1. INTRODUCTION

Chemring Group PLC is committed to sound business conduct in the way we interact with our key stakeholders (shareholders, employees, customers, business partners and suppliers), governments and regulators, communities and society, and the environment.

This Code of Business Principles applies to all Chemring companies, and all Chemring employees are required to follow the principles when performing their day to day duties as employees of Chemring or where they are representing Chemring.

More detailed policies and guidelines supplement the principles of the Code. These may relate to specific issues such as health and safety or the environment. These policies and guidelines are available from the Chemring Group Company Secretary or from the Managing Directors of individual business units. The provisions of the Code and other policies and guidelines may be changed unilaterally by Chemring at any time and they are of course subject to the provisions of local law.

If employees require guidance about any of the principles or about any issue which may arise, they should seek help from their managers, HR managers or the Chemring Group Company Secretarial department at head office.

2. CHEMRING'S PRINCIPLES

A. COMPLYING WITH LAW

All employees must comply with the law of countries where they are employed or where they carry out business on behalf of Chemring. All employees are responsible for ensuring that they are aware of relevant legal requirements by obtaining appropriate advice if necessary.

Employees should pay particular attention to the following areas:

(i) Insider Dealing, Creating a False Market and Market Abuse

Chemring´s shares are listed on the London Stock Exchange. There are certain periods when directors and employees may not deal in the company´s shares. These times are the two months preceding the announcement of the interim and final financial results. In addition, those employees with unpublished inside information (“Inside Information”) at other times may not deal in the company´s shares. This also applies to members of the immediate family of the employee. Employees with Inside Information may not disclose it to third parties who wish to deal. Likewise, employees with Inside Information about customers, competitors or suppliers may not use that information to deal in the shares of those companies for personal gain. Dealing in a company´s shares on the basis of Inside Information not available to the market is called insider dealing. In the UK and many other countries it is a criminal offence. Likewise, knowingly or recklessly making a misleading statement or forecast or creating a false market in a company's shares is also a criminal offence. In addition, abuse of information (eg creating a false or misleading impression) is a civil offence in the UK. Insider dealing or deliberately creating a false market or market abuse by any Chemring employee is gross misconduct. Further details are set out in Chemring´s Share Dealing Code.

(ii) Procedure for co-ordinating and disseminating Inside Information relating to Chemring

Inside Information is information which may or would be likely to lead to a substantial movement in the price of Chemring´s shares. In order to ensure that Inside Information is released to the market in a clear, co-ordinated and timely way, all employees must follow this Procedure. Only announcements approved by a Chemring main Board director may be made by the Chemring Group Company Secretary to the UK Listing Authority.

(iii) Complying with competition/anti-trust/export licensing or trade embargo law

All employees are required to comply with anti-trust or export licensing or trade embargo laws of the countries in which Chemring does business. This area of the law is highly technical and detailed provisions vary from one country to another. Failure to comply with the law may expose Chemring to substantial fines and litigation and, in some countries, not only the company but also the relevant employees may be prosecuted or fined. Legal advice must be sought.

Employees should avoid getting into situations where they might be accused of colluding with or participating in prohibited activities.

(iv) Dealing with governments, customers, suppliers and third parties

Chemring requires its employees to conduct business honestly and with integrity.

Paying or conspiring to pay, soliciting or accepting bribes is contrary to Chemring´s policy. Nor may Chemring funds be paid to government officials or employees of state organisations for improper purposes. This applies not only to payment of money. Gifts of more than a nominal value and entertainment other than on a modest scale should not be provided.

Bribery is a criminal offence.

(v) Dealing with third party partners (sales agents, sales consultants, distributors, service providers)

If Chemring carries on business in certain countries through an agent or uses a consultant or distributor, the payment of commission or fees could be misinterpreted. Therefore any commissions or fees paid must relate to the work carried out and must be invoiced. Only Managing Directors may approve rates of commission and fees, and these must comply with Chemring´s policy on commissions. The relationship must be documented in an appropriate legal agreement. Cash payments of commissions or fees are prohibited.

The selection and appointment of suitable third party partners is therefore extremely important. Please refer to the Chemring policy on the appointment and management of sales agents, distributors and consultants for more detailed guidance on this.

B. CONFLICTS OF INTEREST

Employees must avoid any relationship with a customer, supplier or competitor where their personal interest conflicts or might appear to conflict with that of Chemring. Examples include:

(i) an employee or his family owning shares, especially if the shareholding is substantial, in a company with whom Chemring does business. This is especially so if the company is a private one;

(ii) an employee performing work in his spare time for such third parties;

(iii) any employee being involved in activities for personal gain which conflict with Chemring´s business interests;

(iv) employee soliciting any work for personal gain which might conflict with Chemring´s interests or compete with Chemring;

(v) an employee accepting or soliciting gifts or favours from such third parties where the gift or favour or its size or nature is either illegal, disproportionate to normal business practice or could appear to put the employee under a sense of obligation to the donor in conflict with his duty to Chemring;

(vi) an employee borrowing from any third party who does business with Chemring other than at arm´s length and on commercial terms;

(vii) an employee performing or using or appointing a relative to perform services for Chemring for reward.

There may be exceptions to the rule prohibiting relatives from doing work for Chemring. For example, it may be permissible for a student to do a summer job. However no employee may enter into a business relationship with Chemring nor may any relative of an employee be employed by Chemring without prior approval from the Chemring Group Chief Executive (for head office personnel and divisional Managing Directors) or the local Managing Director for employees at other locations. However, in no circumstances should an employee be directly responsible for supervising the work of a relative.

Employees should always disclose to their manager the offer of a gift or favour which would appear to have been offered for a corrupt motive or which is of disproportionate cost or value. Excessive gifts or entertainment should be refused or donated to a reputable charity.

C. NON-EXECUTIVE BUSINESS DIRECTORSHIPS AND SIMILAR APPOINTMENTS

Employees wishing to take up such an appointment must inform the Chemring Group Chairman via their divisional Managing Director. There will be no objection provided that such an appointment does not conflict with the employee´s ability to carry out his duties properly nor with the reasonable interests of Chemring.

D. PROTECTING CHEMRING´s ASSETS

Employees must look after Chemring´s property whether tangible (such as computers, physical plant, stock, furniture etc) or intangible (such as intellectual property, proprietary software, trade secrets, and confidential information). This means using such property for Chemring´s business and not for the employee´s personal benefit or for any illegal purpose. It also means not disclosing without proper authorisation or unless legally required confidential information about Chemring to third parties. Abuse of this may be not only a criminal offence but also gross misconduct.

Examples of abuse include:

(i) using Chemring´s own products for an employee´s personal gain;

(ii) using computer equipment to download or send to others pornography or offensive material.

E. PROTECTING THIRD PARTIES´ CONFIDENTIAL INFORMATION/SOFTWARE

Chemring will receive from time to time confidential information from third parties. All employees must respect the conditions under which such information is supplied. Likewise if Chemring is licensed by a third party to use its property, all employees must comply with the terms of the licence. This means that, for example, software may not be copied either for use elsewhere in the business or for an employee´s personal benefit.

F. POLITICAL DONATIONS

Chemring does not give donations to political parties. Employees may not use corporate funds for this purpose.

G. HEALTH & SAFETY AND ENVIRONMENT

Chemring requires its businesses to be operated to comply with applicable laws and regulations and in accordance with industry and Chemring's own standards and procedures. All employees have a responsibility to ensure these requirements are met. For example, if safety equipment is required to operate a machine, employees should ensure that it is used.

H. EMPLOYMENT

Chemring is an equal opportunity employer. Employees must have the opportunity to develop their career and skills, and promotion will be based solely on their ability to do a particular job. Chemring will not tolerate discrimination on grounds of age, disability, sexual inclination, gender, religion or race and all businesses are required to follow this principle.

Employees are required to devote their energies whilst at work to pursuing the interests of Chemring in a lawful manner. Breaches of this may, depending on the circumstances, amount to gross misconduct. Obvious examples are theft of company property, misuse of drugs or alcohol, sexual or racial harassment or bullying of other employees.

Whilst the activities of an employee outside work are not normally the concern of the employer there may be exceptions where such activities reflect on the reputation of Chemring or the ability of the employee to do his or her job or the trust by Chemring in the integrity of the employee. Examples of this may include insider dealing, fraud or theft or drug or alcohol abuse.

I. ACCOUNTING STANDARDS AND REPORTING FINANCIAL PERFORMANCE

Detailed controls are set out in the Group Accounting Policy Manual. The general principle is that proper records must be kept in a timely fashion and in accordance with UK (or, for producing local statutory accounts, relevant overseas) Generally Accepted Accounting Principles as consistently applied by Chemring so that all transactions and assets and liabilities are properly recorded. Group funds must not be held outside Chemring´s books of account.

From time to time businesses come under performance pressure. It is, however, unacceptable artificially to inflate the results of a period to show a position which is better than actual.

3. IMPLEMENTING THE PRINCIPLES

The Chemring main Board has approved this Code of Business Principles. All current and new employees will receive a personal copy. All managers must ensure that their staff are properly briefed.

Employees who have a query should raise it initially with their immediate or business unit managers. Employees who are concerned about the way in which the Code is applied or about business practices within the company should contact their line manager, HR manager or alternatively the Chemring Group Company Secretary.