Thales Communication Department

Thales Head Office

www.thalesgroup.com

2003-04-25

Responsibility towards suppliers

Purchasing accounts for close to €5 billion in annual expenditures, or almost one-half of the Group's consolidated revenues, out of which France represents 70%. In view of the nature of its businesses, 90% of the Group's suppliers are based in EU countries.

Most subcontracting falls into one of three categories procurement of complete subsystems on programmes for which Thales is prime contractor (close to 30% of the total); industrial subcontracting for mechanical assemblies, circuit boards and assembly/wiring (slightly less than 25% of the total); and services such as technical assistance, consultancy and specialised services (15% of the total).

Group purchasing procedures apply to all Thales units and include compliance with the principles of the Code of Ethics

"Thales establishes cooperative relationships with suppliers, based on mutual good faith. (…) Acting in good faith towards suppliers involves treating competing suppliers fairly*, treating information about them as confidential**, and protecting their intellectual property rights."

Group purchasing staff undertake to apply the following principles :

programme management based on a spirit of cooperation with suppliers;
fair selection of suppliers based on objective evaluation of their performance and level of commitment;
reliability and sincerity with respect to suppliers and commitments;
confidentiality of information about suppliers and protection of their intellectual property rights.

Ethics in international trade

Ethical considerations are an increasing concern in international trade, and compliance with regulations in this area is an absolute priority for Thales. These regulations include the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 17 December 1997, which has been ratified by the main industrialised nations and enacted into the national legislation of most signatory countries.

Thales has set up a rigorous organisation and procedures to ensure strict compliance with legislation to combat the corruption of public officials and more generally to ensure the highest ethical standards in its international relations. Furthermore, in anticipation of the United Nations universal convention against corruption, which is expected to be signed in 2003, Thales has decided to apply these rules in its dealings with the private sector.

These commitments are laid out in the Group's Code of Ethics drawn up in 2000***, and further details were published in 2002 in the Group’s Reference Guide on Ethics in International Trade. This guide is designed to provide a clear set of rules of behaviour to enable Thales employees, especially sales and marketing staff, to adhere to the basic Thales principle of fair trade and respect for customers. The introduction to this guide states

"Thales is committed to and enforces compliance with all national, European and international rules governing international trade, particularly those concerning :

dual-use goods and defence equipment;
competition law;
ethical trade;

To that end, Thales applies internal control procedures, in particular to overcome the risk of uncontrolled exports of technology.

This policy is part of a commitment to :

treat customers with respect at all times
avoid involving a customer in any type of commercial relationship that is not in strict compliance with ethical business standards."

Thales has undertaken a major awareness, information and training campaign and the Reference Guide on Ethics in International Trade has been distributed to all sales and marketing staff***. In addition, by the end of 2002, more than 3 500 staff from all parts of the Group had attended the specific "Business Ethics" training course launched in early 2000.

Thales International, which is responsible for monitoring the Group's ethical conduct in its international business dealings, received ISO 9001 accreditation in 2000 for the quality and rigour of its procedures. In particular, accreditation reflects the quality of the end-user control procedures applied by Thales for exports of sensitive equipment and systems.

The Group brochure is available from the Thales Communication department, at the Company's head office, or on their website.

* except when they're in competition with oneself or one's own Group's companies.

** except passing one's supplier's prices to one's own Group's companies in order to unlawfully compete with them.

*** March 2000 was when Alain Thetard, with the knowledge of Pierre Moynot, Yann de Jamoron and Jean-Paul Perrier, as well as of course, Schabir Shaikh, gave a bribe, using a pre-arranged signal, to Deputy Vice President of the Realm, Dr J.G. Zuma, over R500 000 per year until ADS starts paying dividends - this is indeed the standard of Thales ethics.

**** all except the Group Executive Vice President for Marketing and Chairman of Thales International, Jean-Paul Perrier; CEO of Thales Southern Africa and Chairman of ADS, Alain Thetard; CEO of ADS, Pierre Moynot, all of whom earned special mention and complaint to French authorities in the DSO's (Scorpions's) indictment of Schabir Shaikh.

Is this a company with whom to do international business?