 22.00                             |   |      | 2,225               |   |  | 18.30                             |  | 3,761               |   |  | 15.14                            
|Exercised                        |  |                    |   |  |                                  |   |      | (561                | ) |  | 12.07                             |  | (1,292              | ) |  | 8.61                             
|Canceled or expired              |  | (1,353              | ) |  | (22.00                            | ) |      | (311                | ) |  | 13.84                             |  | (244                | ) |  | 20.87                            
|                                 |  |                     |   |  |                                   |   |      |                     |   |  |                                   |  |                     |   |  |                                  
|                                 |  |                     |   |  |                                   |  
|Exercisable at end of year       |  |                    |   |  |                                  |   |      | 1,353               |   |  | 22.00                             |  | 2,225               |   |  | 18.30                            
|                                 |  |                     |   |  |                                   |   |      |                     |   |  |                                   |  |                     |   |  |                                  



|28 | Income Taxes
|-- | ------------

Income tax expense is comprised of
the following:



|                       |  |       |   |  |       |   |  |       |  
|---------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                       |  | 2008  |   |  | 2007  |   |  | 2006  |  
|Current                |  | (11.6 | ) |  | (33.5 | ) |  | (45.7 | )
|Deferred               |  |      |   |  |      |   |  |      |  
|Temporary differences  |  | (27.6 | ) |  | 14.5  |   |  | 0.2   |  
|Tax loss carryforwards |  | (1.9  | ) |  | 16.3  |   |  | 1.1   |  
|                       |  |       |   |  |       |   |  |       |  
|                       |  |       |  
|Total deferred         |  | (29.5 | ) |  | 30.8  |   |  | 1.3   |  
|                       |  |       |   |  |       |   |  |       |  
|                       |  |       |  
|Income tax expense     |  | (41.1 | ) |  | (2.7  | ) |  | (44.4 | )
|                       |  |       |   |  |       |   |  |       |  



The accompanying notes are an integral part of these consolidated financial statements.

F-47



---

##### Table of Contents

The reconciliation of reported income tax expense to the amount calculated based on the Brazilian
combined nominal statutory tax rate is summarized as follows:



|                                                        |  |       |   |  |       |   |  |       |  
|------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                        |  | 2008  |   |  | 2007  |   |  | 2006  |  
|Income before taxes as reported                         |  | 437.3 |   |  | 499.9 |   |  | 444.2 |  
|Combined Brazilian statutory income tax rate - %        |  | 34    |   |  | 34    |   |  | 34    |  
|                                                        |  |       |   |  |       |   |  |       |  
|                                                        |  |       |  
|Tax expense at statutory income tax rate                |  | 148.7 |   |  | 170.0 |   |  | 151.0 |  
|                                                        |  |       |   |  |       |   |  |       |  
|                                                        |  |       |  
|Translation effects (including SFAS 109 paragraph 9(f)) |  | (22.5 | ) |  | (57.1 | ) |  | (36.9 | )
|Benefit from distribution of interest on capital        |  | (43.3 | ) |  | (59.6 | ) |  | (45.6 | )
|Research and development tax incentives                 |  | (37.6 | ) |  | (31.2 | ) |  | (16.9 | )
|Other tax incentives                                    |  | (1.8  | ) |  | (1.4  | ) |  |      |  
|Change in deferred tax valuation allowance              |  | (1.3  | ) |  | (0.2  | ) |  | 0.5   |  
|Non-deductible expenses, net                            |  | 4.8   |   |  | 3.3   |   |  | 6.4   |  
|Differences in foreign jurisdiction tax rates           |  | (13.6 | ) |  | (19.2 | ) |  | (11.2 | )
|Equity in earnings (loss) of affiliates                 |  | 0.0   |   |  | 0.1   |   |  | (0.0  | )
|Other                                                   |  | 7.7   |   |  | (2.0  | ) |  | (2.9  | )
|                                                        |  |       |   |  |       |   |  |       |  
|                                                        |  |       |  
|Income tax expense as reported                          |  | 41.1  |   |  | 2.7   |   |  | 44.4  |  
|                                                        |  |       |   |  |       |   |  |       |  

Deferred tax assets and liabilities are comprised of the following:



|                                                                     |  |        |   |  |        |  
|-------------------------------------------------------------------- |  | ------ | - |  | ------ | -
|                                                                     |  | 2008   |   |  | 2007   |  
|Deferred tax assets                                                  |  |        |   |  |        |  
|Temporary differences                                                |  |        |   |  |        |  
|Deferred deductibility of research and development and other charges |  | 162.3  |   |  | 245.7  |  
|Accrued expenses temporarily not tax deductible                      |  | 146.2  |   |  | 94.8   |  
|Accrued taxes other than taxes on income                             |  | 76.7   |   |  | 82.8   |  
|Accrual for product warranties and improvements                      |  | 39.5   |   |  | 43.8   |  
|Differences in tax basis of inventory                                |  | 30.0   |   |  | 35.2   |  
|Differences in tax basis of property, plant and equipment            |  | 7.9    |   |  | 11.0   |  
|Accrued post-retirement benefits                                     |  | 0.9    |   |  | 0.9    |  
|Other                                                                |  | 23.0   |   |  | 29.3   |  
|Tax loss carryforwards (i)                                           |  | 21.8   |   |  | 25.0   |  
|Valuation allowance (ii)                                             |  | (2.3   | ) |  | (3.5   | )
|                                                                     |  |        |   |  |        |  
|                                                                     |  |       
|Total deferred tax assets                                            |  | 506.0  |   |  | 565.0  |  
|                                                                     |  |        |   |  |        |  
|                                                                     |  |       
|Deferred tax liabilities                                             |  |        |   |  |        |  
|Temporary differences                                                |  |        |   |  |        |  
|Deferred deductibility of research and development and other charges |  | (234.5 | ) |  | (270.3 | )
|Differences in tax basis of property, plant and equipment            |  | (14.1  | ) |  | (17.2  | )
|Other                                                                |  | (29.5  | ) |  | (20.1  | )
|                                                                     |  |        |   |  |        |  
|                                                                     |  |       
|Total deferred tax liabilities                                       |  | (278.1 | ) |  | (307.6 | )
|                                                                     |  |        |   |  |        |  
|                                                                     |  |       
|Net deferred tax asset                                               |  | 227.9  |   |  | 257.4  |  
|                                                                     |  |        |   |  |        |  



The accompanying notes are an integral part of these consolidated financial statements.

F-48



---

##### Table of Contents

| | (i) | Tax loss carryforwards are derived from:
| | --- | ----------------------------------------



|                      |  |      |  |     
|--------------------- |  | ---- |  | ----
|                      |  | 2008 |  | 2007
|Brazilian entities    |  | 19.6 |  | 21.5
|Foreign jurisdictions |  | 2.2  |  | 3.5 
|                      |  |      |  |     
|                      |  | 21.8 |  | 25.0
|                      |  |      |  |     

Tax losses originated from the Brazilian entities do not have expiration dates but utilization is
limited to 30% of the taxable income for each period. Tax losses from foreign subsidiaries are not subject to any statute of limitations.



| | (ii) | The valuation allowance relates to tax loss carryforwards of foreign subsidiaries, which cannot be offset against taxable income in Brazil.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Changes in the valuation allowances are as follows:
| | ----- | ---------------------------------------------------



|                  |  |      |   |  |      |   |  |      |  
|----------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                  |  | 2008 |   |  | 2007 |   |  | 2006 |  
|Beginning balance |  | 3.5  |   |  | 3.7  |   |  | 3.2  |  
|Additions         |  | 2.1  |   |  | 0.9  |   |  | 0.7  |  
|Reversals         |  |     |   |  |     |   |  | (0.2 | )
|Write-off         |  | (3.4 | ) |  | (1.1 | ) |  |     |  
|                  |  |      |   |  |      |   |  |      |  
|                  |  |      |  
|Ending balance    |  | 2.2  |   |  | 3.5  |   |  | 3.7  |  
|                  |  |      |   |  |      |   |  |      |  



|29 | Other Operating Income (Expenses), Net
|-- | --------------------------------------



|                                  |  |       |   |  |      |   |  |       |  
|--------------------------------- |  | ----- | - |  | ---- | - |  | ----- | -
|                                  |  | 2008  |   |  | 2007 |   |  | 2006  |  
|Product modifications             |  | (11.2 | ) |  | (3.4 | ) |  | (1.6  | )
|Contractual fines                 |  | 8.2   |   |  | (9.7 | ) |  | 12.7  |  
|Provision for contingencies and   |  |      |   |  |     |   |  |      |  
|disputed taxes (*)                |  | (2.1  | ) |  | 94.5 |   |  | 3.8   |  
|Sales-type lease gain (loss), net |  |      |   |  | 1.4  |   |  | (12.6 | )
|Royalties                         |  | 10.1  |   |  | (1.4 | ) |  | 1.8   |  
|Other                             |  | 11.0  |   |  | (3.1 | ) |  | (2.5  | )
|                                  |  |       |   |  |      |   |  |       |  
|                                  |  | 16.0  |   |  | 78.3 |   |  | 1.6   |  
|                                  |  |       |   |  |      |   |  |       |  
|                                  |  |       |   |  |      |   |  |       |  

| | (*) | In 2007 mainly includes the reversal of US$ 104.8 of PIS/COFINS provisions following a favorable judicial decision (Note 17).
| | --- | -----------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-49



---

##### Table of Contents

|30 | Foreign Exchange Gain (Loss), Net
|-- | ---------------------------------

Foreign exchange
gains and losses result from the remeasurement to US dollars, as follows:



|                                            |  |        |   |  |        |   |  |       |  
|------------------------------------------- |  | ------ | - |  | ------ | - |  | ----- | -
|                                            |  | 2008   |   |  | 2007   |   |  | 2006  |  
|Assets                                      |  |        |   |  |        |   |  |       |  
|Cash and cash equivalents                   |  | (92.4  | ) |  | 163.5  |   |  | 23.8  |  
|Trade accounts receivable                   |  | (18.7  | ) |  | 15.2   |   |  | (0.7  | )
|Tax recoverable and deferred                |  | (10.0  | ) |  | 70.7   |   |  | 3.1   |  
|Other assets                                |  | (15.8  | ) |  | 27.6   |   |  | 8.0   |  
|                                            |  |        |   |  |        |   |  |       |  
|                                            |  |        |  
|Exchange (loss) gain on assets              |  | (136.9 | ) |  | 277.0  |   |  | 34.2  |  
|                                            |  |        |   |  |        |   |  |       |  
|                                            |  |        |  
|Liabilities                                 |  |        |   |  |        |   |  |       |  
|Taxes                                       |  | 100.1  |   |  | (156.4 | ) |  | (12.2 | )
|Loans                                       |  | 47.9   |   |  | (93.8  | ) |  | (7.1  | )
|Provisions                                  |  | 21.2   |   |  | (22.9  | ) |  | (3.9  | )
|Trade accounts payable                      |  | 14.7   |   |  | (8.3   | ) |  | (8.1  | )
|Other liabilities                           |  | 24.7   |   |  | (33.3  | ) |  | (6.9  | )
|                                            |  |        |   |  |        |   |  |       |  
|                                            |  |        |  
|Foreign exchange gain (loss) on liabilities |  | 208.6  |   |  | (314.7 | ) |  | (38.2 | )
|                                            |  |        |   |  |        |   |  |       |  
|                                            |  |        |  
|Foreign exchange gain (loss), net           |  | 71.7   |   |  | (37.7  | ) |  | (4.0  | )
|                                            |  |        |   |  |        |   |  |       |  



|31 | Related-Party Transactions
|-- | --------------------------

Brazilian Government

The Company considers Banco do Brasil S.A., which is controlled by the Brazilian Federal Government and is one of the Company`s
shareholders, to be a related party. In addition, Caixa de Previdência dos Funcionários do Banco do Brasil - PREVI, the Brazilian Air Force and Banco Nacional de Desenvolvimento Econômico e Social - BNDES are also controlled by
the Brazilian Federal Government and, therefore, are considered by the Company to be related parties.

The Brazilian Government, principally
through the Brazilian Air Force, has participated in the development of the Company since its inception. For the years ended December 31, 2008, 2007 and 2006, the Brazilian Air Force accounted for 3.4%, 1.8% and 1.9% of the Companys net
sales, respectively.



The accompanying notes are an integral part of these consolidated financial statements.

F-50



---

##### Table of Contents

BNDES and Banco do Brasil S.A have several transactions with the Company, mainly debt financing and other
bank transactions, such as depositary services for cash equivalents and a provider of certain line of credit facilities.

Transactions with
such related parties are summarized as follows:



|                               |  |                    |  |                     |  |       |  |      
|------------------------------ |  | ------------------ |  | ------------------- |  | ----- |  | -----
|                               |  | 2008              
|                               |  | BrazilianAir Force |  | Banco doBrasil S.A. |  | BNDES |  | Total
|Assets                         |  |                    |  |                     |  |       |  |      
|Cash and cash equivalents      |  |                   |  | 252.9               |  |      |  | 252.9
|Trade accounts receivable      |  | 95.4               |  |                    |  |      |  | 95.4 
|Other assets                   |  |                   |  | 187.1               |  |      |  | 187.1
|                               |  |                    |  |                    
|Liabilities                    |  |                   |  |                    |  |      |  |     
|Loans and financing            |  |                   |  | 241.2               |  | 558.4 |  | 799.6
|Recourse and non-recourse debt |  |                   |  | 286.7               |  | 30.1  |  | 316.8
|Advances from customers        |  | 43.8               |  |                    |  |      |  | 43.8 
|                               |  |                    |  |                    
|Results of operations          |  |                   |  |                    |  |      |  |     
|Net sales                      |  | 214.1              |  |                    |  |      |  | 214.1
|Interest income                |  |                   |  | 10.6                |  |      |  | 10.6 
|Interest expense               |  |                   |  | 18.3                |  | 40.4  |  | 58.7 
|                               | 
|                               |  | 2007              
|                               |  | BrazilianAir Force |  | Banco doBrasil S.A. |  | BNDES |  | Total
|Assets                         |  |                    |  |                     |  |       |  |      
|Cash and cash equivalents      |  |                   |  | 174.4               |  |      |  | 174.4
|Trade accounts receivable      |  | 68.9               |  |                    |  |      |  | 68.9 
|Other assets                   |  |                   |  | 179.1               |  | 1.3   |  | 180.4
|                               |  |                    |  |                    
|Liabilities                    |  |                    |  |                     |  |       |  |      
|Loans and financing            |  |                   |  | 12.1                |  | 728.2 |  | 740.3
|Recourse and non-recourse debt |  |                   |  | 271.4               |  | 20.1  |  | 291.5
|Advances from customers        |  | 63.2               |  |                    |  |      |  | 63.2 
|                               |  |                    |  |                    
|Results of operations          |  |                    |  |                     |  |       |  |      
|Net sales                      |  | 96.9               |  |                    |  |      |  | 96.9 
|Interest income                |  |                   |  | 32.1                |  |      |  | 32.1 
|Interest expense               |  |                   |  | 18.2                |  | 45.0  |  | 63.2 



The accompanying notes are an integral part of these consolidated financial statements.

F-51



---

##### Table of Contents

|                               |  |                    |  |                     |  |       |  |      
|------------------------------ |  | ------------------ |  | ------------------- |  | ----- |  | -----
|                               |  | 2006              
|                               |  | BrazilianAir Force |  | Banco doBrasil S.A. |  | BNDES |  | Total
|Assets                         |  |                    |  |                     |  |       |  |      
|Cash and cash equivalents      |  |                   |  | 78.7                |  |      |  | 78.7 
|Trade accounts receivable      |  | 87.3               |  |                    |  |      |  | 87.3 
|Other assets                   |  |                   |  | 327.8               |  | 1.8   |  | 329.6
|                               |  |                    |  |                    
|Liabilities                    |  |                    |  |                     |  |       |  |      
|Loans and financing            |  |                   |  | 66.7                |  | 292.3 |  | 359.0
|Recourse and non-recourse debt |  |                   |  | 318.6               |  | 511.2 |  | 829.8
|Advances from customers        |  | 17.5               |  |                    |  |      |  | 17.5 
|                               |  |                    |  |                    
|Results of operations          |  |                    |  |                     |  |       |  |      
|Net sales                      |  | 70.8               |  |                    |  |      |  | 70.8 
|Interest income                |  |                   |  |                    |  |      |  |     
|Interest expense               |  |                   |  | 20.0                |  | 18.1  |  | 38.1 



|32 | Financial Instruments and Risk Management
|-- | -----------------------------------------

The
Company is primarily engaged in the assembly and sale of aircraft to various markets. More than 95% of the Companys sales are exports and sales prices are U.S. dollar-denominated, which is the Companys functional currency. Nevertheless,
a significant portion of the Companys labor costs and other local cost overheads are Brazilian real-denominated.

Therefore,
the Company maintains certain monetary assets and liabilities, mainly represented by taxes recoverable and payable, cash equivalents and loans, in Brazilian reais, to balance its non-U.S. dollar-denominated assets against its non-U.S.
dollar-denominated liabilities plus shareholders equity in relation to its projected future cash flows.

The Companys market
risks include fluctuations in interest rates and foreign currency exchange rates. The Company has established policies and procedures to manage sensitivity to interest rate and foreign currency exchange rate risk. These procedures include monitoring
the Companys level of exposure to each market risk, including the analysis of the amounts based on projected future cash flows, the matching of variable rate assets with variable rate liabilities, and limiting the amount of fixed rate assets
which may be funded with floating rate liabilities. These procedures may also include the use of derivative financial instruments to mitigate the effects of interest rate fluctuations and to reduce the exposure to exchange rate risk. By using
derivative instruments, the Company exposes itself to credit risk (Note 33).



The accompanying notes are an integral part of these consolidated financial statements.

F-52



---

##### Table of Contents

|(a) | Interest rate risk
|--- | ------------------

The Company is exposed to risk
that it will incur losses due to adverse changes in interest rates. This interest rate exposure principally relates to changes in the market interest rates affecting the Companys loans.

The Companys U.S. dollar-denominated debt bears interest at fixed or variable interest rates based on 6-month or 12-month LIBOR. The Companys
foreign currency debt is primarily denominated in Brazilian reais and in euros. The Brazilian real-denominated debt bears interest at a variable rate based on the TJLP and the euro-denominated debt bears interest at fixed rates.

The Companys interest rate risk management strategy may use derivative instruments to mitigate interest rate volatility.



|(b) | Foreign exchange rate risk
|--- | --------------------------

The Company is exposed
to risk that it will incur losses due to adverse changes in foreign exchange rates. The Companys primary exposures to foreign currency exchange fluctuations are the Brazilian real/U.S. dollar and euro/U.S. dollar exchange rates. The Company
aims to mitigate its exposure in foreign currencies through (i) balancing its non-U.S. dollar-denominated assets against its non-U.S. dollar-denominated liabilities and (ii) using derivative instruments. The Company typically uses
derivatives such as foreign currency forward cross-currency interest rate swap contracts and NDFs to implement this strategy.



|(c) | Derivative financial instruments
|--- | --------------------------------

Derivative
instruments outstanding as of December 31, 2008, are as follows:



|                              |  |                                                      |      |                  |       |                    |                                             |                         |      |                       |  
|----------------------------- |  | ---------------------------------------------------- | ---- | ---------------- | ----- | ------------------ | ------------------------------------------- | ----------------------- | ---- | --------------------- | -
|2008                          | 
|Underlying transactions       |  | Type                                                 |      | Maturity date    |       | Notionalamount     |                                             | Agreed average rate - % |      | Gain/(loss)fair value |  
|Project development           |  | Swap (variable interest into fixed interest - US$)   |      | 2009 to 2016     |       | 130.2              |                                             | 5,910                   |      | (10.3                 | )
|Export financing              |  | Cross currency swap (US$ fix to a percentage of CDI) |      | 2009             |       | 130.0              |                                             | Asset 5,26 p.a. +       |      |                      |  
|                              |  |                                                      |      |                  |       |                    | FX variation (US$ - R$) liability 99 of CDI |                         | 1.1  |                      
|No-recourse and recourse debt |  | Swap (fixed interest into variable interest US$)     |      |                  |       |                    |                                             |                         |      |                      |  
|                              |  |                                                      | 2019 |                  | 185.9 |                    | 5,958                                       |                         | 28.8 |                      
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      |                       |  
|                              |  |                                                      |      |                  |      
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      | 19.6                  |  
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      |                       |  
|                             
|2008                          | 
|Underlying transactions       |  | Type                                                 |      | Originalcurrency |       | Negotiatedcurrency |                                             | National amount         |      | Gain/(loss)fair value |  
|Future exports                |  | NDF                                                  |      | U. S. dollars    |       | Reais              |                                             | 575.0                   |      | (156.1                | )
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      |                       |  
|                              |  |                                                      |      |                  |      
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      | (156.1                | )
|                              |  |                                                      |      |                  |       |                    |                                             |                         |      |                       |  



The accompanying notes are an integral part of these consolidated financial statements.

F-53



---

##### Table of Contents

|                        |  |                                                                            |              |                  |       |                    |              |                                                |      |                       |  
|----------------------- |  | -------------------------------------------------------------------------- | ------------ | ---------------- | ----- | ------------------ | ------------ | ---------------------------------------------- | ---- | --------------------- | -
|2007                    | 
|Underlying transactions |  | Type                                                                       |              | Maturity date    |       | Notionalamount     |              | Agreed average rate - %                        |      | Gain/(loss)fair value |  
|Import financing        |  | Swap (interest + US$ into R$ + CDI + fixed interest rate)                  |              |                  |       |                    |              |                                                |      | 0.0                   |  
|                        |  |                                                                            | 2008         |                  | 4.8   |                    | 64.95 of CDI |                                                | (8.0 | )                    
|Project development     |  | Swap (variable interest into fixed interest - US$)                         |              |                  |       |                    |              |                                                |      | 0.0                   |  
|                        |  |                                                                            | 2008 to 2016 |                  | 200.8 |                    | 6,010        |                                                | (2.9 | )                    
|Export financing        |  | Swap (CDI into dual currency - the greater than exchange variation or CDI) |              |                  |       |                    |              | 100 exchange variation (US$ - R$) or 75 of CDI |      | 0.0                   |  
|                        |  |                                                                            | 2008         |                  | 2.50  |                    |              | 0.0                                            |     
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      |                       |  
|                        |  |                                                                            |              |                  |      
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      | (10.9                 | )
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      |                       |  
|                       
|2007                    | 
|Underlying transactions |  | Type                                                                       |              | Originalcurrency |       | Negotiatedcurrency |              | National amount                                |      | Gain/(loss)fair value |  
|Suppliers               |  | NDF                                                                        |              | GBP              |       | U.S. dollars       |              | 0.3                                            |      | 0.0                   |  
|Accounts receivable     |  | NDF                                                                        |              | U.S. dollars     |       | Reais              |              | 250.0                                          |      | 8.1                   |  
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      |                       |  
|                        |  |                                                                            |              |                  |      
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      | 8.1                   |  
|                        |  |                                                                            |              |                  |       |                    |              |                                                |      |                       |  



|33 | Concentration of Credit Risk
|-- | ----------------------------

The Company may incur
losses if counterparties to the Companys contracts do not pay amounts owed to the Company. The Companys primary credit risk derives from the sales of aircraft, spare parts and related services to its customers, including the financial
obligations related to these sales (Notes 9 and 35).

Financial instruments which may potentially subject the Company to concentrations of
credit risk include (a) cash and cash equivalents, (b) trade and other accounts receivable, (c) customer commercial financing (d) advances to suppliers and (e) financial derivative contracts. The Company limits its credit
risk associated with cash and cash equivalents by placing its investments with investment grade-rated institutions in short-term securities and mutual funds. With respect to trade accounts receivable and customer commercial financing, the Company
limits its credit risk by performing ongoing credit evaluations. All such customers are meeting current commitments, are operating within established credit limits and are considered by management to represent an acceptable credit risk level. The
Company believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Companys trade accounts receivable. Advances to suppliers are made only to select long-standing suppliers. The financial condition
of such suppliers is analyzed on an ongoing basis to limit credit risk. The Company addresses credit risk related to derivative instruments by restricting the counterparties of such derivatives to major financial institutions.

The Company may also have credit risk related to the sale of aircraft while its customers are finalizing the financing structures for their purchases from
the Company. To minimize these risks, customer credit analyses are continuously monitored and the Company works closely with the financial institutions to facilitate customer financing.



The accompanying notes are an integral part of these consolidated financial statements.

F-54



---

##### Table of Contents

|34 | Fair Value of Financial Instruments
|-- | -----------------------------------



|(a) | SFAS 157 adoption
|--- | -----------------

The Company adopted SFAS 157,
effective January 1, 2008, as discussed in Note 4(a), which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value.

As defined in SFAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit
price). However, as permitted under SFAS 157, the Company utilizes a mid-market pricing convention (the mid-point price between bid and ask prices) as a practical expedient for valuing the majority of its assets and liabilities measured and reported
at fair value. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can
be readily observable, market corroborated, or generally unobservable. The company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company is able to classify fair value balances based on the observability of those inputs. SFAS 157 establishes a fair value hierarchy
that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs
(level 3 measurement). The three levels of the fair value hierarchy defined by SFAS 157 are as follows:



|(i) | Level 1 - quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the
asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | Level 2 - pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2
includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value,
volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the
instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded derivatives such as over-the-counter forwards and
options.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) | Level 3 - pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be
|----- | ----------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these consolidated financial statements.

F-55



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| | used with internally developed methodologies that result in managements best estimate of fair value. At each balance sheet date, the Company performs
an analysis of all instruments subject to SFAS 157 and includes in level 3 all of those whose fair value is based on significant unobservable inputs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth by level within the fair value hierarchy the Companys financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008. As
required by SFAS 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to
the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.



|                   |  |                                                             |  |                                            |  |                                         |  |      
|------------------ |  | ----------------------------------------------------------- |  | ------------------------------------------ |  | --------------------------------------- |  | -----
|                   |  | Fair value measurements at December 31, 2008               
|                   |  | Quoted prices inactive marketsfor identicalassets (level 1) |  | Significantotherobservableinputs (level 2) |  | Significantunobservableinputs (level 3) |  | Total
|Assets             |  |                                                             |  |                                            |  |                                         |  |      
|Trading securities |  | 633.2                                                       |  | 92.4                                       |  | 109.7                                   |  | 835.3
|Derivatives        |  |                                                            |  | 29.9                                       |  |                                        |  | 29.9 
|                   |  |                                                             |  |                                           
|Liabilities        |  |                                                             |  |                                            |  |                                         |  |      
|Derivatives        |  |                                                            |  | 166.5                                      |  |                                        |  | 166.5

The table below presents a reconciliation for the assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) for the period from January 1, 2008 to December 31, 2008.



|                    |  |                                                                                           |  
|------------------- |  | ----------------------------------------------------------------------------------------- | -
|                    |  | Fair value measurements usingsignificant
unobservableinputs (level 3) atDecember 31, 2008 |  
|Beginning balance   |  |                                                                                           |  
|Purchases           |  | 120.0                                                                                     |  
|Losses (unrealized) |  | (10.3                                                                                     | )
|                    |  |                                                                                           |  
|                    | 
|Ending balance      |  | 109.7                                                                                     |  
|                    |  |                                                                                           |  

Level 3 investment securities primarily relate to certain investment positions in a exclusive
fund which invests in 9 different hedge funds in the total amount of US$ 109.7, that are accounted for as trading securities under SFAS No. 115. Due to the market turmoil, a portion of the assets held by the funds may not have an
active market price and, as a consequence, considerable assumptions were made by each of the managers of the funds in the determination of the market value of those assets, including third party appraisal valuations.

Gains and losses included in the income statement for the year ended December 31, 2008 are recorded under interest income (expense).



The accompanying notes are an integral part of these consolidated financial statements.

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|(b) | Fair value measurements
|--- | -----------------------

The following estimated
fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data and to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair
values.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is
practicable to estimate that value. Potential income tax ramifications related to the realization of unrealized gains and losses that would be incurred in an actual sale or settlement have not been taken into consideration.

The carrying amounts for cash and cash equivalents, trading debt securities, accounts and notes receivable and current liabilities approximates their fair
values. The fair value of held-to-maturity securities is estimated using the discounted cash flows method. The fair value of long-term debt is based on the discounted value of contractual cash flows. The discount rate is estimated based on the
market forecasted curves for the remaining cash flow of each obligation.

The estimated fair values of financial instruments are as follows:



|                               |  |                 |  |           |  |                 |  |          
|------------------------------ |  | --------------- |  | --------- |  | --------------- |  | ---------
|                               |  | 2008            |  | 2007     
|                               |  | CarryingAmounts |  | Fairvalue |  | Carryingamounts |  | FairValue
|Financial assets               |  |                 |  |           |  |                 |  |          
|Cash and cash equivalents      |  | 1,391.4         |  | 1,391.4   |  | 1,307.4         |  | 1,307.4  
|Trading securities             |  | 836.5           |  | 836.5     |  | 1,183.0         |  | 1,183.0  
|Trade accounts receivable, net |  | 444.0           |  | 444.0     |  | 394.3           |  | 394.3    
|Guarantee deposits (Note 11)   |  | 493.2           |  | 493.2     |  | 469.6           |  | 469.6    
|Held-to-maturity securities    |  | 42.2            |  | 40.3      |  | 43.5            |  | 40.6     
|Derivatives                    |  | 29.9            |  | 29.9      |  | 8.1             |  | 8.1      
|                               |  |                 |  |          
|Financial liabilities          |  |                 |  |           |  |                 |  |          
|Loans and financing            |  | 1,825.4         |  | 1,688.7   |  | 1,753.0         |  | 1,827.3  
|Trade accounts payable         |  | 1,078.1         |  | 1,078.1   |  | 912.9           |  | 912.9    
|Derivatives                    |  | 166.5           |  | 166.5     |  | 10.9            |  | 10.9     



|35 | Off-Balance Sheet Arrangements
|-- | ------------------------------

The Company
participates in certain off-balance sheet arrangements, in the normal course of business, including by providing guarantees, repurchase obligations, trade-in and product warranty commitments.



|(a) | Guarantees
|--- | ----------

Financial guarantees are triggered if
customers do not perform their obligation to service the debt during the term of the financing under the relevant financing arrangements. Financial guarantees provide credit support to the guaranteed party to mitigate default-related losses. The
underlying assets collateralize these guarantees. The value of the underlying assets may be adversely affected by an economic or industry downturn. Upon an event of default, the Company usually is the agent for the



The accompanying notes are an integral part of these consolidated financial statements.

F-57



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##### Table of Contents

guaranteed party for the refurbishment and remarketing of the underlying asset. The Company may be entitled to a fee for such remarketing services. Typically
a claim under the guarantee is made only upon surrender of the underlying asset for remarketing.

Residual value guarantees provide a third
party with a specific guaranteed asset value at the end of the financing agreement. In the event of a decrease in market value of the underlying asset, the Company bears the difference between the specific guaranteed amount and the actual fair
market value. The Companys exposure is mitigated by the fact that, in order to benefit from the guarantee, the guaranteed party has to make the underlying asset meet tight specific return conditions.

The following table provides quantitative data regarding the Companys guarantees to third parties. The maximum potential payments represent the
worst-case scenario, and do not necessarily reflect the results expected by the Company. Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets the Company could liquidate or receive from
other parties to offset its payments under guarantees.



|                                                                     |  |         |   |  |         |  
|-------------------------------------------------------------------- |  | ------- | - |  | ------- | -
|                                                                     |  | 2008    |   |  | 2007    |  
|Maximum financial guarantees                                         |  | 1,537.4 |   |  | 1,701.6 |  
|Maximum residual value guarantees                                    |  | 754.0   |   |  | 946.4   |  
|Mutually exclusive exposure (*)                                      |  | (393.9  | ) |  | (415.4  | )
|Provisions and liabilities recorded                                  |  | (27.4   | ) |  | (24.5   | )
|                                                                     |  |         |   |  |         |  
|                                                                     |  |        
|Off-balance sheet exposure                                           |  | 1,870.1 |   |  | 2,208.1 |  
|                                                                     |  |         |   |  |         |  
|                                                                     |  |        
|Estimated proceeds from performance guarantees and underlying assets |  | 2,013.5 |   |  | 2,352.7 |  
|                                                                     |  |         |   |  |         |  
|                                                                     | 

| | (*) | In the event both guarantees were issued for the same underlying asset, the residual value guarantees can only be exercised if the financial guarantees have expired without having
been triggered and, therefore, the residual value and financial guarantees have not been combined to calculate the maximum exposure.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2008 and 2007, the Company had escrow deposits of US$ 299.7 and US$ 287.5, respectively, in favor of third parties to whom it has provided financial and residual value guarantees in connection with certain
aircraft sales financing structures (Note 11).



|(b) | Aircraft Trade-In Options
|--- | -------------------------

In connection with the
signing of a purchase agreement for new aircraft, the Company may provide trade-in options to its customers. These options provide a customer with the right to trade-in existing aircraft upon the purchase and acceptance of a new aircraft. Currently,
the Company has entered into a total of 15 trade-in aircraft options. From these 15 trade-in options, 12 rights were exercised through December 31, 2008. Of these 12 aircraft, 4 were received until fiscal year end 2008 and the
remaining 8 will be received during 2009. The Companys obligation to receive the remaining 3 aircraft as trade-ins are directly



The accompanying notes are an integral part of these consolidated financial statements.

F-58



---

##### Table of Contents

tied to contractual obligations with our customer of them actually taking delivery of certain new aircraft. The Company continues to monitor all trade-in
commitments in order to anticipate any adverse economic impact. Based on the current evaluation of the Company and based on third parties appraisals, the Company believes that any aircraft accepted under trade-in may be sold or leased in the market
without losses.



|(c) | Product Warranties
|--- | ------------------

The Company provides product
warranties in conjunction with certain product sales.

Generally, aircraft sales are accompanied by a standard warranty for systems,
accessories, equipment, parts and software manufactured by the Company. Warranty expense related to aircraft and parts is recognized at the time of sale based on estimated amounts of warranty costs anticipated to be incurred. These estimates are
based on factors that include, among other things, warranty claim and cost experience, warranty coverage available from suppliers, type and duration of warranty coverage and the volume and mix of aircraft sold and in service. The warranty period
typically ranges from 2 to 5 years.

Product and performance provisions are included in other payables and accrued liabilities and presented
the following activity:



|                     |  |                            |   |  |                                     |   |  |                                   |  
|-------------------- |  | -------------------------- | - |  | ----------------------------------- | - |  | --------------------------------- | -
|                     |  | Productwarranties(Note 15) |   |  | Productimprovementaccruals(Note 15) |   |  | FIN-45guaranteeliability(Note 15) |  
|At December 31, 2006 |  | 97.4                       |   |  | 43.5                                |   |  | 27.0                              |  
|                     |  |                            |   |  |                                     |   |  |                                   |  
|Additions            |  | 49.3                       |   |  | 16.9                                |   |  | 0.3                               |  
|Payments/reversals   |  | (41.8                      | ) |  | (39.0                               | ) |  | (2.8                              | )
|                     |  |                            |   |  |                                     |   |  |                                   |  
|                     |  |                            |  
|At December 31, 2007 |  | 104.9                      |   |  | 21.4                                |   |  | 24.5                              |  
|                     |  |                            |   |  |                                     |   |  |                                   |  
|Additions            |  | 73.8                       |   |  | 18.4                                |   |  | 5.4                               |  
|Payments/reversals   |  | (82.6                      | ) |  | (18.3                               | ) |  | (2.5                              | )
|                     |  |                            |   |  |                                     |   |  |                                   |  
|                     |  |                            |  
|At December 31, 2008 |  | 96.1                       |   |  | 21.5                                |   |  | 27.4                              |  
|                     |  |                            |   |  |                                     |   |  |                                   |  



|36 | Segment Information
|-- | -------------------

The Company is organized based
on the products and services it offers. Under this organizational structure, the Company operates in the following segments: commercial aviation, executive aviation, aviation services, defense and government and others.



|(a) | Commercial aviation segment
|--- | ---------------------------

The Company developed
the ERJ 145, a 50-passenger twin jet-powered regional aircraft, introduced in 1996, to address the growing demand among regional airlines for medium-range, jet-powered aircraft. After less than two years of development,



The accompanying notes are an integral part of these consolidated financial statements.

F-59



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##### Table of Contents

the ERJ 135, a 37-seat regional jet based on the ERJ 145, was introduced in July 1999. In addition, The Company developed the 44-seat ERJ 140 as part of the
ERJ 145 regional jet family, which the Company began delivering in the second half of 2001. The Company believes that the ERJ 145 regional jet family provides the comfort, range and speed of a jet at costs comparable to turboprop aircraft. The
Company is continuing to develop the EMBRAER 170/190 jet family with its 70-122 seat platform to serve the trend in the commercial airline market towards larger, faster and longer range jets and to further diversify its strength in the jet market.



|(b) | Executive aviation
|--- | ------------------

The Company has developed a
line of executive jets, the Legacy 600 and is developing additional executive jets in the very light, light and ultra-large segments - namely - the Phenom 100, Phenom 300, Lineage 1000, Legacy 450 and Legacy 500, respectively. The Company
markets its executive jets to customers, including fractional ownership companies, charter companies, air-taxi companies and high net-worth individuals.



|(c) | Aviation services
|--- | -----------------

The Company provides after-sales
customer support services and manufactures and markets spare parts for the fleets of its commercial, executive and defense and government customers. Activities in this segment include the sale of spare parts, maintenance and repair, training and
other product support services. This segment was presented separately for the first time in 2007 and the Company has represented information for 2006.



|(d) | Defense and government segment
|--- | ------------------------------

The Company
designs, develops, integrates and manufactures a wide range of defense and government products, principally for transport, training, light attack and surveillance aircraft.

The Company is the leading supplier of defense aircraft to the Brazilian Air Force based on the total number of aircraft in its current fleet. The Company
has also sold defense aircraft to military forces of 16 other countries in Europe and Latin America, including the United Kingdom, France, Greece and Mexico.



|(e) | Others
|--- | ------

The Company recognizes revenues related to
sales of used aircraft or leases to customers primarily through its leasing subsidiary, ECC Leasing Co. Ltd. In addition, the Company provides structural parts and mechanical and hydraulic systems to Sikorsky Corporation for its production of
helicopters. The Company also manufactures landing gear, on a limited basis and upon customer request, general aviation propeller aircraft, such as executive planes and crop dusters, also known as light aircraft.



The accompanying notes are an integral part of these consolidated financial statements.

F-60



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##### Table of Contents

Other unallocated costs include corporate costs not allocated to the operating segments. Unallocated
capital expenditures and depreciation related primarily to shared service assets.

The following table provides geographic information
regarding net sales. The geographic allocation is based on the location of the operator of the aircraft.



|                             |  |         |   |  |         |  |        
|---------------------------- |  | ------- | - |  | ------- |  | -------
|Net sales by geographic area |  | 2008    |   |  | 2007    |  | 2006   
|Americas (excluding Brazil)  |  |         |   |  |         |  |        
|Commercial Aviation          |  | 2,401.9 |   |  | 2,277.9 |  | 1,407.0
|Executive Aviation           |  | 446.6   |   |  | 302.2   |  | 304.8  
|Aviation Services            |  | 241.8   |   |  | 213.9   |  | 180.2  
|Defense and Government       |  | 214.5   |   |  | 156.7   |  | 142.1  
|Others                       |  | 51.8    |   |  | 69.4    |  | 92.7   
|                             |  |         |   |  |         |  |        
|                             |  |         |  
|                             |  | 3,356.6 |   |  | 3,020.1 |  | 2,126.8
|                             |  |         |   |  |         |  |        
|Brazil                       |  |         |   |  |         |  |        
|Executive Aviation           |  | (0.0    | ) |  | 27.7    |  |       
|Aviation Services            |  | 14.6    |   |  | 46.4    |  | 50.2   
|Defense and Government       |  | 214.1   |   |  | 96.9    |  | 71.2   
|Others                       |  | 53.4    |   |  | 78.0    |  | 25.0   
|                             |  |         |   |  |         |  |        
|                             |  |         |  
|                             |  | 282.1   |   |  | 249.0   |  | 146.4  
|                             |  |         |   |  |         |  |        
|Europe                       |  |         |   |  |         |  |        
|Commercial Aviation          |  | 645.2   |   |  | 485.8   |  | 430.1  
|Executive Aviation           |  | 225.1   |   |  | 484.2   |  | 161.3  
|Aviation Services            |  | 252.1   |   |  | 227.6   |  | 237.0  
|Defense and Government       |  | 16.2    |   |  | 29.2    |  | 13.4   
|Others                       |  | 7.6     |   |  | 6.4     |  |       
|                             |  |         |   |  |         |  |        
|                             |  |         |  
|                             |  | 1,146.2 |   |  | 1,233.2 |  | 841.8  
|                             |  |         |   |  |         |  |        
|Others                       |  |         |   |  |         |  |        
|Commercial Aviation          |  | 1,190.4 |   |  | 612.9   |  | 516.1  
|Executive Aviation           |  | 202.3   |   |  | 23.9    |  | 116.0  
|Aviation Services            |  | 93.9    |   |  | 40.3    |  | 12.4   
|Defense and Government       |  | 59.7    |   |  | 63.6    |  |       
|Others                       |  | 3.9     |   |  | 2.2     |  |       
|                             |  |         |   |  |         |  |        
|                             |  |         |  
|                             |  | 1,550.3 |   |  | 742.9   |  | 644.5  
|                             |  |         |   |  |         |  |        
|                             |  |         |  
|                             |  | 6,335.2 |   |  | 5,245.2 |  | 3,759.5
|                             |  |         |   |  |         |  |        



The accompanying notes are an integral part of these consolidated financial statements.

F-61



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##### Table of Contents

The following table presents statement of income information by operating segment:



|                               |  |          |   |  |          |   |  |          |  
|------------------------------ |  | -------- | - |  | -------- | - |  | -------- | -
|Operating income               |  | 2008     |   |  | 2007     |   |  | 2006     |  
|Net sales                      |  |          |   |  |          |   |  |          |  
|Commercial Aviation            |  | 4,237.5  |   |  | 3,376.6  |   |  | 2,353.2  |  
|Executive Aviation             |  | 874.0    |   |  | 838.0    |   |  | 582.1    |  
|Aviation Services              |  | 602.4    |   |  | 528.3    |   |  | 479.8    |  
|Defense and Government         |  | 504.5    |   |  | 346.4    |   |  | 226.7    |  
|Others                         |  | 116.8    |   |  | 155.9    |   |  | 117.7    |  
|                               |  |          |   |  |          |   |  |          |  
|                               |  |          |  
|                               |  | 6,335.2  |   |  | 5,245.2  |   |  | 3,759.5  |  
|                               |  |          |   |  |          |   |  |          |  
|Cost of sales and services     |  |          |   |  |          |   |  |          |  
|Commercial Aviation            |  | (3,534.0 | ) |  | (2,737.3 | ) |  | (1,780.5 | )
|Executive Aviation             |  | (616.3   | ) |  | (602.5   | ) |  | (399.0   | )
|Aviation Services              |  | (387.5   | ) |  | (393.1   | ) |  | (349.6   | )
|Defense and Government         |  | (365.6   | ) |  | (236.8   | ) |  | (174.5   | )
|Others                         |  | (88.3    | ) |  | (123.8   | ) |  | (103.2   | )
|                               |  |          |   |  |          |   |  |          |  
|                               |  |          |  
|                               |  | (4,991.7 | ) |  | (4,093.5 | ) |  | (2,806.8 | )
|                               |  |          |   |  |          |   |  |          |  
|Gross profit                   |  |          |   |  |          |   |  |          |  
|Commercial Aviation            |  | 703.5    |   |  | 639.3    |   |  | 572.7    |  
|Executive Aviation             |  | 257.7    |   |  | 235.5    |   |  | 183.1    |  
|Aviation Services              |  | 214.9    |   |  | 135.2    |   |  | 130.2    |  
|Defense and Government         |  | 138.9    |   |  | 109.6    |   |  | 52.2     |  
|Others                         |  | 28.5     |   |  | 32.1     |   |  | 14.5     |  
|                               |  |          |   |  |          |   |  |          |  
|                               |  |          |  
|                               |  | 1,343.5  |   |  | 1,151.7  |   |  | 952.7    |  
|                               |  |          |   |  |          |   |  |          |  
|Operating expenses             |  |          |   |  |          |   |  |          |  
|Commercial Aviation            |  | (331.7   | ) |  | (299.3   | ) |  | (303.4   | )
|Executive Aviation             |  | (176.8   | ) |  | (237.6   | ) |  | (130.4   | )
|Aviation Services              |  | (88.5    | ) |  | (80.1    | ) |  | (25.6    | )
|Defense and Government         |  | (66.0    | ) |  | (60.5    | ) |  | (38.0    | )
|Others                         |  | (3.0     | ) |  | (6.0     | ) |  |         |  
|Unallocated corporate expenses |  | (140.5   | ) |  | (94.0    | ) |  | (112.5   | )
|                               |  |          |   |  |          |   |  |          |  
|                               |  |          |  
|                               |  | (806.5   | ) |  | (777.5   | ) |  | (609.9   | )
|                               |  |          |   |  |          |   |  |          |  
|                               |  |          |  
|Income from operations         |  | 537.0    |   |  | 374.2    |   |  | 342.8    |  
|                               |  |          |   |  |          |   |  |          |  



The accompanying notes are an integral part of these consolidated financial statements.

F-62



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##### Table of Contents

The following tables present other information about the Companys operating segments:



|                                   |  |         |  |        
|---------------------------------- |  | ------- |  | -------
|Property, plant and equipment, net |  | 2008    |  | 2007   
|Commercial aviation                |  | 230.0   |  | 165.8  
|Executive aviation                 |  | 48.7    |  | 48.8   
|Aviation services                  |  | 110.0   |  | 56.5   
|Defense and government             |  | 19.0    |  | 14.4   
|Others                             |  | 4.6     |  | 38.6   
|Unallocated                        |  | 325.6   |  | 241.9  
|                                   |  |         |  |        
|                                   |  |        
|                                   |  | 737.9   |  | 566.0  
|                                   |  |         |  |        
|                                   |  |        
|Trade accounts receivable, net     |  | 2008    |  | 2007   
|Commercial aviation                |  | 0.1     |  | 34.7   
|Aviation services                  |  | 299.0   |  | 190.9  
|Defense and government             |  | 98.7    |  | 92.4   
|Others                             |  | 46.2    |  | 76.4   
|                                   |  |         |  |        
|                                   |  |        
|                                   |  | 444.0   |  | 394.4  
|                                   |  |         |  |        
|                                   |  |        
|Advances from customers            |  | 2008    |  | 2007   
|Commercial aviation                |  | 741.7   |  | 608.1  
|Executive aviation                 |  | 525.8   |  | 439.5  
|Aviation services                  |  | 80.3    |  | 35.7   
|Defense and government             |  | 250.1   |  | 66.3   
|Others                             |  | 2.8     |  | 20.0   
|                                   |  |         |  |        
|                                   |  |        
|                                   |  | 1,600.7 |  | 1,169.6
|                                   |  |         |  |        



|37 | Supplemental Disclosure of Cash Flow Information
|-- | ------------------------------------------------



|                                              |  |       |  |      |  |     
|--------------------------------------------- |  | ----- |  | ---- |  | ----
|Operating income                              |  | 2008  |  | 2007 |  | 2006
|Cash paid during the year for                 |  |       |  |      |  |     
|Interest                                      |  | 103.5 |  | 78.3 |  | 99.6
|Income taxes                                  |  | 19.2  |  | 14.3 |  | 89.9
|                                              |  |       | 
|Operating income                              |  | 2008  |  | 2007 |  | 2006
|Non-cash financing and investing transactions |  |       |  |      |  |     
|Dividends payable                             |  |      |  |     |  | 35.6
|Assets acquired under capital leases          |  | 9.4   |  | 11.3 |  | 3.9 



The accompanying notes are an integral part of these consolidated financial statements.

F-63



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##### Table of Contents

|38 | Subsequent Events
|-- | -----------------



|(a) | Reduction in personnel
|--- | ----------------------

As a consequence of the
unprecedented crisis affecting the global economy, particularly the air transportation industry, the Company announced, on February 19, 2009, a revision to its cost structure and a reduction in its workforce in order to adjust its cost and
workforce to the new demand for commercial and executive aircraft.

The reduction in personnel represents approximately 20 percent of its
21,362 employees, excluding Harbin Embraer Aircraft Industry Company Ltd. and Ogma - Indústria Aeronáutica de Portugal S.A., concentrating in the production and administrative areas, including the elimination of one layer in the
management structure.



|(b) | Embraer Overseas Bond repurchase
|--- | --------------------------------

On March 31,
2009 Embraer repurchased and cancelled US$19.9 (4,97%) bonds of its issuance, totaling US$15.2 (face value of US$19.9), issued by Embraer Overseas. These bonds were repurchased by Embraer Overseas through open market transactions.

*    *    *



The accompanying notes are an integral part of these consolidated financial statements.

F-64