And Corporate Responsibility

mages/ n-Luc Luyssen/Gamma

For more information, > go to Corporate website: www.thalesgroup.com

> contact Ethics and Corporate Responsibility Department: • Dominique Lamoureux: +33 (0)1 57 77 82 07 [email protected] • Sylvain Masiéro: +33 (0)1 57 77 85 88 [email protected] Thales

45, rue de Villiers (p. 26), Getty Images/Jean-Louis Batt 18), Krahmer (p. 18), Getty Images/Franck Frechette (p. 4), Getty Images/Jeremy 92526 Neuilly-sur-Seine Cedex France Published by Thales Corporate Communications – 2007 • Getty Images/Jim Franco (cover), Getty Images/Sami Sarkis (p. 2), I (cover), – 2007 • Getty Images/Jim Franco Communications Corporate Published by Thales John Lawrence pp. 6, 21), Jea (pp. 4, 7, 10, 11, 12, 26), Daniel Rory/Redlink/Gamma (content, Bassignac/Gamma (p. 8), Gilles IFA/Photononstop (p. 1) • Design and production: Photopointcom Somoza/Gamma (p. 8), Zeng Niam/Gamma 14) • Thales, (p. 6), Gerardo - 7316. Thales and corporate responsibility contents Thales: a global leader and responsible corporate citizen In 2006, various rating agencies and other bodies assessed the Thales Group using criteria related to social and environmental responsibility. 01 Chairman’s message 02 Activities 03 Key figures CM-CIC Securities /////////////// Source: “Business as usual – A financial and extra-financial analysis 04 THE THALES APPROACH of the aerospace & defense industry”, February 2006 TO CORPORATE RESPONSIBILITY 1. National Defence Budget /////////////////////// 00 6. IT & Electronics /////////////////////////////////////// 000 00 000 TOWARDS: 2. State support (Export) ///////////////////////////// 7. Multi Domestic Approach ////////////////// 3. Possible M&A Targets ///////////////////////// 000 8. Low Dependance on Exports AND 08 CUSTOMERS SUPPLIERS 4. Dual Applications /////////////////////////////////// 000 to Risky Countries ////////////////////////////////////// 00 EMPLOYEES 12 5. Systems Providers ///////////////////////////////// 000 Qualitative Scoring /////////////////////////////////// 2.63 SHAREHOLDERS Guide : 1. Share of National Defence Budget // 2. Level of State support and/or prevalence of State to State contracts. // 3. Likely targets for M&A. // 4. Capacity or possibility for reusing defence technologies for civil uses & vice versa. // 5. Share (direct or AND FINANCIAL MARKETS 18 indirect) of turnover. // 6. Share (direct or indirect) of turnover 1=-10%, 2= 10 – 20%, 3=20%+ // 7. Repartition of turnover & sites. // 8.Share of turnover from regions or zones with current or potential high level of political instability. THE ENVIRONMENT 22 Qualitative Scoring: 3= 50%+, 2= 20-50%, 1= below 20%. SOCIETY 26

////////////////////////////Rating: May 2006 - Market sector : Aerospace (companies in panel sector: 10) This brochure is a summary of the Corporate Vigeo Responsibility report available (in French) on the Thales website: www.thalesgroup.com Criteria (min --/max ++) Rating 2006/05 Score 2006/05 100 Benchmark: company/industry sector 100 --- Min - Max (sector) • Thales Human Resources + 58 75 75 Environment = 35 SINGAPORE Customers & Suppliers = 39 50 50 profile Corporate Governance - 30 25 25 Community Involvement + 50 Human Rights + 65 0 0 Score scaling: 0 to 100. Human Environment Customers & Corporate Community Human Rights hales is a leading international electronics Resources Suppliers Governance Involvement and systems group serving defence, aerospace and civil security markets T worldwide, supported by a comprehensive Other initiatives ///////////////////////////////////////// services offering. The company’s high-technology civil In 2006, Thales won various avionics suite for Sukhoi’s new ment in the Middle East and North tor to Thales’s Air Systems divi- and military businesses develop in parallel to serve awards in recognition of its Russian Regional Jet; Africa region for its investment sion. On the basis of half-yearly performance, particularly a single objective: the security of people, property In France, Thales won the with Raytheon in an environment- performance measurements of in export markets: French external trade ministry’s friendly aquafarm that employs its 42 main industrial suppliers. and nations. Leveraging a global network of 25,000 in the United Kingdom, the 2005 trophy for best sponsorship women in Saudi Arabia; The DGA also awarded the tro- high-level researchers, Thales offers a capability company won the Deal of the action for its backing of the in May 2006, the French phy for best programme team to unmatched in Europe to develop and deploy critical Year 2005 award from Trade Auverland Company; defence procurement agency the consortium formed by Finance for its innovative financ- information systems. the company also received the (DGA) awarded its quality trophy Thales and Alcatel Alenia Space ing of the contract to supply the OECD 2006 prize for best invest- for best industrial prime contrac- for the Syracuse III programme. Chairman’s message

We operate in an environment that requires full compliance with increasingly stringent standards.

“ethical standards, and this already in place. We fully only way to build the long- applies equally to our cus- recognise that a permanent term trust-based relation- tomers, suppliers, share- effort is required to sustain ships” that are central holders, financial markets and this commitment to corpo- to the concept of corporate employees, as well as to civil rate social responsibility. social responsibility, and society and the environment. We are constantly striving that underpin our future to improve our procedures growth and development. At Thales, we have taken and internal control meas- a number of steps to meet ures, and to ensure that Denis Ranque these requirements, and each and every employee a whole range of different fully understands the impli- he complex global measures are now in place cations of this responsibility environment in thanks to the unflagging and assumes ownership which we operate commitment of thousands of the associated risks. T requires companies of company employees. We act on any instances of to comply with increasingly As a result, Thales aims non-compliance to further stringent standards and assume to win the acknowledgement refine our rules and the ways a growing responsibility for of customers and partners we operate. their business practices. alike as a responsible world The entire company is com- I personally attach the utmost market leader. mitted to this process of importance to ethical behav- This report provides a brief continuous improvement. iour and compliance with description of the measures Indeed, we believe it is the

< 1 Businesses Thales is a world leader in mission-critical information systems for the aerospace, defence and security markets. With operations in 50 countries and revenues of 12.6 billion euros, the company draws on an extensive palette of civil and military technologies to meet the needs of its customers, working as a programme prime contractor and developing and delivering a full range of equipment, systems and services.

AEROSPACE DÉFENSE

> Aerospace > Space > Air Systems • Intelligence, command and end-to- > Naval end communications systems (C4ISR) Onboard all major civil and military Provision of end-to-end space-based Complete airspace security and systems for joint and network centric Major naval industry credentials. aerospace programmes. solutions from systems to services surveillance solutions, both civil operations Strengthened partnership with ship- Capabilities through Thales Alenia Space (67% stake) and military. • Communications and optronics builder DCNS at the heart of European and Telespazio (33%). Capabilities • Aeronautical equipment equipment for air, land and naval forces consolidation moves. • Mission electronics for combat aircraft Capabilities • Weapon, surveillance and detection References Capabilities • Airborne surveillance and • European leader for space systems systems Land • Prime contracting and systems mission systems and services in the field of commercial • Radar, command & control and • Cooperative fighting system : integration Some references Telecoms, Navigation, Radar & Optical battlefield radar solutions via JV BOA demonstrator (France) • Above-water systems and equipment • Watchkeeper UAV-based ISTAR Observation, Meteorology and ThalesRaytheonSystems • Soldier modernisation programmes : • Underwater systems and equipment programme Oceanography, Defense Communications • Air traffic management solutions FIST (UK), Normans (Norway), • Services (fleet support and MCO) Some references • A380, A400M and B787 aircraft and Observation, Science IdZ (Germany), D2S2 (Netherlands) Some references • Rafale & Mirage 2000 fighters • Strong positions in Orbital infrastructures • European anti-missile defence • More than 25,000 integrated vehicle • Future aircraft carriers CVF (UK) and • S76d, Lynx, Future Lynx, Tiger, and Transportations programmes FSAF, PAAMS and SAAM systems in service of 150 different PA2 (France) Some references NH90 helicopters • Crotale and Shahine short-range types. • FREMM (Franco-Italian multimission • Meltem maritime patrol programme • Commercial telecommunication missiles • CYTOON program (South Africa) frigates) (Turkey) satellites W2A (Eutelsat, Mobile TV), • Starstreak very short-range missile to deliver land battalion with ISTAR • Horizon and LCF frigates • Regional aircraft (Bombardier, Sukhoi) Globalstar (48 constellation for mobile • ACCS LOC-1, NATO Air Command capabilities • MINREM strategic intelligence • In-flight entertainment systems for telephony) and Control Systems • 500,000 tactical radios in vessel (France) international airlines • France’s Syracuse, Italian Sicral, • Cobra counter-battery radar 100 countries, 30,000 infra-red • Scorpene submarines (India, Chile, German Satcom BW, Korean Koreasat • Air traffic management systems for cameras in 40 countries Malaysia) defense telecommunication satellites Australia and China Joint operations • Sawari II frigates (Saudi Arabia) • Defense observation programs • 200 Electro-Optic Recce and • SAN PC frigates (South Africa) Helios & Pleïades (France), COSMO- > Land & Joint Systems lasers pods • FFG7 Mine hunters (Australia) SkyMed (Italy) and Sar Lupe (Germany) Support Land Warfare Transformation • Naval communications, information • EGNOS and Galileo navigation programs Deliver Forces operational superiority and command systems : Destroyers • GMES (Global Monitoring for through information dominance T45 (UK), RIFAN (France), SEA 1442 Environment and Security), MSG Capabilities (Australia), SIC 21 (France) (Meteosat Second Generation) • Syracuse III (France) satellite • Huygens, Herschel Planck, ExoMars • Complete range of land systems solutions : from large cooperative communications ground segment scientific programs • Delivery of communications services • International Space Station systems, soldier/vehicle systems to key equipment and services for NATO forces in Afghanistan

2>Thales of the global leaders in mission-critical systems for safety and security markets in the civil sector. In turn, Alcatel-Lucent can now focus on its core business of telecommunications while benefiting from Thales's exceptional position in defence and security markets and making greater SÉCURITÉ use of dual technologies to grow sales > Alliances with Alcatel-Lucent and DCNS of telecommunications solutions.

Major milestones in the development of Thales • Consolidating their industrial and technological cooperation The agreements signed with Alcatel- • Optimise synergies between civil and in optics, system architectures, Lucent at the end of 2006 and DCNS military technologies: Thales solutions advanced software and components. in early 2007 are crucial milestones draw on an exceptional platform of Although very different, the products in Thales's growth strategy. They make technologies with applications across offered by Alcatel-Lucent and Thales > Security Solutions the company bigger and stronger, the company's whole range of businesses. incorporate the same core technologies. & Services enhancing its capabilities and expanding The organisation actively cross-pollinates The two companies have already set its international dimension. civil and military technologies to serve up a joint research laboratory dedicated Solutions to meet safety and security a single objective: the security of people, to optoelectronic and microelectronic needs, an extensive services offering and Agreement with Alcatel-Lucent brings property and nations. The arrival of components based on III-V semicon- cutting-edge simulation technologies. strategic businesses to Thales the Alcatel-Lucent businesses has ductor technologies for applications in Capabilities established a closer balance between telecommunications, defence, security • Ground transportation solutions The arrival of Alcatel-Lucent's transport, the defence and non-defence businesses and space. • Critical infrastructure security systems security and space businesses signifi- in the company's portfolio. • Enterprise services; defence and aerospace cantly strengthens Thales's European • Extending this cooperation to • Simulation solutions and services leadership and its place among the • Leverage the company's multido- marketing and sales so each partner Some references world's top three players in most mestic operations to remain as close can benefit from the other's international as possible to its customers. As a result presence. • Nationwide secure e-ticketing system of the markets for integration of mission- critical electronic systems for aerospace, of its multidomestic strategy, Thales (Netherlands, Denmark) is recognised as a fully fledged local Agreement with DCNS spawns • Metro (London, Hong Kong, Dubai, Madrid, defence and security. With this operation, the company's outlook player in each of its target markets a champion of the naval defence Beijing, Shanghai, Turin, New York) & people for growth has further improved and its and can anticipate and meet local industry movers systems (Las Vegas) portfolio of businesses is more balanced customer requirements more effectively. • Rail Signalling (Austria, Finland, France, between civil and military markets. The strategy is a resounding success: In early 2007, Thales became DCNS's Germany, Hungary, Latvia, Portugal, Thales is the leading French supplier industrial partner and shareholder Romania, Spain, Switzerland) The alliance with Alcatel-Lucent is to the Pentagon, the largest defence with a 25% interest in the naval defence • Oil and gas pipeline security (Russia, fully in line with the three main pillars contractor in Australia, Korea and company. As part of the same operation, Algeria, Kazakhstan, Mexico, Pakistan), of the Thales strategy: the Netherlands, and the second-largest Thales contributed its French-based airport security (Dubai, Qatar) and sensitive contractor to the UK Ministry of Defence. naval operations, with the exclusion site security (France) • Span the entire value chain: Thales of its equipment businesses. • Secure government communications (US, UK) provides all the capabilities its cus- The agreement also provides for The alliance significantly strengthens • Secure ID documents (France, Morocco) tomers require, from equipment and closer cooperation with Alcatel-Lucent. Thales's involvement in naval markets, • Crisis management system (Mecca) systems to comprehensive support It establishes a genuine win-win which now represent 2 billion euros • French tax portal and procedures services, as well as prime contracting partnership between the two in business, and its European rankings • Tornado GR4 flight training centre (UK) on large-scale programmes. Through organisations by: in the naval sector. • Logistics and data systems (Airbus, Embraer) this operation, Thales has achieved a The merger consolidates the French • Paris ethnic art museum facility management unique positioning across the value • Clarifying the respective areas of naval defence industry as a first step chain and strengthened its core capa- business of Thales and Alcatel-Lucent. towards broader consolidation at the bilities in mission-critical systems. The new businesses make Thales one European level.

Thales < 3 BRISTOL, UK Thales and corporate responsibility

4> “Thales strives constantly to improve best practices by incorporating the most stringent professional standards and by playing a proactive role in the development of an international frame of reference.” Bernard Rétat Chairman of the Ethics and Corporate Responsibility Committee, WHAT DOES CORPORATE RESPONSIBILITY Honorary Vice Chairman of Thales MEAN FOR THALES? As an electronics specialist serving defence, aerospace and security markets worldwide, Thales and its business activities are intimately connected with the geopolitical context. The deep-seated geopolitical changes occurring Focus today are affecting the company’s markets and are directly impacting its management processes and business models, making it crucial Thales has on occasion been named in alleged to reinforce its approach to corporate responsibility. irregularities and failures to comply with international legislation and national laws. When it has considered these allegations to be unfounded and false, the company has filed official NEW RESPONSIBILITIES further consolidation of its ethical compliance complaints. In all cases, it has cooperated fully IN THE GLOBAL MARKETPLACE system and business models. with the national legal authorities. Recently, in a number of legal proceedings overseas, no charges were brought against the Group. In the few Changing regulatory context Security and fair trade isolated cases where the suspected irregularities International bodies and national administrations The rise in global terrorism and the proliferation were found to be true, the company responded in are exerting increasing regulatory pressure. of weapons of mass destruction and other threats two ways: it sanctioned the employees responsible Globalisation is contributing to this trend, and underscores the importance for Thales to exercise for breaking the law and contravening its internal particularly to the growing consensus that trade the strictest controls over the end uses of the rules; and it tightened the procedures already in place. Steps are also being taken to strengthen should be easier but more transparent and that all equipment it sells. internal control procedures, including the transactions must be traceable. The company has proactively deployed a rigorous appointment of Compliance Officers at all major At the same time, the development of “soft law” is set of internal procedures to combat any illicit entities across the company and the creation of reflected in such initiatives as the United Nations transfer of sensitive goods or technologies. a Risk and Internal Control Committee at corporate Global Compact on human rights, labour stan- These measures ensure that the company not only level. Measures are also being introduced to make the procedures for delegating responsibilities dards and environmental protection, and the complies with national and international regula- within the organisation both clearer and stricter. worldwide fight against corruption. Thales has tions on export sales, but also meets the most signed up to the Global Compact as a baseline for stringent standards of ethical conduct.

< 5 Focus

The Ethics and Corporate Responsibility Committee Chairman: • Bernard Rétat, Honorary Vice Chairman, Thales Secretary: • Dominique Lamoureux, Vice President, Ethics and Corporate Responsibility Members: • Sandrine Bouttier-Stref, Environmental Affairs Manager • Didier Brugère, Vice President, Defence Marketing and Sales France • Sylvie Dumaine, Senior Vice President, Communications • John Howe, Vice Chairman, Thales UK • Alexandre de Juniac, THE MAINSTAYS OF THALES’S ment. The company’s corporate governance prac- Senior Vice President, Air Systems Division CORPORATE RESPONSIBILITY POLICY tices and internal control procedures, combined with • Jean-Paul Lepeytre, a policy of open and transparent communication, Deputy Senior Vice President, Security Solutions & Services Division An ethical approach based send a powerful signal to employees, shareholders • Sylvie Lucot, on shared values and financial markets about the strength of its com- Vice President, Investor Relations The Thales’s corporate responsibility policy is based mitment to ethical business practices. It is also tak- • Anne de Ravaran, Vice President, Legal and HR Ethics on a transverse approach covering trade, environ- ing steps to achieve measurable reductions in the • Veronique Silverman, mental and social issues. Consequently, Thales is environmental impact of its activities. By the same Vice President, HR and Corporate Affairs, Thales North America, Inc. committed to taking concrete measures to enhance token, the notion of social responsibility is one of the its ethical compliance and ensure that the core val- guiding principles for Thales’s research and develop- ues of ethical conduct are upheld throughout the ment activities. For instance, the company is com- organisation. The company also endeavours to mitted to making its technological know-how avail- develop responsible commercial relationships with able to improve the quality of life, serve socially use- its customers and suppliers, and is constantly mind- ful projects or support local development. ful of the need to fight corruption and provide a clear In a sector where contracts can represent consid- procedural underpinning for its ethical practices. Ethical compliance system erable amounts of money, Thales has reinforced Thales’s objective is to ensure that its employees Thales has put in place an ethical compliance system its internal procedures to combat any attempts at perform effectively in an environment that is con- based on a Code of Ethics and a dedicated organisation corruption as effectively as possible. ducive to their personal and professional develop- to ensure that the Code is applied. The Thales Code

6> Focus

On 31 January 1999, former United Nations Secretary General Kofi Annan set out the principles of the Global Compact in an address to the World Economic Forum in Davos. The Global Compact’s operational phase was launched at UN Headquarters in New York on 26 July 2000. The Secretary General invited business leaders to join this international initiative, which aims to rally companies, UN agencies, professional organisations and civil society around ten universal principles relating to human rights, labour standards, environmental protection and the fight against corruption. By encouraging companies to incorporate these princi- of Ethics was drafted in 2001 as the baseline for the A dedicated organisation ples into their strategies and professional conduct of the company’s employees An Ethics and Corporate Responsibility Department is in business models, the Global with respect to its various stakeholders. Issued to all charge of implementing this ethical compliance system Compact seeks to promote transparency and responsi- employees in various languages (Dutch, English, and coordinating measures across the Thales organisa- ble corporate citizenship French, German, Spanish, etc.), the Code sets forth tion. To perform these roles, the department’s six staff to ensure that the business community plays the company’s values and clearly demonstrates its members work first and foremost with the company’s its rightful role in meeting the challenges commitment to compliance with well-defined princi- functional and operational departments, but also with of globalisation. By applying these principles, ples of ethical business conduct. local structures in the main countries of operation. the private sector – in partnership with other players in society – can make a tangible In line with the priorities set by the Ethics and contribution to realising the Secretary Dedicated training plan Corporate Responsibility Committee, the depart- General’s vision of a more viable and open Deployment of the Code of Ethics is supported by a spe- ment’s main roles are as follows: global economy. cific training plan. The in-house training institute, Thales contribute to the definition and deployment of best Through a letter of commitment from Université, has incorporated a module devoted to ethical practice Chairman & CEO Denis Ranque, Thales signed issues into its core training programmes. Ethical issues set Group-wide standards with respect to ethical up to the Global Compact in 2003 and has adopted the ten universal principles. The and the broader principles of corporate responsibility business practices company renews its commitment on a regular are systematically covered in all transverse manage- recommend awareness and communication actions basis, particularly by providing Communications ment training courses. In addition, dedicated e-learning help to create a culture of corporate responsibility on Progress (COPs) for the organisation’s modules are being developed to ensure that all employ- contribute to efforts to monitor changes in regula- database. ees are aware of the importance of ethical practices. tions and standards.

< 7 Responsibility CLARKSBURG, USA customerstowards and suppliers

8> RIGOROUS CONTROL OF SALES “To support the increasingly global nature of its business activities, AND MARKETING OPERATIONS Thales maintains close contact with major Given the nature of Thales’s businesses, guaranteeing the integrity national and international institutions. of its sales and marketing operations is a crucial part of its corporate The results of this dialogue are shared responsibility. across the organisation to foster a genuine culture of responsibility.” Dominique Lamoureux END USER CONTROL Best practice Vice President, Thales is applying a set of “best practice” standards Ethics and Corporate Responsibility In the current geopolitical turmoil, Thales recog- to progressively bring all its operating units up to the nises its duty to rigorously control the sale and highest level of maturity. Internal audit programmes transfer of its equipment and technologies. and a major ongoing effort to train employees and raise awareness support this process. PREVENTING CORRUPTION As well as complying with national, European and Export compliance committee international regulations, the company has adopt- This committee defines export control policy to Recognising that all of its activities must be conduct- ed a proactive stance by implementing its own guarantee compliance, in the broadest sense, with ed in strict compliance with a set of principles of export control system. international rules and legislation, and to ensure business ethics incorporated into its corporate val- that Thales units in each country of operation ues, Thales attaches particular importance to the For an international group such as Thales, whose meet local legal obligations with respect to the fight against corruption. finished products virtually all incorporate sub- transfer of goods and technologies. assemblies, components and technologies Committee for exports to “sensitive countries” Dedicated procedures and organisations sourced from multiple industrialised countries, This committee examines all projects involving No operating unit may independently enter into a including the United States, the obligation to com- countries identified as sensitive, whether or not contractual relationship with any agent or exter- ply with established procedures goes well beyond they are covered by domestic controls, to decide nal service provider for the purposes of an international regulatory frameworks. whether an export complies with the international national commercial transaction. Thales’s internal control system comprises three commitments made by the company as part of its All the resources made available to support the key elements: global approach to responsible export control. export sales and marketing efforts of operating

< 9 To achieve this ambition, a number of internal related to all forms of corruption. The company measures have been taken, including the intro- has issued a Reference Guide on the Ethics duction of the corporate reference system to help in International Trade and a behaviour guide on drive a process of continuous improvement with- Ethics in International Trade, both notably devoted in its procedures, guidelines and organisation. to the fight against corruption. This commitment to continuous improvement, All the main Thales Université training courses based on the principles of transparency and related to sales and marketing also include modules global compliance, also relies on the constant specifically devoted to the fight against corruption. exchange of best practices with industry partners. This process is implemented through close cooperation with various professional bodies including the French employers’ organisation Medef, the Confederation of British Industry (CBI), the Organisation for Economic Cooperation and Development (OECD), particularly its Business and Industry Advisory Committee Focus (BIAC), the International Chamber of Commerce (ICC), the AeroSpace and Defence Industries Defence Industry Initiative (DII) Association of Europe (ASD) and the Observatoire In 1986, the major American defence de la Responsabilité Sociétale des Entreprises contractors embarked on a proactive units are managed by dedicated organisations, (ORSE). Internal control mechanisms have also industry-wide initiative to establish and including Thales International. been improved by committing greater resources promote the principles of ethical business These dedicated organisations are the only ones to Internal Control and extending its mandate. conduct. On the basis of these principles, professional standards have been developed, recognised by the company for their specialised Training and awareness campaigns have been many of them more stringent than the legal expertise in this area. This policy not only makes implemented at the same time, and specific obligations currently in force, as well as best Thales’s sales and marketing efforts more effi- online training modules are being developed to practices that each member company agrees cient, but also guarantees strict control over the sustain the learning process. All these initiatives to implement. Through its US subsidiary compliance of its international commercial trans- are monitored and overseen by the Ethics and Thales North America, Thales was the first non-US company to sign the Defence Industry actions. Corporate Responsibility Committee. Initiative (in 2002), committing the company to a set of principles of self-governance for Permanent exchange of best practices Specific awareness players in the US market. Thales Thales aims to be a global leader in each of its and training programme North America is actively contributing core business areas by combining growth and Thales is pursuing a major effort to raise emplo- to the ongoing work of the DII. value creation. yee awareness and provide training on issues

10 > > More than 2,000 sales and marketing managers have completed Thales’s Business Ethics training course since it was launched in 2000.

> With €5.4 billion in procure- ments from outside the company each year, Thales is establishing a select portfolio of reliable, high-performance suppliers and subcontractors with a demonstrated commitment to compliance with international legislation and standards.

RESPONSIBLE SUPPLIER on the basis of certain principles: selecting programme. Teams of decision-makers and RELATIONSHIPS suppliers fairly, defining and meeting mutual purchasers analyse key requirements, define commitments, defining and sharing risks and standards applicable to the entire company and Mutual cooperation responsibilities, keeping supplier information identify the suppliers to be included in its portfolio Thales is committed to applying competitive pur- confidential and protecting suppliers’ intellectual of target suppliers. chasing procedures and methods with its suppli- property rights. Action plans to support the continuous improve- ers, in strict compliance with the notion of cooper- ment of supplier performance are overseen by ative relationships based on mutual good faith, as Purchasing policy multidisciplinary teams working closely with sup- laid down in its Code of Ethics. Thales is developing a purchasing policy that plier relations managers. This process continues This type of cooperation involves selecting the strengthens the contribution of suppliers and sub- throughout the life cycle of each product, system most appropriate suppliers for each market contractors to the overall performance of each or service.

< 11 THALES UNIVERSITÉ, JOUY-EN-JOSAS, FRANCE

Responsibility employeestowards

12 > DEVELOPING PEOPLE: THE KEY TO PERFORMANCE Shaped by the international scope of the company’s operations and the high level of qualification of its employees, Thales’s human resources policy hinges on mobility, training and recognition of performance.

Belgium 1,000 Netherlands 2,000 Germany 4,700 Canada 1,100

THE THALES WAY: A DIFFERENT United Kingdom 8,800 Number APPROACH TO HUMAN RESOURCES of employees United States 2,900 France 35,200 in each country Korea 1,300 To ensure that its employees perform effectively in an Spain 2,600 of operation including all joint environment that is conducive to their professional venture staff development, Thales has introduced a human Italy 2,600 resources management strategy at international level. South America 600 Built around common processes, this strategy is a prime illustration of “the Thales way”. The guiding principle is that individual employees are responsi- Australia 3,300 ble for their performance and drive their own career development. Underpinning the Thales way is a Others : Poland 110, Portugal 160, Austria 170, Singapore 170, Norway 230, Switzerland 280, China 300, South Africa 330, Saudi Arabia 530 company-wide culture of continuous professional training, which is the key to individual and collective “Thales’s human resources policy is resolutely international success. The integrity of this system hinges on the values of transparency, accessibility and clear in scope. Its prime objective is to help employees to map out communication of performance targets. The Thales their individual career paths, with a strong focus on mobility way is a holistic approach that incorporates the company’s values and behaviour, its trust-based and knowledge sharing through Thales Université.” relations with each employee and its company-wide Yves Barou human resources management processes. Senior Vice President, Human Resources

< 13 and to ensure that trade union organisations have Professional development discussion the resources they need to pursue constructive For Thales, this annual appraisal is an fundamental dialogue with the company. opportunity to review the career progress of each Under French labour law, group-wide agreements individual employee and prepare for the future. now have the same validity as agreements with The objectives of the professional development individual companies. Since 2005, Thales has been discussion are to identify the skills that employees negotiating group-level agreements that are have acquired or need to develop, clarify their directly applicable to all companies within their career aspirations and consider the best way to scope. Since 1999, Thales has also recognised the achieve them. Intercentres organisations, which are dedicated structures set up to interface with corporate man- A safe and healthy workplace agement, identify issues of common concern and Guaranteeing safety in the workplace is a major proactively prevent labour disputes. concern for Thales. A reference guide available on In France, Thales operates a central works Council the corporate intranet lays down the practices Managing job families and specialists comprising representatives of all its French sub- and procedures applicable in this area and At Thales, jobs are organised into job families, sidiaries. At European level, its European works defines a risk management and security process adding an important operational dimension to the Council now has significantly extended responsi- for the entire organisation. A specific directive way human resources are managed and devel- bilities, following a 2002 amendment to the origi- covers international travel. The terrorist attacks oped. This organisational model helps the compa- nal 1993 agreement. of 11 September 2001 underscored the impor- ny to anticipate future requirements by providing tance of a rigorous policy to protect people and greater visibility on developments and trends Overcoming discrimination property. A corporate crisis management centre within each broad job type. in the workplace can be activated at any time in response to any Thales has introduced an innovative dual career Thales is committed to overcoming all forms of serious situation or event that could adversely ladder as a way of recognising the value of spe- discrimination in the workplace. These objectives affect the company. Business continuity plans are cialists in each job family and at all levels of are formally expressed in its Code of Ethics. being developed at all companies across the responsibility. With this dual ladder, managers Ensuring equal opportunities at work for men and organisation. and specialists at equivalent levels of responsibil- women is extremely important to Thales. A comp- In France, an agreement on working hours was ity are managed in exactly the same way. any-wide framework agreement on equal oppor- signed in July 2000. Since then, employees in tunities was signed on 13 January 2004 and is now France have worked 35 hours per week (averaged Constructive dialogue in effect at companies across the organisation. over the year). Depending on their level of auton- The Thales Code of Ethics includes a clear com- Illustrating this commitment, Thales employee omy, executives have been offered various ways mitment to cooperation with employees and Cécile Dubrovin received the 2006 Excellencia to benefit from more free time. In the United employee representatives. In particular, the com- female high-tech engineer trophy from the Kingdom, employees work an average of 37 hours pany undertakes to provide employees with high- French minister for social cohesion and equal per week. In the Netherlands, the average work- quality information on issues of common interest opportunities at a ceremony in May. ing week is 40 hours.

14 > Focus EMPLOYEES DRIVING Job mobility THEIR OWN PROFESSIONAL In an increasingly competitive marketplace, job Innovative employee agreements in France DEVELOPMENT mobility and professional development enhance a In late 2006, Thales and the bodies repre- 1995 social convention up to date and company’s capacity to adapt and respond to change. senting its French employees signed three addresses the issues raised by lower strategic agreements in the areas of state funding of health and insurance Sharing knowledge Job mobility is therefore one of the top priorities of forward planning, innovation and labour benefits. By harmonising the various Being an employer of choice with a strong focus the Thales human resources policy. relations. provisions applicable to different employee on training and professional development is a key Since 2004, the company has provided employees in categories on a Group-wide basis, the principle for Thales. The Thales training policy France with a comprehensive guide describing the • The first agreement provides Thales with agreement creates a common baseline is designed to meet the company’s requirements company’s 62 job families and the pathways that a method for anticipating employment needs that strengthens cohesion and facilitates more effectively and offering employees mobility. The harmonised approach will by developing its skills base, while taking make it possible to move from one family to another. a more diverse range of career options. generate economies of scale and create employees’ individual aspirations fully into Teams of specialists are also on hand to provide - First, through better forward planning in a win-win situation, ensuring better consideration. support on issues related to professional develop- each job family. This entails continuous protection at lower cost for employees Founded in 1988, Thales Université is recognised ment, retraining, enterprise creation, relocation dialogue with the best experts on the while maintaining a balanced cost as one of the very best corporate universities. Its and new employment opportunities in areas future of the Group’s core businesses structure for the company. and the quantitative and qualitative mission is to foster a shared corporate culture and affected by shifts in industrial activity changes they anticipate; making the • The third agreement concerns labour adapt individual and collective skills to operational results of this analysis available to all relations and union membership. Thales requirements in pursuit of the company’s Geographic mobility employees so that they can get the most is committed to open dialogue and seeks strategic priorities. To organise mobility to ensure geographic proxim- out of their annual professional develop- to facilitate employee representation, fully Its training programmes cover all the company’s ity and meet local requirements more effectively, ment discussions; sharing this informa- recognising trade union organisations and tion with trade union organisations via a guaranteeing employees’ rights of associ- key competencies under four main workstreams: Thales has created seven employment areas in Group-level forward-planning commit- ation. The Group acknowledges union Management, Business Administration and France and six in the United Kingdom. tee; and putting training plans in place activity as a service to the broader Programme Management, Engineering and to provide the necessary solutions. community and makes every effort to Product Development, and Transverse Processes. Variable compensation package - Second, by avoiding conventional redun- promote transparency and avoid any form Two other programmes, Career Guidance Review for engineers and executives dancy schemes wherever possible and of discrimination. Thales seeks to achieve instead addressing employment issues the broadest possible consensus and will and Career Review, specifically address The Group’s social policy is founded on the princi- through the Proactive Resource continue to act on majority agreement employees’ questions about their professional ples of performance management and profession- Management programme, based only. Agreements signed by majority vote development. al development. These principles have translated on transparency, voluntary participation reflect this commitment to majority Thales managers and experts are closely involved into a variable compensation package for engi- and personalised support. participation and responsibility. In addi- in defining Thales Université’s training objectives neers and executives worldwide. The variable por- - And third, through continuous employ- tion, Thales encourages employees ment management, supported in the near to exercise their full civic responsibilities and course content, as well as in teaching. This tion of the compensation package is based on the term by early retirement measures. during the various elections that take involvement ensures that the training programmes level of responsibility of the post occupied and • The second agreement harmonises place within the Group, thereby ensuring match the specific skills development requirements linked in equal proportions to financial results and the social provisions applicable to Group that their elected members are as of company employees. In-house teaching staff individual performance. employees. The agreement brings the representative as possible. work alongside external experts, consultants and university lecturers.

< 15 Focus

International careers for young graduates and professionals Thales has developed Career1st to help recently hired staff progress rapidly along international career paths. Since 2005, the programme has focused on Asia, aiming to recruit Asian gradu- Further to the various employee share ownership The company pursues an active policy of internal ates in Europe or Asia. Known as AsianCareer1st, operations proposed, more than 42,000 employees mobility with a strong focus of professional the programme includes training on how Thales throughout the world now hold shares in the com- reassignment and retraining. teams operate in Europe. After two to four years’ pany. At 31 December 2005, Thales employees The professional reassignment programme relies experience, candidates are offered positions with Thales in Asia. held 4.6% of the company’s share capital. on an active network of employment managers led by the company’s Opportunities Forum and acting REDEPLOYMENT SUPPORT within its main employment areas. The Opportuni- ties Forum supports employees throughout Capitalising on professional experience restructuring operations. Thales Missions & Conseil (TM&C) was set up to For restructuring measures in the United Kingdom, Company savings plan help senior managers at key stages in their Thales provides a dedicated task force to help Since 1998, Thales has operated a company-wide careers to apply their professional experience by employees with the process of professional reas- savings plan. This plan regularly incorporates progressing to consultancy roles within the com- signment. These measures include career devel- shares issued under share offers reserved for pany. TM&C has since gained recognition not only opment seminars, early retirement seminars, employees. Open since 2002 to international sub- for its services to the company, but also for the mobility workshops and financial consultancy sidiaries in countries where the company has a success of its external consultancy assignments. services. significant presence, the savings plan was over- To encourage these employees’ professional In the Netherlands, Thales works closely with the hauled in 2004 to give employees more scope to development, Thales offers an innovative career re-employment agency SMEO, which the company manage their investments. The company savings option involving training in consultancy followed by helped to set up in the 1990s. All employees plan now comprises the employee share owner- an 18-month detachment leading to a more per- affected by redundancy receive support from ship fund invested in company shares, plus four manent position within the company. In the last five SMEO. The type and duration of the support pro- diversified funds. Employees can invest the pro- years, TM&C has arranged 250 assignments, 95% vided are determined by the job protection plan. ceeds of profit sharing and incentive plans, and within the company, with 65 consultants. Some 106 SMEO has an 80% success rate in finding new jobs can also make voluntary payments. posts have been secured, 75% within the company. for affected employees. At 31 December 2005, about 50,000 employees In Germany, dialogue with employee representa- had signed up to the company savings plan. Supporting restructuring tive institutions is central to any restructuring In France, Thales also assumes its social respon- measures. Employee share ownership sibility by implementing a job protection plan and In Australia, internal reassignment options are Thales is committed to promoting employee share offering tailored solutions for individual employ- considered as a priority and may include retrain- ownership as one of its corporate values. ees affected by restructuring measures. ing opportunities.

16 > Socio-economic indicators >1,500 mobility plans completed, 78% within the company. 1,500 Thales employees have made use of the Opportunities Forum, 2004 2005 Scope the company’s career support and advice centre, 2005 since it was created in 2000. RESEARCH & DEVELOPMENT Group R&D budget/revenues 17.9% 18.5% World EMPLOYEES Total Group employees at 31 Dec. 2005 59,842 57,810 World >4,170 trainees completed courses Country employees/total Group employees: at the Thales Université campus in Jouy-en- - France 53.9% 54.9% World Josas, near Paris, in 2005. - United Kingdom 16.7% 15.7% World - Germany 5.6% 5.2% World - Netherlands 4.0% 3.9% World >2,005 people (senior corporate offi- - Other Europe 5.2% 5.1% World cers, executives, managers, experts, technicians - Rest of the world 14.4% 15.1% World and key contributors at all levels of the company in Number of recruitments 775 1,040 France around 20 countries) benefited last year from Proportion of female employees/total 25.8% 27.8% France Thales’s stock option plan, approved on 30 June MOBILITY 2005 by the company’s Board of Directors. Geographic mobility 1,016 1,023 France Job mobility 2,639 3,167 France Geographic mobility/recruitments* 2.75 2.18 France TRAINING of gross payroll distributed >3.8% Average training hours per capita 16.4 16.0 France under profit-sharing and incentive schemes in Number of employees to follow training courses 15,342 15,635 France 2005 in respect of FY 2004 (compared with 3.4% in 2004 in respect of 2003). SOCIAL ACTION Number of employees with disabilities 1,200 1,300 World PROFIT-SHARING AND INCENTIVES Profit share distributed to employees €37.6m €42.8m France Incentives paid to employees €9.5m €7.9m France Profit share and incentives/gross payroll 3.4% 3.8% France

* Excl. recruitment by Thales Services.

< 17 Responsibility towards shareholders and financial markets

18 > CORPORATE GOVERNANCE, RISK MANAGEMENT AND HIGH-QUALITY FINANCIAL INFORMATION As an international group listed on the single regulated market, Eurolist by Euronext, Thales is committed to pursuing its business activities in strict compliance with the principles of good corporate governance, optimising its risk management and internal control procedures, and providing clear and accurate information concerning its financial situation, strategy and management policies.

CORPORATE GOVERNANCE financial security act of 1 August 2003. rigorous compliance with the rules of interna- AND BOARD OF DIRECTORS This report is made available to shareholders, tional trade included as a reference document in the compa- high-quality human resources management The Thales Board of Directors comprises sixteen ny’s annual report and submitted to the French In its sectors of activity, Thales must be perma- directors, of whom fourteen are appointed by the financial markets authority AMF. nently vigilant to avoid or limit cost or schedule General Meeting and two are elected by the overruns on major contracts. employees of the Group’s French companies. Of the RISK MANAGEMENT All Thales employees with an involvement in risk fourteen directors appointed by the General Meeting, AND INTERNAL CONTROL management are aware of this requirement, and four are “outside directors” under the terms of the for many years the company has applied accepted shareholders’ agreement, one represents employee Risk management: priority processes best practice in this area. In addition, Thales maps shareholders and the others are submitted to the and permanent vigilance its risks by sector and updates these risk maps on vote of the General Meeting by the public sector Thales conducts a significant part of its business a regular basis. In particular, it identifies the main and the Industrial Partner. The Board of Directors through long-term contracts with a few major risks it would incur as a result of any anomaly in reviews the work of an Audit Committee, a customers in each country. In view of the com- the products it supplies, and takes substantive Nomination and Remuneration Committee and a plexity involved in negotiating and managing these measures to eliminate these risks or reduce them Strategy Committee. Since 2003, the Board of contracts, the company attaches particular to an absolute minimum. Directors has published a report on the company’s importance to: risk exposure, in compliance with the French cor- long-term strategic processes Internal control: dedicated teams, porate governance act (NRE) of 15 May 2001. optimisation of bid submission procedures high-performance tools, Each year, the Chairman publishes a report on continuous improvement of programme man- shared culture Board administration, internal control procedures agement techniques Thales’s internal control rules apply to all compa- and possible restrictions to the Chief Executive optimal management of technical and techno- nies in which the group has a controlling interest Officer’s powers, in accordance with the French logical resources or manages operations.

< 19 “Given the nature of our business and the international scope of our operations, it is absolutely vital for Thales to apply the highest possible standards of corporate governance and to disclose reliable, high-quality financial information.” Patrice Durand Senior Vice President, Finance and Administration

To ensure good corporate governance, a number sidiaries in all locations. As part of this process, accepted rules and practices. This financial dis- of key tools have also been developed to support certain procedures have been updated or re-eval- closure policy entails regular publication of the deployment of internal control measures: a uated in the light of new regulations and to incor- mandatory information in legally required jour- Code of Ethics, a Group Risks and Internal Control porate lessons learned and best practices applied nals and as recommended by the market authori- Committee and a reference system. Established in at operating units. This proactive approach also ties, and on the Thales corporate website. Over 2002, the Internal Audit department draws on an aims to systematically strengthen internal control and above this regulatory compliance, the compa- Internal Audit Charter laying down the basic prin- systems and the procedures in place for delegating ny provides more qualitative information, for ciples of internal control, the scope and limits of responsibilities. To ensure effective implementa- example through financial conferences led by the the department’s responsibilities and the type of tion, Compliance Officers have been appointed at Chairman and Chief Financial Officer. controls it conducts at Thales units. Lastly, an all the major entities across the organisation. Internal Control Manual serves as a technical IFRS accounting standards guide to help operating units to analyse risk and POLICY OF RELIABLE The accounting data published by Thales is subject identify and implement measures to reduce it. AND TRANSPARENT FINANCIAL to detailed examination by the statutory auditors DISCLOSURE appointed by the General Meeting of shareholders. Reinforced measures in 2006 The auditors statements are published in a special Thales set up a Group Risk and Internal Audit Regular information report included in the company’s annual report. Committee in 2006. One of the committee’s main Thales regularly provides the markets with clear From financial year 2005, the company’s consolidat- objectives is to ensure that control and compliance and accurate information concerning its financial ed financial statements are prepared in accordance measures are properly implemented in all of the situation, strategy and management policies, in with International Financial Reporting Standards company’s sectors of activity, and at all its sub- compliance with its Code of Ethics and generally (IFRS), as approved by the European Union.

20 > Board of Directors* at 1 May 2007 • Denis Ranque, Chairman and Chief Executive Officer of Thales • Jean-Paul Barth, former Senior Executive Vice-President of Alcatel • Bruno Bézard, Managing Director, French Government Shareholding Agency (APE) • François Bujon de l’Estang, Ambassador of France • Olivier Costa de Beauregard, Managing Director, Groupe Industriel Marcel Dassault (GIMD) • Charles de Croisset, international advisor to Goldman Sachs International • Marie-Paule Delpierre, director elected by employees • Roger Freeman, Consultant and Chairman of the Advisory Panel of PriceWaterhouseCoopers, London UK • Didier Gladieu, director elected by employees • Philippe Lépinay, representative of employee shareholders • Didier Lombard, Chairman and Chief Executive Officer of France Telecom • Klaus Naumann, Bundeswehr General (ret.) • Serge Tchuruk, Chairman and Chief Executive Officer of Alcatel-Lucent • Alcatel Participations, represented by Laurent Collet-Billon, advisor to the Chairman and CEO of Alcatel-Lucent • TSA, represented by Marcel Roulet, former Chairman of Thomson, Thomson-CSF and France Telecom

* Information concerning the members of the Thales Board of Directors is included in the Reference Document submitted to the French financial markets authority AMF. Strategic and budget plans Since these plans indicate Thales’s strategic objectives and outlook, they draw primarily on the internal processes managed by the Group Strategy Department and Finance Department. Each year, the Strategy Department works with the Finance Department and the operating units to prepare a long-term strategic plan, including financial data. This plan identifies the major developments and trends in the compa- business activities and financial performance. Lastly, the monthly reporting system used to ny’s businesses and financial performance, and The plan focuses in particular on variations in track operational management and the corres- serves as a valuable tool for executive manage- order bookings, revenues, income and cash- ponding accounting data was modified to meet ment to support strategic decisions. flow. the new IFRS accounting standards from the In addition, each operating unit prepares a Thales has issued procedures manuals applica- end of the 2004 financial year. more detailed three-year budget plan. The first ble to all units; unit chief financial officers are year of this plan serves as the basis for the accountable for compliance with these proce- monthly reports used to monitor the company’s dures.

< 21 SYDNEY, AUSTRALIA

Responsibility towards the environment

22 > MANAGING THE ENVIRONMENTAL IMPACT OF OUR ACTIVITIES

As a responsible corporate citizen, Thales is committed to protecting Implement an environmental management sys- the environment by limiting the environmental impact of its activities, tem tailored to the specific characteristics and managing any associated health risks, meeting and exceeding applica- constraints of each activity ble legal regulations and anticipating future requirements. Since 1997, These environmental management systems Thales has pursued a proactive environmental management policy. ensure that all units comply with local regulations. Products Focused as they are on research and development In France, the company has embarked on a pro- Since 2002, Thales has been working closely with and the testing and integration of electronic equip- gramme involving the systematic removal of its main subcontractors and suppliers to identify ment and systems, Thales’s current activities gen- asbestos as part of any refurbishments (over and the most appropriate substitute technologies in erally have a limited environmental impact. There above legal obligations), inspection and upgrading of compliance with the RoHS Directive restricting the are exceptions, however, with areas such as wastewater systems, replacement of spray cooling use of certain hazardous substances in electrical pyrotechnics and the manufacture of mechanical towers, and soil testing. In addition, environmental and electronic equipment. Thales products and parts and components having greater implications factors are automatically taken into consideration in equipment have to guarantee extremely high lev- for the environment. construction, renovation and demolition projects. els of reliability over very long lifespans and in harsh operating conditions. As a result, substitute THE THALES APPROACH TO Manufacturing technologies will be adopted as soon as they are ENVIRONMENTAL MANAGEMENT Since 2000, Thales has progressively introduced shown to provide the required levels of system measures whereby all its production units safety and reliability. Since 1997, Thales has pursued a proactive environ- throughout the world systematically take environmental management policy deployed on three levels: mental factors into account, in accordance with a sites (property), manufacturing and products. multi-year plan defined and monitored by a steer- ing committee. The main objectives of the plan are Sites as follows: Focus Thales has launched a programme of action to Ensure that all facilities and activities comply To limit the risks associated with legionella, Thales ensure the continued compliance of all premises with statutory and technical regulations decided in 2002 to replace spray cooling towers with and related technical installations while providing Limit energy consumption and the use of natural air-to-air heat exchange systems at all its French sites its industrial operations with the means to expand resources – a total of 76 towers. The last tower is scheduled for at the same time as managing risks and limiting Conduct environmental audits to identify and replacement at the end of 2006. their environmental impact. quantify the impact of each activity

< 23 (areas of administrative and technical non-compliance, “Risks have changed. Today, potential pollution risks, asbestos, legionella, etc.), the programme has now progressed to the risk while managing the company’s characterisation phase. This involves detailed analysis industrial past, we also have and a broad range of measures to limit risks or eliminate them completely. a responsibility to anticipate and prevent the environmental CONTINUOUS IMPROVEMENT PROGRAMME risks of the future.” Sandrine Bouttier-Stref Environment Manager The company’s continuous improvement programme Focus applies to all processes and products. It is based on: The company’s environmental management Impact analysis system classifies each site in one of three Risk mapping and associated action plans categories: Performance measurement, leading to the defini- nies, along with multi-year improvement targets in Category A: industrial sites with facilities that have a potential environmental impact tion of local objectives in line with the company’s such areas as energy consumption, waste production, (waste from surface treatment, mechanical environmental commitments. atmospheric emissions and hazardous substances. processes, etc.). ISO 14001 certification is mandatory. The overall objectives of this approach are: A RESPONSIVE ORGANISATION Category B: sites where electronic equipment and systems are tested and integrated. Limit energy consumption and the use of natural ISO 14001 certification is recommended. resources The Thales environmental organisation is based on Alternatively, a specific environmental manage- Limit waste production and promote waste three areas: ment system is put in place. recovery and recycling A central structure reporting directly to the company’s Category C: sites involved exclusively in service provision. An environmental manage- Manage emissions and effluent discharges Operations Department and responsible for supervising ment system focusing on energy and water Incorporate health risk management into contin- environmental risks and managing and coordinating consumption and waste management is put uous improvement plans. actions at international level. This structure defines and in place. deploys corporate strategy and continuous improve- PERFORMANCE MEASUREMENT ment initiatives, and analyses performance. Country/site structures with managers responsi- Since 2002, Thales has adopted a continuous improve- ble for applying company policy, coordinating local RISK MANAGEMENT ment approach to environmental reporting with a view actions and collecting the information needed to to extending its geographic scope and improving the meet reporting requirements. In 2003, Thales launched an environmental risk- accuracy and reliability of the information provided. In Correspondents at operational entities, respon- mapping programme covering all its sites throughout 2005, performance metrics for water consumption sible for implementing the various measures at the world. Initially concentrating on risk identification and waste treatment were applied to Group compa- process and product level.

24 > Environmental indicators

Units 2004 2005 Scope > Almost 60% of group companies have 2005 an environmental management system in place. ENERGY AND EMISSIONS Electrical energy consumption TOE (1) 149,176 129,092 84% Electrical energy consumption per capita TOE/cap. 2.99 2.63 84% > 44% of company employees work at a company with Fossil energy consumption TOE 23,857 (2) 27,081 (3) 84% ISO 14001 certification. Fossil energy consumption per capita TOE/cap. 0.48 (2) 0.5 (3) 84% Total energy consumption TOE 173,033 156,173 84% 3 Total energy consumption per capita TOE/cap. 3.5 3.18 84% > Water consumption: 2.5 million m . WATER Water consumption m3 2,850,893 2,495,293 84% > Energy consumption: TOE 3 156,000 Water consumption per capita m /cap. 57.3 50.9 84% (tonne oil equivalent). WASTE Production of non-hazardous waste t 19,144 20,753 84% Production of non-hazardous waste per capita kg/cap. 380 420 84% > Non-hazardous waste generated: 20,750 tonnes. Percentage of non-hazardous waste recycled (4) %5052 84% Production of hazardous waste t 2,914 (5) 2,648 84% Production of hazardous waste per capita kg 58 53 84% > Hazardous waste generated: 2,650 tonnes. Percentage of hazardous waste recycled (4) %ND79 84% MISCELLANEOUS Sites with an environmental management system in place % 55 100% Manufacturing sites with ISO 14001 certification % 44 100%

(1) TOE= tonne oil equivalent. (2) Gas and fuel oil. (3) Gas: 14% - Coal: 2% - Fuel oil: 1% - Steam: 1%. (4) Not incinerated or otherwise discarded without energy recovery. (5) Adjusted value (annual figure excluding hazardous waste generated in the exceptional case of a site decontamination in Australia).

< 25 READING LABORATORY, UK Responsibility towards society

26 > RESPONSIBLE CORPORATE CITIZENSHIP “Our Technology for Education and Youth sponsorship programme As a major player in economies around the world, Thales seeks to participate fully in each local community. The company demonstrates is a perfect illustration of the Thales this commitment through initiatives to create employment, a proac- way and our commitment to the community. tive policy of partnerships with the academic and scientific communi- It is an international programme hinging ties, and an active sponsorship programme. on advanced technologies and our core value of knowledge sharing.”

Sylvie Dumaine EMPLOYMENT SUPPORT Senior Vice President, Corporate Communications

Developing the local economic fabric through the YES programme (Young Employees In France, Thales has a specialised organisation Society). called Géris that helps to support local development and revitalise local economies. Pioneering the employment of people In 2005, 120 projects to launch start-up companies with disabilities or turn around existing businesses were submitted Thales has championed the cause of disabled flight data. The Portanum system helps people to Géris. Of these, 30 projects have materialised. people in the workplace, signing a corporate with impaired vision to read wall and flip charts. Géris also works locally to facilitate the divestment agreement in 1992 to increase job opportunities On 30 June 2005, Thales was awarded the Medef of non-strategic assets, help employees get back to and support their professional development. The (French business confederation) prize for its sup- work after restructuring measures and revitalise proportion of people with disabilities employed by port for young people with disabilities, in particu- the local economic fabric in affected areas. the company has risen steadily from 2.91% in 1992 lar its successful efforts to facilitate the integra- to 5.98% at 31 December 2005. tion of a blind student at an engineering school. Opportunities for young jobseekers Among the initiatives undertaken by Thales in this The company worked with the Garches Hospital In France, Thales supports the government’s area, perhaps the most remarkable is the devel- Institute to develop a solution for people who need youth employment policy through two appren- opment of special tools incorporating proprietary to change careers after suffering an injury or ticeship training centres, one specialising in technologies to support the integration of people developing a vision or hearing impairment. information technology, and the other, set up with disabilities in the workplace. Operational since late 2004, the Access Learning with Air France, promoting careers in aviation. In For example, for people with impaired hearing, platform provides totally individualised distance the United Kingdom, Thales finances grants for Thales has developed a CD-Rom for learning learning over the internet. In 2005, around 100 technology students and young people seeking to French sign language and cued speech. people used the platform, either directly over the train as pilots. In the Netherlands, Thales is The Soundflyer system enables visually-impaired internet, or at the Raymond-Poincaré Hospital at developing a network of graduate employees pilots to fly aircraft by giving them direct access to Garches, outside Paris.

< 27 Focus R&D: OPENNESS In the Netherlands, Thales has long-standing links AND KNOWLEDGE SHARING with Twente University and Saxion College. Responding to crisis situations In Australia, the company has developed partner- Thales and its employees came to the aid The principle of technology partnerships ships with universities across the country, as well of victims of the tsunami that hit southeast Asia in late 2004, providing help through Thales’s R&D activity is based on technology part- as with Engineers Australia and the Australian local organisations and donations to nerships and driven by a commitment to corporate Institute of Project Management. UNICEF (United Nations Children’s Fund). citizenship. For several years, Thales has taken In September 2005, the company responded steps to share its know-how with the research SPONSORSHIP: rapidly to the devastation caused community and to keep the channels of communi- A GROUND-BREAKING PROGRAMME by Hurricane Katrina in the southern cation open with some of the most prestigious United States by providing rescue teams with GPS systems and waterproof commu- public and private research centres and universi- As part of its international sponsorship pro- nication equipment. Thales also made a ties. This approach has translated into coopera- gramme, Technology for Education and Youth, significant donation to the fund set up by tion agreements with France’s leading research Thales has launched a ground-breaking scholar- the American Red Cross. institutes, engineering schools and numerous ship programme under an agreement with the other research bodies across Europe and around French foreign affairs ministry and various busi- the world. Thales is also closely involved in a num- ness and engineering schools to host and support ber of major European military and civil R&D pro- overseas graduate science students in France. grammes. For 2006/2007, some 30 students from China, India In addition, the company locates its R&D opera- and Russia will be taking part in the programme. tions as close to its partners as possible. For They are studying at French business or engi- example, its research centres in France, the neering schools and are benefiting from a Thales Netherlands and Singapore are now located at the Academia grant of around €10,000 per student per École Polytechnique campus, Delft University and year, personalised mentoring and management and technology through the Thales Charitable Nanyang Technological University, respectively. trainings at Thales Université. On completion of their Trust. In the Netherlands, Thales is engaged in masters degrees, they will be offered internships numerous efforts to promote employment and Connecting with the teaching community with the company. sponsor cultural, social and sporting initiatives. In To further develop its capacity to innovate, Thales Germany, company employees took part in the maintains permanent contact with higher educa- LOCAL INITIATIVES THROUGHOUT Frankfurt JP Morgan Run, a cross-country race to tion establishments. THE WORLD raise money for the underprivileged. Thales sub- In France, the company specifically targeted sidiaries in the United States support a range of around 20 major engineering schools in 2005 and In each country of operation, Thales pursues its charitable initiatives, particularly to help regional forged links with three top business schools. business activities in close partnership with the children’s hospitals and educational programmes In the United Kingdom, Thales is contributing to local community. In the United Kingdom, Thales in schools and universities, while its Australian various high-profile programmes, including SETNET companies support many local initiatives and companies are working to promote long-term (Science Engineering & Technology Network). sponsor charity work to promote young people employment.

28 > contents Thales: a global leader and responsible corporate citizen In 2006, various rating agencies and other bodies assessed the Thales Group using criteria related to social and environmental responsibility. 01 Chairman’s message 02 Activities 03 Key figures CM-CIC Securities /////////////// Source: “Business as usual – A financial and extra-financial analysis 04 THE THALES APPROACH of the aerospace & defense industry”, February 2006 TO CORPORATE RESPONSIBILITY 1. National Defence Budget /////////////////////// 00 6. IT & Electronics /////////////////////////////////////// 000 00 000 TOWARDS: 2. State support (Export) ///////////////////////////// 7. Multi Domestic Approach ////////////////// 3. Possible M&A Targets ///////////////////////// 000 8. Low Dependance on Exports AND 08 CUSTOMERS SUPPLIERS 4. Dual Applications /////////////////////////////////// 000 to Risky Countries ////////////////////////////////////// 00 EMPLOYEES 12 5. Systems Providers ///////////////////////////////// 000 Qualitative Scoring /////////////////////////////////// 2.63 SHAREHOLDERS Guide : 1. Share of National Defence Budget // 2. Level of State support and/or prevalence of State to State contracts. // 3. Likely targets for M&A. // 4. Capacity or possibility for reusing defence technologies for civil uses & vice versa. // 5. Share (direct or AND FINANCIAL MARKETS 18 indirect) of turnover. // 6. Share (direct or indirect) of turnover 1=-10%, 2= 10 – 20%, 3=20%+ // 7. Repartition of turnover & sites. // 8.Share of turnover from regions or zones with current or potential high level of political instability. THE ENVIRONMENT 22 Qualitative Scoring: 3= 50%+, 2= 20-50%, 1= below 20%. SOCIETY 26

For more information, > go to Corporate website: www.thalesgroup.com

> contact Ethics and Corporate Responsibility Department: • Dominique Lamoureux: +33 (0)1 57 77 82 07 [email protected] • Sylvain Masiéro: +33 (0)1 57 77 85 88 [email protected] Thales 45, rue de Villiers 92526 Neuilly-sur-Seine Cedex

France (p. 26), Getty Images/Jean-Louis Batt 1 Krahmer (p. 18), Getty Images/Franck Frechette (p. 4), Getty Images/Jeremy Lawrence Published by Thales Corporate Communications – 2007 • Getty Images/Jim Franco (cover), Getty Images/Sami Sarkis (p. 2), I (cover), – 2007 • Getty Images/Jim Franco Communications Corporate Published by Thales John pp. 6, 21), Jea (pp. 4, 7, 10, 11, 12, 26), Daniel Rory/Redlink/Gamma (content, Bassignac/Gamma (p. 8), Gilles IFA/Photononstop (p. 1) • Design and production: Photopointcom Somoza/Gamma (p. 8), Zeng Niam/Gamma 14) • Thales, (p. 6), Gerardo - 7316. Thales and corporate responsibility