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Response to the WRC Report

April 18, 2002

Herzogenaurach, 18 April 2002 - adidas-Salomon is committed to its stakeholders. We actively pursue a policy of listening to their views. Those stakeholders who are in direct contact with the employees of factories where our products are made, provide valuable information regarding working conditions and the treatment of workers. Consequently, we have studied the report by the Workers Rights Consortium ("WRC") on the PT Dada factory in Indonesia extremely closely. The report sets out preliminary findings and recommendations only. Nonetheless we take the report very seriously and we share a common concern with the WRC: the wellbeing and safety of the workers in that factory.

Our code of conduct, the Standards of Engagement ("SOE"), requires our suppliers to comply with core labour standards. In Indonesia, one of our main sourcing countries, we have two SOE Team members: a specialist in labour issues, and a health and safety manager. Other members of our 30-strong SOE Team visit regularly to support the SOE programme and conduct training workshops. For instance, in February of this year a workshop was conducted with factory union representatives and management personnel. The workshop focussed on compliance with the local and international laws relating to union activity and collective bargaining, and methods for improving communications between management and unions. Local staff from the International Labour Organisation ("ILO") and the Indonesian Ministry of Manpower also attended.

In addition to our internal SOE efforts, through our membership of the Fair Labour Association ("FLA") we require independent third party monitors to regularly audit oursuppliers. As part of our commitment to FLA a number of independent audits have been conducted at Indonesian factories supplying adidas-Salomon, including an audit of PT Dada. As a further measure, we welcome constructive discussion with, and investigations by, other stakeholders. This is the basis upon which we have been engaged in discussions with the WRC.

During the investigations into conditions at PT Dada, the WRC met with the local SOE Team members in Jakarta and the adidas-Salomon country managers for Indonesia and Singapore. It was important for us to understand first hand WRC´s concerns, and to provide the WRC with information relating to our ongoing SOE efforts at PT Dada. Since mid-2001, we have been aware of many problems within the factory. These problems relate to physical working conditions, i.e. basic health and safety, as well as workers´ rights in respect of freedom of association and associated cases of harassment. The SOE action plans which have been developed for the factory over the last 8 months, closely reflect many of the recommendations stated in the WRC report.

We have given our commitment to a number of stakeholders - the workers themselves, the FLA, the WRC, other buyers and local NGO´s - to actively pursue a course of remediation. We have continued to do business with PT Dada, in the belief that we can positively influence the management to make the necessary improvements. To do this, we have spent considerable time interviewing workers to gain their perspective. We have also met with management regularly to agree on deadlines for action plan items requiring immediate and ongoing attention. Additionally, even before the WRC investigations took place, we approached other buyers in the factory to explain the adidas-Salomon SOE programme and invite them to work with us on joint implementation of acceptable labour standards and work conditions. Since mid-2001, adidas-Salomon production has accounted for approximately 40% of the factory´s cap production and there are 2,000 workers employed in this section. Another 1,000 workers are employed in the toy production section of the factory. It is particulalry important to engage other buyers where the factory does not produce exclusively for adidas-Salomon.

Finally, we have made it clear to PT Dada management in Indonesia, as well as their parent company in Korea, that the findings of the WRC closely mirror many of the issues which adidas-Salomon identified, and has been working on locally. In particular, we have been concerned about workers unfairly suspended and dismissed for their involvement in union activity. In several cases of which the WRC is aware, we have clearly advised the factory to fully reinstate those employees who were treated unfairly and adopt more transparent guidelines for workers regarding their rights and obligations. While PT Dada management has already made many substantial improvements, as set out in the WRC report, there is still a long way to go before all workers may enjoy the full exercise of their labour rights and a working environment 100% free of occupational hazards. We will continue to work closely with the factory, and with other stakeholders, to ensure that this is achieved.