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AUDITORS REPORT ON CORPORATE SOCIALRESPONSIBILITY

(INDIA-BASED FACTORIES)

APOLLO-ELTEX INDIA PVT. LTD.

(MANGO'S SUPPLIER: PARTNERS AGENCY)


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CSR AUDITORS REPORTTABLE OF CONTENTS

1. INTRODUCTION............................................................................................ 3

2. SUBJECT-MATTER....................................................................................... 3

3. SCOPE........................................................................................................... 3

4. AUDITING APPROACH................................................................................. 4

4.1. AUDITING CRITERIA.............................................................................. 4

4.2. DOCUMENTARY REVIEW...................................................................... 4

4.3. PERSONAL INTERVIEWS WITH EMPLOYEES..................................... 4

4.4. INTERVIEWS WITH REPRESENTATIVES OF THE COMPANY............ 4

4.5. INSPECTION OF THE FACTORY........................................................... 5

5. AUDITING TEAM ........................................................................................... 6

6. GENERAL DATA ON AUDITED FACTORY................................................... 7

7. RESULT OF COMPLIANCE WITH THE CODE OF CONDUCT .................... 8

7.1 CHILD LABOUR ....................................................................................... 8

7.2. FORCED LABOUR.................................................................................. 9

7.3. HEALTH & SAFETY AT WORK............................................................. 10

7.4. RIGHT TO ORGANISE AND COLLECTIVE BARGAINING................... 14

7.5. DISCRIMINATION................................................................................. 15

7.6. DISCIPLINARY ACTION, HARASSMENT AND ABUSE....................... 16

7.7. WORKING TIME.................................................................................... 17

7.8. REMUNERATION.................................................................................. 18

7.9. ENVIRONMENTAL ASPECTS .............................................................. 19

7.10. COMPLIANCE WITH LEGISLATION................................................... 20

8. APPENDICES .............................................................................................. 21


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CSR AUDITORS REPORT1. INTRODUCTION

In modern society corporate social responsibility has become an increasinglyrelevant part of companies operations. The concept of a sustainable

organisation that creates economic, environmental and social value both in theshort and long termthereby contributing to the progress and well-being ofpresent and future generationsrequires companies to adopt a proactiveapproach. As part of their commitment to social values, companies shoulddevelop initiatives to achieve their social responsibility objectives and ensurethat they are fulfilled adequately. In order to ensure that these objectives aremet across the entire organisation, companies need to draw up ethical codes,or codes of conduct that provide an optimal tool for attaining these objectives.Companies should also ensure that the suppliers that have adhered to the codeof conduct comply with its requirements, as well as drawing up improvementplans to ensure that the principles set out in the relevant code of conduct are

implemented effectively.

AUREN AUDITORS I CONSULTORS BARCELONA, S.A. have staffspecialising in the implementation, assessment and control of Corporate SocialResponsibility.

PUNTO FA, S.L. (MANGO) asked us to conduct an audit of its suppliers (textilefactories) in India, to ensure that they comply with the companys Code ofConduct (RC/COD/RC/01). This document contains the auditors report drawnup by our firm according to principles of independence and objectivity, and ithas been prepared to the best of our knowledge.

2. SUBJECT-MATTER

A series of controls were carried out to ensure that the textile factories in whichproduction is subcontracted comply with the requirements of the Code ofConduct (RC/COD/RC/01) drawn up by Mango.

3. SCOPE

This report is concerned with the operations carried out on behalf of MANGO inthe India-based textile factories. The audit conducted as part of this report wasperformed on the 20th of December 2006. It deals with the application of theprinciples set out in the MANGO Code of Conduct in relation to the companysactivities.


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CSR AUDITORS REPORT4. AUDITING APPROACH

The audit was conducted on site by a team of two auditors. The followingsection outlines the criteria that were taken into account in conducting the audit,

as well as the different stages of the audit.4.1. AUDITING CRITERIA

The auditing criteria used are those laid down by the following documents andorganisations:

The Mango Code of Conduct (RC/COD/RC/01) The Child Labour (Prohibition and Regulation) Act, 1986 The Contract Labour (Regulation and Abolition) Act, 1970 The Employees State Insurance Act, 1948

The Minimum Wages Act, 1948 The Trade Unions Act, 1926 The Maternity Benefits Act, 1961 ILO Conventions referring to labour matters (see appendix) Auditing Requirements specified by AUREN AUDITORS

CONSULTORS BARCELONA, S.A.

4.2. DOCUMENTARY REVIEW

We have reviewed a number of documents relating to the companyscommercial and payroll management. We went to the offices of the department

responsible for the companys payroll and commercial management andrequested to see the documents that we thought could be of interest to us.Among the documents reviewed were employment contracts and staff records,a sample of 20 pay slips chosen randomly, the records kept by the companywith regard to the employees performance, and other documents relating to thecompanys ordinary business activities.

4.3. PERSONAL INTERVIEWS WITH EMPLOYEES

The company provided us with a room isolated from other employees and theirrepresentatives. We interviewed 15 employees and asked them questionsabout the companys activities in the areas of interest relating to therequirements of the MANGO Code of Conduct. Out of the 15 peopleinterviewed, 12 were selected randomly from the assembly line and the last 3directly from the chain.

4.4. INTERVIEWS WITH REPRESENTATIVES OF THE COMPANY

We met with the companys representatives at the companys head office andasked them a series of questions concerning the companys compliance withthe principles set out in the MANGO Code of Conduct (area of interest). Someof the questions were identical to those put to employees, so that we couldcompare the answers.


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CSR AUDITORS REPORT4.5. INSPECTION OF THE FACTORY

We inspected the premises (plant and offices) using graphic reproductionmeans. Despite being accompanied by a guide, we were able to inspect thefactory without interference from company representatives or employees, who

complied with all the inspection requirements we had established for them. Allcommon areas, lavatories, production rooms, administrative rooms, entrancesand exits were inspected thoroughly. We took photographs and videos, withoutinterruptions, to analyse in detail the most relevant aspects to our audit.


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CSR AUDITORS REPORT5. AUDITING TEAM

The audit was performed by the following AUREN experts:

- Marta Gir Via (Expert Auditor)

- Oscar J. lvarez Civantos (Head of Audit and Expert Auditor)

The auditors selected to conduct the audit on the compliance of MANGOsIndian suppliers with the requirements of the MANGO Code of Conduct havebeen submitted to a preliminary statistical analysis, so as to assess thereproducibility and level of accuracy of their knowledge of Indian regulationsand its application to the audited companies.

Independent appraisers questioned them separately on the application of theCode of Conduct (the questions were posed twice and with an interval of a fewhours). Their answers were compared both with the information furnished by the

Indian Ministry of Finance and Employment in relation to the application ofIndian regulations and with interpretations issued by the ILO.

The results are outlined below:

Appraiser

Percent

21

100

95

90

85

80

75

70

65

95,0% C I

Percent

Appraiser

Percent

21

100

95

90

85

80

75

70

65

95,0% C I

Percent

Date of study:

Reported by :

Name of product:

Misc:

Assessment Agreement

Within Appraisers Appraiser vs Standard

The auditors achieved a level of consistency of 100% and 93% (on the samequestions which, as explained above, were formulated twice with a few hoursinterval). As regards the accuracy of their appraisals according to theregulations underpinning the report, both auditors achieved a rate of accuracyabove 90% (100% and 93%, respectively).


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CSR AUDITORS REPORT

6. GENERAL DATA ON AUDITED FACTORY

The most relevant management and organisational features of the APOLLO,ELTEX INDIA PVT. LTD. factory are listed below:

Location887, Udyog Vihar, Phase-V, Gurgaon, Haryana, 122016India

Length of the relationship withMANGO

11 years

Staff 150 employees

Working times 9h30 to 13h30, 14h to 17h and 17h15 to 18h

Shifts 1

Type of production for MANGO Woven

Delivery times 8 to 10 weeks

OTHERS CSR AUDIT No

Has the factory adhered to theMANGO Code of Conduct?

Yes

Does the factory subcontractproduction to other companies?

No

Exclusive production for MANGO 95% of its production is for MANGO

Does MANGO own the factory? No


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CSR AUDITORS REPORT7. RESULT OF COMPLIANCE WITH THE CODE OF CONDUCT

The results of the audit for each of the requirements included in the MangoCode of Conduct (RC/COD/RC/01) are detailed below:

7.1 CHILD LABOUR

AUDITING CRITERIA AUDITING EVIDENCE

Documentary review Payslips, payroll records including identity documents.

Interviews with employees Unanimity in employees answers.

Interviews with company Confirmation by the companys representatives.

On-site auditDuring the visit we did not identify any worker under the minimum employmentage.

During our review of payslips, contracts and employment records we did not

find any evidence suggesting that any of the workers is under the age of 18.Employees professional records include a copy of their ID and, in some cases,of their birth certificate.

In this respect, the answers of employees matched those of the company.

The on-site inspection of the factory did not reveal any incident that could resultin a breach of the Code of Conduct.

STRENGTHS

According to the audit performed, none of the companys workers isunder the age of 14, which is the statutory limit under Indian law. Infact, according to our review of payslips and employment records,which include a copy of the employees identity cards, none of theworkers is aged under 18.

AREA OF IMPROVEMENT NONENON-

COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.2. FORCED LABOUR


Documentary review No documents were reviewed.



On-site audit We did not detect any behaviour in breach of the law.

In reviewing the documents we did not find any evidence of forced labour, withinthe definitions of forced labour laid down in Conventions 29 and 105 of the ILO.

All the employees said that there was no forced labour in the company. Thecompany confirmed these statements.

During our on-site review we did not detect any event or behaviour suggestingany case of forced labour.

STRENGTHSAccording to the audit performed, none of the companys workers issubjected to forced labour.


COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.3. HEALTH & SAFETY AT WORK


Documentary review

There are no written documents relating to health and safety policies

or procedures.



On-site audit The safety and emergency exits and signs are well displayed.

The most relevant aspects in this area are described below:

- Machines: As regards the machines used in production, cutting machinesinclude a protecting device that prevents employees from suffering cuts through

adequate handling. The rest of the machines also have emergency stopsystems.

- Accidents: During the interview both company and employees said thatserious accidents were rare, with only a low number of needle pricks beingreported. Given the type of machine on which these accidents occur, theycannot be considered as a result of a breach by the company of its duty toprotect workers, as it provides them with the protection equipment needed tocarry out their functions.

- Ventilation of the factory: The level of ventilation is appropriate. The factoryis equipped with large windows across the entire building. We have alsochecked that it is provided with adequate ventilation systems.

- Ergonomics in the workplace: Employees are allowed to move freely in theirworkplaces at regular intervals, to mitigate the effects of their working positions.

Actually, there arent pregnant women working in the factory although thefactory said that maternity leave and other benefits like special work conditionsduring pregnancy period were provided.


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CSR AUDITORS REPORT- Medical assistance: According to the statements of the interviewedemployees, the company keeps first-aid kits. These statements have beenconfirmed by the company. The number of first-aid kits complies with thelegislation: no less than one every 150 employees.

- Chemical and/or flammable products: We have only detected the use ofnoxious, flammable chemical substances in some cleaning products and stainremovers. We have not detected any incidents that could involve a risk in theuse of such products, as they are kept in a separate area away fromemployees.

- Hygienic conditions in common areas: There are at least 2 commonlavatories (divided into a mens section and a womens section) on each floor.Each lavatory is divided in individual, separate cubicles, and the floor and the

internal walls are tiled, enamelled or covered with a material to provide with awaterproof and polished surface.

Employees have unrestricted access to the bathroom.

Both lavatories and dining rooms are kept in good hygienic conditions.


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CSR AUDITORS REPORT

- Dormitories and other services: We were also able to establish that thecompany provides additional services to its employees. These services, whichare recognised by the employees themselves, include the canteen.

- Fire prevention: The factory carries out two emergency drills every year, fromwhich it extracts time data and keeps photographic records.

During the inspection of the factory we were able to ensure that the fire safetymeasures are appropriate to the organisation. The fire signs and equipment arein good conditions and easily accessible.

All of the employees interviewed said that they had received safety training,which is consistent with the records reviewed.


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CSR AUDITORS REPORT

- Fire extinguishers:

The number of extinguishers observed during the on-site review is appropriate

to the size of the factory, and access to the extinguishers is not blocked orprevented in any way.

The staff evacuation signs in case of emergency are appropriate. There arereflective substances and signs in all the entrances and exits, and theevacuation path is well marked.

- Health & Safety Staff: As far as the Health and Safety Responsible isconcerned, both employees and firms representatives said that the staffresponsible for health and safety in the workplace matched the companys

organisation chart, with the assembly line managers being responsible forhealth and safety at work.

STRENGTHS According to the audit performed, there is no breach oflegislation.


COMPLIANCEREMARK

We are of the opinion that there should be a written document specifying the structure andfunctions of health & safety staff in the company.


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CSR AUDITORS REPORT

7.4. RIGHT TO ORGANISE AND COLLECTIVE BARGAINING


Documentary reviewLabour regulations are available to employees.

Interviews with employeesNone of the employees said that the company had prevented themfrom exercising their rights to organise and bargain collectively at anypoint.


On-site auditDuring the visit we did not detect any non-compliance with currentlegislation. The applicable employment regulations are displayed onsigns.

The companys commitment to observing the workers right to organise andbargain collectively provides physical evidence of its compliance with thisaspect of the Code of Conduct.

At present, employees must refer their requests and complaints directly to theirimmediate superior (Assembly Line or Factory Manager). According to both thecompanys and the employees statements, the company observes theemployees right to organise and bargain collectively.

The character of the company and the proximity of the heads with their workers,the employees dont show interest in belonging to Trade Union or chooseworkers representative.

Consequently, given that it cannot be concluded from either the employees or

the companys answers that the company bans or takes coercive action toprevent employees from exercising their right to freedom of association, wehave not found any evidence of breaking this requirement of MANGO Code ofConduct.

STRENGTHSAccording to the audit performed, the company has not in any waybanned, prevented or stopped the employees from exercising their rightto freedom of association and assembly.

AREA OF IMPROVEMENT NONE

NON-

COMPLIANCE REMARK


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CSR AUDITORS REPORT

7.5. DISCRIMINATION


Documentary reviewPayslips, remuneration, personnel files, personnel records, selectionprocesses.



On-site audit Not applicable.

During the documentary review conducted in the company, we did not detectany discrimination on grounds of religion, sex, race, status or ideology.

All of the employees we interviewed said that they had not been selected on thebasis of religion, politics or race, but on the basis of their previous experience insimilar positions. They also said that the company ensured equality of treatmentto all employees.

This was confirmed by the company, which said that the candidates experienceand skills are important criteria when it comes to filling a vacancy. Similarly,promotions are decided on the basis of the employees experience and skills.

Although at first sight it seems that the proportion of women is higher than thatof men, the difference is very small. This difference is not due to discrimination,but simply to cultural and training differences.

STRENGTHSAccording to the audit performed, there are no discrimination practicesin the treatment of employees. There is no discrimination in hiring,promotion, salaries or training of employees.


COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.6. DISCIPLINARY ACTION, HARASSMENT AND ABUSE


Documentary review Personnel records (written warnings).




None of the documents reviewed seems to indicate that the companyencourages or imposes corporal punishments, mental or physical constraints, orany other kind of abuse. In the event of a breach by an employee, the companyuses the prior notice procedure established by The Contract Labour (Regulationand Abolition) Act, 1970, thereby complying with the current legislation.

According to the employees statements, the above-mentioned legal procedureis frequently used by the company. The employees were all of the opinion thatthe company treats them respectfully.

The company stated that it complies with Indian legislation with regard to theapplication of disciplinary action.

STRENGTHS According to the audit performed, there are no Physical abuse, or otherharassment.


COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.7. WORKING TIME


Documentary review Payroll, extra time records.

Interviews with employees Unanimity in the employees answers regarding working hours.

Interviews with company Confirmation of compliance by the companys representatives.

On-site audit Working time records. Notice boards. Clock-out and breaks.

The companys working time covers six days per week in one shift from 9,30 to13,30 and from 14.00 to 18.00. there is also a break from 17,00 to 17,15 tohave tea. We were able to check these times through the records and noticeboards located on the premises.

During the interviews the employees unanimously agreed with the workingtimetables, which they regard as stable (they always work the same hours).

During our stay in the company we were able to ensure that the company fulfillsthe requirements in terms of resting time and clock-in and clock-out times.

STRENGTHS

According to the audit performed, none of the companys employees

has been forced to work extra hours in excess of the limit prescribed byIndian law in the textile industry.


COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.8. REMUNERATION


Documentary review Pay slips, extra time payment records and bonus per number of children.

Interviews with employees Unanimity in the employees answers.



At the time of conducting the audit, the professional salary in New Delhi wasdetermined according to the minimum categories set out in the minimum wageregulations laid down by the Indian Labour Ministry, which came into force onthe 1st of August 2006, 3,312 Rupees per month. The wages reviewed duringthe audit were consistently higher than the minimum monthly wage. Wages and

related benefits are accepted by the employees by signing the receipt (in 100%of the cases audited) that provides proof of payment of the employees pay.This shows that the company complies with Indian law. We have also founddocumentary evidence of the payment of employment bonuses, chieflyproductivity bonuses, in accordance with applicable legislation.

All employees are registered in the medical assistance system of the IndianGovernment.

Apart from the purely financial aspects, we were also able to establish that thecompany provides additional services to its employees. These services, which

are recognised by the employees themselves, include: canteen.

We were able to ensure on site that the company currently provides theadditional services described above.

STRENGTHS According to the audit performed, the company complies with Indianlaw as regards minimum interprofessional wages.

AREA OF IMPROVEMENT NONE NON-COMPLIANCE REMARK


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CSR AUDITORS REPORT

7.9. ENVIRONMENTAL ASPECTS


Documentary review None.

Interviews with employees None.


On-site audit We have not detected any non-compliance.

The textile waste is reused as much as possible or it is given to smallbusinessmen to reuse it.

Chemical cleaning products are kept in a separate area and exists correct signsabout dangerous products.

There is also a diesel tank for the boilers running.

STRENGTHS According to the audit performed, the company complies with Indianenvironmental legislation.


COMPLIANCEREMARK


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CSR AUDITORS REPORT

7.10. COMPLIANCE WITH LEGISLATION


Documentary review Sampling of pay slips and personnel files.

Interviews with employees Employees answers.


On-site audit We did not detect any non-compliance.

At the time of the audit the regulatory framework was established by TheContract Labour (Regulation and Abolition) Act, 1970, which was brought intoeffect by numerous decrees and laws, the most relevant of which are:

The Minimum Wages Act, 1948

The Child Labour (Prohibition and Regulation) Act, 1986 The Employees State Insurance Act, 1948

According to our audit the company complies with applicable legislation.

STRENGTHS According to the audit performed, the company complies with currentlegislation in all areas of the Code of Conduct set out in this report.


COMPLIANCE

REMARK


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CSR AUDITORS REPORT

8. APPENDICES

LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS.

8.1. LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS

C1 Hours of Work (Industry) Convention, 1919

C2 Unemployment Convention, 1919

C3 Maternity Protection Convention, 1919

C4 Night Work (Women) Convention, 1919C5 Minimum Age (Industry) Convention, 1919

C6 Night Work of Young Persons (Industry) Convention, 1919

C14 Weekly Rest (Industry) Convention, 1921

C17 Workmen's Compensation (Accidents) Convention, 1925

C18Workmen's Compensation (Occupational Diseases) Convention,1925

C19 Equality of Treatment (Accident Compensation) Convention, 1925

C26 Minimum Wage-Fixing Machinery Convention, 1928

C29 Forced Labour Convention, 1930

C37 Invalidity Insurance (Industry, etc.) Convention, 1933

C39 Survivors' Insurance (Industry, etc.) Convention, 1933

C41 Night Work (Women) Convention (Revised), 1934

C42Workmen's Compensation (Occupational Diseases) Convention(Revised), 1934

C44 Unemployment Provision Convention, 1934

C47 Forty-Hour Week Convention, 1935

C52 Holidays with Pay Convention, 1936C59 Minimum Age (Industry) Convention (Revised), 1937

C61 Reduction of Hours of Work (Textiles) Convention, 1937

C77 Medical Examination of Young Persons (Industry) Convention, 1946

C89 Night Work (Women) Convention (Revised), 1948

P891990 Protocol to the Night Work (Women) Convention (Revised),1948

C90 Night Work of Young Persons (Industry) Convention (Revised), 1948

C98 Right to Organise and Collective Bargaining Convention, 1949

C100 Equal Remuneration Convention, 1951


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CSR AUDITORS REPORTC103 Maternity Protection Convention (Revised), 1952

C105 Abolition of Forced Labour Convention, 1957

C106 Weekly Rest (Commerce and Offices) Convention, 1957

C111 Discrimination (Employment and Occupation) Convention, 1958

C118 Equality of Treatment (Social Security Convention), 1962C120 Hygiene (Commerce and Offices) Convention, 1964

C121 Employment Injury Benefits Convention, 1964

C130 Medical Care and Sickness Benefits Convention, 1969

C131 Minimum Wage Fixing Convention, 1970

C132 Holidays with Pay Convention (Revised), 1970

C135 Workers' Representatives Convention, 1971

C138 Minimum Age Convention, 1973

C148 Working Environment (Air Pollution, Noise and Vibration) Convention,1977

C154 Collective Bargaining Convention, 1981

C155 Occupational Safety and Health Convention, 1981

P155Protocol of 2002 to the Occupational Safety and Health Convention,1981

C156 Workers with Family Responsibilities Convention, 1981

C157 Maintenance of Social Security Rights Convention, 1982

C158 Termination of Employment Convention, 1982

C159Vocational Rehabilitation and Employment (Disabled Persons)Convention, 1983

C174 Prevention of Major Industrial Accidents Convention, 1993

C175 Part-Time Work Convention, 1994

C182 Worst Forms of Child Labour Convention, 1999

C183 Maternity Protection Convention, 2000


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