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AUDITORS REPORT ON CORPORATE SOCIAL RESPONSIBILITY (INDIA-BASED FACTORIES) APOLLO - ELTEX INDIA PVT. LTD.

(MANGO'S SUPPLIER: PARTNERS AGENCY)

CSR AUDITORS REPORT TABLE 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 REPORT 1. INTRODUCTION In modern society corporate social responsibility has become an increasingly relevant part of companies operations. The concept of a sustainable organisation that creates economic, environmental and social value both in the short and long termthereby contributing to the progress and well-being of present and future generationsrequires companies to adopt a proactive approach. As part of their commitment to social values, companies should develop initiatives to achieve their social responsibility objectives and ensure that they are fulfilled adequately. In order to ensure that these objectives are met 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 code of conduct comply with its requirements, as well as drawing up improvement plans to ensure that the principles set out in the relevant code of conduct are implemented effectively. AUREN AUDITORS I CONSULTORS BARCELONA, S.A. have staff specialising in the implementation, assessment and control of Corporate Social Responsibility. PUNTO FA, S.L. (MANGO) asked us to conduct an audit of its suppliers (textile factories) in India, to ensure that they comply with the companys Code of Conduct (RC/COD/RC/01). This document contains the auditors report drawn up by our firm according to principles of independence and objectivity, and it has 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 which production is subcontracted comply with the requirements of the Code of Conduct (RC/COD/RC/01) drawn up by Mango. 3. SCOPE This report is concerned with the operations carried out on behalf of MANGO in the India-based textile factories. The audit conducted as part of this report was performed on the 20th of December 2006. It deals with the application of the principles set out in the MANGO Code of Conduct in relation to the companys activities.

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CSR AUDITORS REPORT 4. AUDITING APPROACH The audit was conducted on site by a team of two auditors. The following section 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 and organisations: 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 companys commercial and payroll management. We went to the offices of the department responsible for the companys payroll and commercial management and requested 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 company with regard to the employees performance, and other documents relating to the companys ordinary business activities.
4.3. PERSONAL INTERVIEWS WITH EMPLOYEES

The company provided us with a room isolated from other employees and their representatives. We interviewed 15 employees and asked them questions about the companys activities in the areas of interest relating to the requirements of the MANGO Code of Conduct. Out of the 15 people interviewed, 12 were selected randomly from the assembly line and the last 3 directly from the chain.
4.4. INTERVIEWS WITH REPRESENTATIVES OF THE COMPANY

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

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4.5. INSPECTION OF THE FACTORY

We inspected the premises (plant and offices) using graphic reproduction means. Despite being accompanied by a guide, we were able to inspect the factory without interference from company representatives or employees, who complied with all the inspection requirements we had established for them. All common areas, lavatories, production rooms, administrative rooms, entrances and exits were inspected thoroughly. We took photographs and videos, without interruptions, to analyse in detail the most relevant aspects to our audit.

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CSR AUDITORS REPORT 5. 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 MANGOs Indian suppliers with the requirements of the MANGO Code of Conduct have been submitted to a preliminary statistical analysis, so as to assess the reproducibility and level of accuracy of their knowledge of Indian regulations and its application to the audited companies. Independent appraisers questioned them separately on the application of the Code of Conduct (the questions were posed twice and with an interval of a few hours). Their answers were compared both with the information furnished by the Indian Ministry of Finance and Employment in relation to the application of Indian regulations and with interpretations issued by the ILO. The results are outlined below:
Assessment Agreement
Date of study : Reported by: Name of product: Misc:

Within Appraisers
100 95 90 Percent 85 80 75 70 65 1 Appraiser 2 Percent
95,0% C I P ercent

Appraiser vs Standard
100 95 90 85 80 75 70 65 1 Appraiser 2
95,0% C I P ercent

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

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6. GENERAL DATA ON AUDITED FACTORY The most relevant management and organisational features of the APOLLO, ELTEX INDIA PVT. LTD. factory are listed below:
Location Length of the relationship with MANGO Staff Working times Shifts Type of production for MANGO 1 Woven 887, Udyog Vihar, Phase-V, Gurgaon, Haryana, 122016 India 11 years 150 employees 9h30 to 13h30, 14h to 17h and 17h15 to 18h

Delivery times OTHERS CSR AUDIT Has the factory adhered to the MANGO Code of Conduct? Does the factory subcontract production to other companies? Exclusive production for MANGO

8 to 10 weeks No Yes

No

95% of its production is for MANGO

Does MANGO own the factory?

No

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CSR AUDITORS REPORT 7. RESULT OF COMPLIANCE WITH THE CODE OF CONDUCT The results of the audit for each of the requirements included in the Mango Code of Conduct (RC/COD/RC/01) are detailed below:
7.1 CHILD LABOUR
AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
Payslips, payroll records including identity documents. Unanimity in employees answers. Confirmation by the companys representatives. During the visit we did not identify any worker under the minimum employment age.

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 result in a breach of the Code of Conduct.

STRENGTHS

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

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.2. FORCED LABOUR


AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
No documents were reviewed. Unanimity in employees answers. Confirmation by the companys representatives. We did not detect any behaviour in breach of the law.

In reviewing the documents we did not find any evidence of forced labour, within the 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. The company confirmed these statements. During our on-site review we did not detect any event or behaviour suggesting any case of forced labour.

STRENGTHS

According to the audit performed, none of the companys workers is subjected to forced labour.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.3. HEALTH & SAFETY AT WORK


AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
There are no written documents relating to health and safety policies or procedures. Unanimity in employees answers. Confirmation by the companys representatives. 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 machines include a protecting device that prevents employees from suffering cuts through adequate handling. The rest of the machines also have emergency stop systems. - Accidents: During the interview both company and employees said that serious accidents were rare, with only a low number of needle pricks being reported. Given the type of machine on which these accidents occur, they cannot be considered as a result of a breach by the company of its duty to protect workers, as it provides them with the protection equipment needed to carry out their functions.

- Ventilation of the factory: The level of ventilation is appropriate. The factory is equipped with large windows across the entire building. We have also checked that it is provided with adequate ventilation systems. - Ergonomics in the workplace: Employees are allowed to move freely in their workplaces at regular intervals, to mitigate the effects of their working positions. Actually, there arent pregnant women working in the factory although the factory said that maternity leave and other benefits like special work conditions during pregnancy period were provided.

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

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

- Hygienic conditions in common areas: There are at least 2 common lavatories (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 a waterproof 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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- Dormitories and other services: We were also able to establish that the company provides additional services to its employees. These services, which are recognised by the employees themselves, include the canteen.

- Fire prevention: The factory carries out two emergency drills every year, from which it extracts time data and keeps photographic records. During the inspection of the factory we were able to ensure that the fire safety measures are appropriate to the organisation. The fire signs and equipment are in 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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- 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 or prevented in any way. The staff evacuation signs in case of emergency are appropriate. There are reflective substances and signs in all the entrances and exits, and the evacuation path is well marked.

- Health & Safety Staff: As far as the Health and Safety Responsible is concerned, both employees and firms representatives said that the staff responsible for health and safety in the workplace matched the companys organisation chart, with the assembly line managers being responsible for health and safety at work.

STRENGTHS AREA OF IMPROVEMENT

According to the audit performed, there is no breach of legislation. NONE NONCOMPLIANCE REMARK

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

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7.4. RIGHT TO ORGANISE AND COLLECTIVE BARGAINING


AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
Labour regulations are available to employees. None of the employees said that the company had prevented them from exercising their rights to organise and bargain collectively at any point. Confirmation by the companys representatives. During the visit we did not detect any non-compliance with current legislation. The applicable employment regulations are displayed on signs.

The companys commitment to observing the workers right to organise and bargain collectively provides physical evidence of its compliance with this aspect of the Code of Conduct. At present, employees must refer their requests and complaints directly to their immediate superior (Assembly Line or Factory Manager). According to both the companys and the employees statements, the company observes the employees 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 choose workers representative. Consequently, given that it cannot be concluded from either the employees or the companys answers that the company bans or takes coercive action to prevent employees from exercising their right to freedom of association, we have not found any evidence of breaking this requirement of MANGO Code of Conduct.

STRENGTHS

According to the audit performed, the company has not in any way banned, prevented or stopped the employees from exercising their right to freedom of association and assembly.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.5. DISCRIMINATION

AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit

AUDITING EVIDENCE
Payslips, remuneration, personnel files, personnel records, selection processes. Unanimity in employees answers. Confirmation by the companys representatives. Not applicable.

During the documentary review conducted in the company, we did not detect any discrimination on grounds of religion, sex, race, status or ideology. All of the employees we interviewed said that they had not been selected on the basis of religion, politics or race, but on the basis of their previous experience in similar positions. They also said that the company ensured equality of treatment to all employees. This was confirmed by the company, which said that the candidates experience and 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 that of men, the difference is very small. This difference is not due to discrimination, but simply to cultural and training differences.

STRENGTHS

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

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.6. DISCIPLINARY ACTION, HARASSMENT AND ABUSE


AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
Personnel records (written warnings). Unanimity in employees answers. Confirmation by the companys representatives. Not applicable.

None of the documents reviewed seems to indicate that the company encourages or imposes corporal punishments, mental or physical constraints, or any other kind of abuse. In the event of a breach by an employee, the company uses the prior notice procedure established by The Contract Labour (Regulation and Abolition) Act, 1970, thereby complying with the current legislation. According to the employees statements, the above-mentioned legal procedure is frequently used by the company. The employees were all of the opinion that the company treats them respectfully. The company stated that it complies with Indian legislation with regard to the application of disciplinary action.

STRENGTHS

According to the audit performed, there are no Physical abuse, or other harassment.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.7. WORKING TIME


AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE
Payroll, extra time records. Unanimity in the employees answers regarding working hours. Confirmation of compliance by the companys representatives. Working time records. Notice boards. Clock-out and breaks.

The companys working time covers six days per week in one shift from 9,30 to 13,30 and from 14.00 to 18.00. there is also a break from 17,00 to 17,15 to have tea. We were able to check these times through the records and notice boards located on the premises.

During the interviews the employees unanimously agreed with the working timetables, 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 fulfills the 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 by Indian law in the textile industry.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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CSR AUDITORS REPORT

7.8. REMUNERATION

AUDITING CRITERIA Documentary review

AUDITING EVIDENCE
Pay slips, extra time payment records and bonus per number of children.

Interviews with employees Unanimity in the employees answers. Interviews with company On-site audit
Confirmation of compliance by the companys representatives. Not applicable.

At the time of conducting the audit, the professional salary in New Delhi was determined according to the minimum categories set out in the minimum wage regulations laid down by the Indian Labour Ministry, which came into force on the 1st of August 2006, 3,312 Rupees per month. The wages reviewed during the 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 found documentary evidence of the payment of employment bonuses, chiefly productivity bonuses, in accordance with applicable legislation. All employees are registered in the medical assistance system of the Indian Government. Apart from the purely financial aspects, we were also able to establish that the company 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 the additional services described above.

STRENGTHS

According to the audit performed, the company complies with Indian law as regards minimum interprofessional wages.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.9. ENVIRONMENTAL ASPECTS


AUDITING CRITERIA Documentary review AUDITING EVIDENCE
None.

Interviews with employees None. Interviews with company On-site audit


Confirmation of compliance by the companys representatives. We have not detected any non-compliance.

The textile waste is reused as much as possible or it is given to small businessmen to reuse it. Chemical cleaning products are kept in a separate area and exists correct signs about dangerous products. There is also a diesel tank for the boilers running.

STRENGTHS

According to the audit performed, the company complies with Indian environmental legislation.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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7.10. COMPLIANCE WITH LEGISLATION

AUDITING CRITERIA Documentary review

AUDITING EVIDENCE
Sampling of pay slips and personnel files.

Interviews with employees Employees answers. Interviews with company On-site audit
Confirmation of compliance by the companys representatives. We did not detect any non-compliance.

At the time of the audit the regulatory framework was established by The Contract Labour (Regulation and Abolition) Act, 1970, which was brought into effect 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 current legislation in all areas of the Code of Conduct set out in this report.

AREA OF IMPROVEMENT

NONE

NONCOMPLIANCE

REMARK

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8. APPENDICES LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS. 8.1. LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS

C1 C2 C3 C4 C5 C6

Hours of Work (Industry) Convention, 1919 Unemployment Convention, 1919 Maternity Protection Convention, 1919 Night Work (Women) Convention, 1919 Minimum Age (Industry) Convention, 1919 Night Work of Young Persons (Industry) Convention, 1919

C14 Weekly Rest (Industry) Convention, 1921 C17 Workmen's Compensation (Accidents) Convention, 1925 C18 Workmen'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 C42 Workmen's Compensation (Occupational Diseases) Convention (Revised), 1934

C44 Unemployment Provision Convention, 1934 C47 Forty-Hour Week Convention, 1935 C52 Holidays with Pay Convention, 1936 C59 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 P89 1990 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 REPORT C103 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), 1962 C120 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 P155 Protocol 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 C159 Vocational 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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Nombre de archivo: Apollo ENG Directorio: C:\Documents and Settings\Montse.suriol\Escritorio\INDIA DIC.2006\Inf. Ingles Plantilla: C:\Documents and Settings\Montse.suriol\Datos de programa\Microsoft\Plantillas\Normal.dot Ttulo: Asunto: Autor: mar Palabras clave: Comentarios: Fecha de creacin: 23/05/2007 10:34 Cambio nmero: 16 Guardado el: 14/06/2007 13:00 Guardado por: montse.suriol Tiempo de edicin: 68 minutos Impreso el: 27/06/2007 16:45 ltima impresin completa Nmero de pginas: 22 Nmero de palabras: 25.912 (aprox.) Nmero de caracteres: 147.703 (aprox.)