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					FLA Audit Profile
Country                             China
Factory name                        440015464E                                                                                   440015464EV
IEM                                 A.L.G.I.                                                                                     Independent External Verification (IEV) conducted by Level Works
Date(s) in facility                 Oct 30-31, 2006                                                                              March 27-28, 2008
PC(s)                               Hennes & Mauritz AB                                                                          Hennes & Mauritz AB
Number of workers                   225                                                                                          221
Product(s)                          Hats
Production processes                Sampling, sewing, ironing, inspection, packing

                                                                                                                                                                                                    IEM Findings                                                                                                                                 Remediation                                                    [Status]                      Updates (28-Aug-2007)                                    Updates (21-Feb-2008)                                                               Third-Party Verification                                                            Company Verification Follow up
FLA Code/ Compliance issue          Country Law/Legal                 FLA Benchmark                                              Non-compliance                                   Risk of Non-       Evidence of   If not corroborated,   Sources/Documentation    Notable       PC         PC Remediation plan                             Target             Factory Response   Company follow     Documenta Completed; Pending;   Company Follow up      Documentation   Company Follow up                              Documentation                 External Verification (Date)                    Documentation                                     Company Follow up (Cite date of planned or      Documentation
                                    Reference                                                                                                                                     compliance        Non-           explain why            used for corroborating   Features      Internal                                                   Completion         (Optional)         up (Cite date of   tion      On-going                                                                                                                                  Independent External Verification was                                                             follow up visit, if appropriate)
                                                                                                                                                                                                    compliance                                                     implemented   audit                                                      Date                                  follow up)                                                                                                                                                             conducted by Level Works on March 27-28,
                                                                                                                                                                                                    (uncorroborate                                                 by Factory    findings                                                                                                                                                                                                                                                                2008
                                                                                                                                                                                                    d)                                                             Management    (Optional)
                                                                                                                                                                                                                                                                   or Company

1. Code Awareness
Code posting/information                                              FLA Principle of Monitoring, Obligation of                 H&M Code of Conduct was not posted in the                                                                Factory tour                                     Generally we do not require our Code of          On-going                                                            on-going             no update.                             Besides internal regulations, training (including   Training records         Not Corrected: It was noted that no H&M Code Factory tour, management interview                   Since we do not require our Code of Conduct
                                                                      Companies: Establish and articulate clear, written         factory.                                                                                                                                                  Conduct to be posted in the factory. In the                                                                                                                                      information in H&M Code of Conduct) was                                      of Conduct was posted in the factory; however,                                                    to be posted in the factory and we encourage
                                                                      workplace standards. Formally convey those standards                                                                                                                                                                 case a factory produces for different buyers                                                                                                                                     provided for all the new workers. And the latest                             the factory had posted a "Factory Rule Summary"                                                   the factories to develop internal regulations in
                                                                      to Company factories as well as to licensees,                                                                                                                                                                        it might be confusing for the workers.                                                                                                                                           training was held on Nov-13-2007.                                            in the production building area, which covered                                                    line with our Code of Conduct and local
                                                                      contractors and suppliers.                                                                                                                                                                                           Instead we encourage the factories to                                                                                                                                                                                                                         some contents (Freedom of Association, Non-                                                       legislation, we will again communicate with the
                                                                                                                                                                                                                                                                                           develop internal regulations in line with our                                                                                                                                                                                                                 discrimination, Harassment and Abuse, Child                                                       Supplier and factory about this and stress the
                                                                                                                                                                                                                                                                                           Code of Conduct and local legislation and to                                                                                                                                                                                                                  Labor etc. ) of H & M Code of Conduct.                                                            importance of setting necessary regulations
                                                                                                                                                                                                                                                                                           clearly communicate these to all workers, for                                                                                                                                                                                                                                                                                                                   and communicate these to all workers.
                                                                                                                                                                                                                                                                                           example through a handbook for the workers
                                                                                                                                                                                                                                                                                           or on the notice board.                                                                                                                                                                                                                                                                                                                                         Completion date: Nov-2008



Worker/management awareness                                           FLA Principle of Monitoring, Obligation of                 Participating company (H&M) has not trained                                                              Management interview                             Factory management will receive renewed          12/1/2007                                                           on-going             no update.                             We have communicated our code again with the                                 Corrected: It was noted that the company (H &  Management Interview, workers interview and
of Code                                                               Companies: Ensure that all Company factories as well       management or employees on the Code.                                                                                                                      training on our Code of Conduct.                                                                                                                                                 supplier. more training activity will be held in                             M) had trained the management on the code. And documents review (Training notification email
                                                                      as contractors and suppliers inform their employees                                                                                                                                                                                                                                                                                                                                                   near future.                                                                 as per workers interview, auditor noted that   and meeting minutes with H & M)
                                                                      about the workplace standards orally and through the                                                                                                                                                                                                                                                                                                                                                                                                                               factory management had trained employees on
                                                                      posting of standards in a prominent place (in the local                                                                                                                                                                                                                                                                                                                                                                                                                            the code.
                                                                      languages spoken by employees and managers) and
                                                                      undertake other efforts to educate employees about the
                                                                      standards on a regular basis.


Confidential non-compliance                                           FLA Principle of Monitoring, Obligation of                 Although H&M has provided hotline number to                                                              Management interview                             During our internal audits and discussions       On-going;                                                           on-going             no update.                             We will keep doing workers interview during our     n/a..                    Not Corrected: It was noted that no H & M           Factory tour, management and workers          H&M will keep doing workers interviews and
reporting channel                                                     Companies: Develop a secure communications channel, some workers during the last compliance visit,                                                                                                                   with the factory, H&M primarily encouraged       hotline June                                                                                                                    visit and pass our contact information to the                                hotline information was posted in the factory for   interview                                     distributing contact information among workers
                                                                      in a manner appropriate to the culture and situation, to   this is not posted for the use of all workers.                                                                                                            the factory to develop and deepen its own        2007                                                                                                                            workers.                                                                     all workers awareness to report grievance                                                         in future visits so as to strengthen the
                                                                      enable Company employees and employees of                                                                                                                                                                            confidential non-compliance system. We                                                                                                                                                                                                                        directly to H & M.                                                                                confidential reporting channel. Furthermore, we
                                                                      contractors and suppliers to report to the Company on                                                                                                                                                                support the factory in building a dialogue                                                                                                                                                                                                                                                                                                                      will monitor the running of grievance and
                                                                      noncompliance with the workplace standards, with                                                                                                                                                                     system within the factory in order to have a                                                                                                                                                                                                                                                                                                                    dialogue system in the factory.
                                                                      security that they shall not be punished or prejudiced for                                                                                                                                                           forum for the workers to communicate
                                                                      doing so.                                                                                                                                                                                                            grievances to the management. During our                                                                                                                                                                                                                                                                                                                        Completion date: On-going; open
                                                                                                                                                                                                                                                                                           audits we regularly check the function of
                                                                                                                                                                                                                                                                                           these systems. At all H&M audits we conduct
                                                                                                                                                                                                                                                                                           worker interviews. During these confidential,
                                                                                                                                                                                                                                                                                           one-to-one interviews, our contact information
                                                                                                                                                                                                                                                                                           is provided to the workers in order for them
                                                                                                                                                                                                                                                                                           to be able to contact with us to put forward
                                                                                                                                                                                                                                                                                           their grievances directly to us. We have
                                                                                                                                                                                                                                                                                           decided to establish a hotline in order to
                                                                                                                                                                                                                                                                                           ensure that the workers can put forward
                                                                                                                                                                                                                                                                                           confidential complaints directly to H&M. It will
                                                                                                                                                                                                                                                                                           be a mobile number that the workers can call
                                                                                                                                                                                                                                                                                           or SMS. The mobile number will be printed on
                                                                                                                                                                                                                                                                                           business cards that will be provided to the
                                                                                                                                                                                                                                                                                           workers during worker interviews.




2. Forced Labor
There will not be any use of forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise.


Employment Records                                                    Employers will maintain sufficient hiring and employment   The factory does not maintain any                                                                        Documentation review                             The factory should sign a legal labour           At next audit.                                                      completed            completed              Documentation   Checked; complete.                                  employment application   Corrected: It was noted that the factory had        Management interview and documents review
                                                                      records to demonstrate and verify compliance with this     employment applications.                                                                                                                                  contract with all workers individually no later                                                                                                                  review.                                                             forms                    maintained updated employment applications for      (Personnel Files)
                                                                      Code provision.                                                                                                                                                                                                      than 30 days after they have started working                                                                                                                                                                                                                  each workers.
                                                                                                                                                                                                                                                                                           in the factory. We will follow-up to ensure that
                                                                                                                                                                                                                                                                                           this practice is in function.
Freedom of Movement                 Art. 96 of PRC Labor Law:         Employers are prohibited from practices that restrict a    [Employees interviewed] stated that they had                                                             Employee interview and                           During our internal audits and discussions      10/1/2007                                                            completed            completed              n/a..           completed                                           n/a..                    Corrected: It was noted that the factory had        Workers interview and documents review
                                    The responsible person of         worker’s ability to terminate his or her employment or     to pay 50 Yuan as deposit when hired and the                                                             management interview                             with the factory we encourage the factory to                                                                                                                                                                                                                  cancelled policy and returned the money to          (Money Return List with workers signatures)
                                    the employer involved in any      freedom of movement, including physical or mental          money would be returned to them after two                                                                                                                 develop internal regulations in line with our                                                                                                                                                                                                                 workers in early 2007.
                                    one of the following cases        coercion, deposits, unreasonable financial penalties or    months of work in the facility.                                                                                                                           Code of Conduct and local legislation and to
                                    shall be taken by a public        recruitment fees, and access to and renewal of identity                                                                                                                                                              clearly communicate these to all workers.
                                    security department into          papers and/or work permits or other legal identification                                                                                                                                                             These should include all disciplinary
                                    custody for 15 days, fined, or    documents.                                                                                                                                                                                                           procedures, including procedures for hiring
                                    given a warning, and criminal                                                                                                                                                                                                                          and termination in place in the factory. We do
                                    responsibilities shall be fixed                                                                                                                                                                                                                        not accept monetary penalties but do instead
                                    upon whoever commits a                                                                                                                                                                                                                                 encourage the factory to work with incentive
                                    crime: (1) Use of violence,                                                                                                                                                                                                                            based systems. Records of disciplinary
                                    threat or illegal deprival of                                                                                                                                                                                                                          actions should be kept in the factory for
                                    personal freedom to force                                                                                                                                                                                                                              review. We have initiated a dialogue with the
                                    labor; (2) Humiliation,                                                                                                                                                                                                                                factory regarding this and it will be
                                    corporal punishment, beating,                                                                                                                                                                                                                          systematically checked during coming audits
                                    and illegal search or holding                                                                                                                                                                                                                          and follow up at the factory to ensure that the
                                    of laborers.                                                                                                                                                                                                                                           penalty system is abolished.




3. Child Labor
No person will be employed at an age younger than 15 (or 14 where the law of the country of manufacture allows) or
younger than the age for completing compulsory education in the country of manufacture where such age is higher than 15.
4. Harassment or Abuse
Every employee will be treated with respect and dignity. No employee will be subject to any physical, sexual, psychological
or verbal harassment of abuse.
Disciplinary Practices              Art. 4 of PRC Labor Law:       Employers will utilize consistent written disciplinary        The factory does not have a policy or                                                                    Documentation review                             During our internal audits and discussions       10/1/2007                                                           completed            completed              Documentation   Policy posted and worker informed.                  visual inspection        Corrected: It was noted the factory had issued a Workers interview and documents review
                                    The employer shall establish practices that are applied fairly among all workers.            procedure for handling discipline.                                                                       and management                                   with the factory, H&M primarily encouraged                                                                                                                       review.                                                                                      procedure for handling discipline. And it was    (Factory Disciplinary Procedure)
                                    and perfect rules and                                                                                                                                                                                 interview                                        the factory to develop and deepen its own                                                                                                                                                                                                                     confirmed by workers interview that the factory
                                    regulations in accordance                                                                                                                                                                                                                              confidential non-compliance system. We                                                                                                                                                                                                                        had communicated these procedure with workers.
                                    with law and guarantee that                                                                                                                                                                                                                            support the factory in building a dialogue
                                    laborers enjoy labor right and                                                                                                                                                                                                                         system within the factory in order to have a
                                    fulfill labor obligations.                                                                                                                                                                                                                             forum for the workers to communicate
                                                                                                                                                                                                                                                                                           grievances to the management. During our
                                                                                                                                                                                                                                                                                           audits we regularly check the function of
                                                                                                                                                                                                                                                                                           these systems. At all H&M audits we conduct
                                                                                                                                                                                                                                                                                           worker interviews. During these confidential,
                                                                                                                                                                                                                                                                                           one-to-one interviews, our contact information
                                                                                                                                                                                                                                                                                           is provided to the workers in order for them
                                                                                                                                                                                                                                                                                           to be able to contact with us to put forward
                                                                                                                                                                                                                                                                                           their grievances directly to us. We have
                                                                                                                                                                                                                                                                                           decided to establish a hotline in order to
                                                                                                                                                                                                                                                                                           ensure that the workers can put forward
                                                                                                                                                                                                                                                                                           confidential complaints directly to H&M. It will
                                                                                                                                                                                                                                                                                           be a mobile number that the workers can call
                                                                                                                                                                                                                                                                                           or SMS. The mobile number will be printed on
                                                                                                                                                                                                                                                                                           business cards that will be provided to the
                                                                                                                                                                                                                                                                                           workers during worker interviews.




Policy                                                                                                                                                                            Facility has no                                         Documentation review                             During our internal audits and discussions       10/1/2007                                                           completed            completed              Documentation   Policy posted and worker informed.                  visual inspection        Corrected: It was noted that policy regarding       Factory tour and documents review (Factory
                                                                                                                                                                                  written policy                                          and management                                   with the factory, H&M primarily encouraged                                                                                                                       review.                                                                                      prohibition of Harassment or Abuse was included     Rule Summary)
                                                                                                                                                                                  regarding                                               interview                                        the factory to develop and deepen its own                                                                                                                                                                                                                     in the "Factory Rule Summary" and posted in the
                                                                                                                                                                                  prohibition of                                                                                           confidential non-compliance system. We                                                                                                                                                                                                                        production area.
                                                                                                                                                                                  Harassment or                                                                                            support the factory in building a dialogue
                                                                                                                                                                                  Abuse.                                                                                                   system within the factory in order to have a
                                                                                                                                                                                                                                                                                           forum for the workers to communicate
                                                                                                                                                                                                                                                                                           grievances to the management. During our
                                                                                                                                                                                                                                                                                           audits we regularly check the function of
                                                                                                                                                                                                                                                                                           these systems. At all H&M audits we conduct
                                                                                                                                                                                                                                                                                           worker interviews. During these confidential,
                                                                                                                                                                                                                                                                                           one-to-one interviews, our contact information
                                                                                                                                                                                                                                                                                           is provided to the workers in order for them
                                                                                                                                                                                                                                                                                           to be able to contact with us to put forward
                                                                                                                                                                                                                                                                                           their grievances directly to us. We have
                                                                                                                                                                                                                                                                                           decided to establish a hotline in order to
                                                                                                                                                                                                                                                                                           ensure that the workers can put forward
                                                                                                                                                                                                                                                                                           confidential complaints directly to H&M. It will
                                                                                                                                                                                                                                                                                           be a mobile number that the workers can call
                                                                                                                                                                                                                                                                                           or SMS. The mobile number will be printed on
                                                                                                                                                                                                                                                                                           business cards that will be provided to the
                                                                                                                                                                                                                                                                                           workers during worker interviews.




Record Maintenance                                                     Employers will maintain written records of disciplinary   No record of disciplinary proceedings was                                                                Documentation review                             During our internal audits and discussions       10/1/2007                                                           pending              no progress.           n/a..           Although policy established, no disciplinary    management talk              Corrected: It was noted that disciplinary records   Documents Review (Disciplinary Records)
                                                                      actions taken.                                             kept by the factory.                                                                                     and management                                   with the factory, H&M primarily encouraged                                                                                                                                       measure has ever taken place, factory explained                              were maintained by factory and provided for
                                                                                                                                                                                                                                          interview                                        the factory to develop and deepen its own                                                                                                                                        that if the worker didn’t performed well during                              review in this audit.
                                                                                                                                                                                                                                                                                           confidential non-compliance system. We                                                                                                                                           the year, that would effect the ‘red pocket
                                                                                                                                                                                                                                                                                           support the factory in building a dialogue                                                                                                                                       money’ the boss usually gave to them at the end
                                                                                                                                                                                                                                                                                           system within the factory in order to have a                                                                                                                                     of Chinese year
                                                                                                                                                                                                                                                                                           forum for the workers to communicate
                                                                                                                                                                                                                                                                                           grievances to the management. During our
                                                                                                                                                                                                                                                                                           audits we regularly check the function of
                                                                                                                                                                                                                                                                                           these systems. At all H&M audits we conduct
                                                                                                                                                                                                                                                                                           worker interviews. During these confidential,
                                                                                                                                                                                                                                                                                           one-to-one interviews, our contact information
                                                                                                                                                                                                                                                                                           is provided to the workers in order for them
                                                                                                                                                                                                                                                                                           to be able to contact with us to put forward
                                                                                                                                                                                                                                                                                           their grievances directly to us. We have
                                                                                                                                                                                                                                                                                           decided to establish a hotline in order to
                                                                                                                                                                                                                                                                                           ensure that the workers can put forward
                                                                                                                                                                                                                                                                                           confidential complaints directly to H&M. It will
                                                                                                                                                                                                                                                                                           be a mobile number that the workers can call
                                                                                                                                                                                                                                                                                           or SMS. The mobile number will be printed on
                                                                                                                                                                                                                                                                                           business cards that will be provided to the
                                                                                                                                                                                                                                                                                           workers during worker interviews.




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         1
                                                                                                                                                                                                       IEM Findings                                                                                                                                Remediation                                                           [Status]                      Updates (28-Aug-2007)                                          Updates (21-Feb-2008)                                                                Third-Party Verification                                                             Company Verification Follow up
FLA Code/ Compliance issue           Country Law/Legal                  FLA Benchmark                                                 Non-compliance                                 Risk of Non-       Evidence of   If not corroborated,   Sources/Documentation    Notable       PC         PC Remediation plan                             Target            Factory Response          Company follow     Documenta Completed; Pending;   Company Follow up      Documentation          Company Follow up                             Documentation                  External Verification (Date)                    Documentation                                      Company Follow up (Cite date of planned or      Documentation
                                     Reference                                                                                                                                       compliance        Non-           explain why            used for corroborating   Features      Internal                                                   Completion        (Optional)                up (Cite date of   tion      On-going                                                                                                                                         Independent External Verification was                                                              follow up visit, if appropriate)
                                                                                                                                                                                                       compliance                                                     implemented   audit                                                      Date                                        follow up)                                                                                                                                                                    conducted by Level Works on March 27-28,
                                                                                                                                                                                                       (uncorroborate                                                 by Factory    findings                                                                                                                                                                                                                                                                             2008
                                                                                                                                                                                                       d)                                                             Management    (Optional)
                                                                                                                                                                                                                                                                      or Company

5. Nondiscrimination
No person will be subject to any discrimination in employment, including hiring, salary, benefits, advancement, discipline,
termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political
opinion, or social or ethnic origin.
Policy                               Art. 15 of PRC Labor Law:                                                                                                                       Facility has no                                         Documentation review                             During our internal audits and discussions       10/1/2007                                                                 completed            completed                Documentation        Policy posted and worker informed.                visual inspection          Corrected: It was noted that policy regarding         Factory tour and documents review (Factory
                                     Laborers shall not be                                                                                                                           policy or                                               and management                                   with the factory, H&M primarily encouraged                                                                                                                               review.                                                                                           Non-discrimination was included in the "Factory       Rule Summary)
                                     discriminated against in                                                                                                                        procedures                                              interview                                        the factory to develop and deepen its own                                                                                                                                                                                                                                  Rule Summary" and posted in the production
                                     employment due to their                                                                                                                         regarding Non-                                                                                           confidential non-compliance system. We                                                                                                                                                                                                                                     area.
                                     nationality, race, gender or                                                                                                                    discrimination.                                                                                          support the factory in building a dialogue
                                     religious belief.                                                                                                                                                                                                                                        system within the factory in order to have a
                                                                                                                                                                                                                                                                                              forum for the workers to communicate
                                                                                                                                                                                                                                                                                              grievances to the management. During our
                                                                                                                                                                                                                                                                                              audits we regularly check the function of
                                                                                                                                                                                                                                                                                              these systems. At all H&M audits we conduct
                                                                                                                                                                                                                                                                                              worker interviews. During these confidential,
                                                                                                                                                                                                                                                                                              one-to-one interviews, our contact information
                                                                                                                                                                                                                                                                                              is provided to the workers in order for them
                                                                                                                                                                                                                                                                                              to be able to contact with us to put forward
                                                                                                                                                                                                                                                                                              their grievances directly to us. We have
                                                                                                                                                                                                                                                                                              decided to establish a hotline in order to
                                                                                                                                                                                                                                                                                              ensure that the workers can put forward
                                                                                                                                                                                                                                                                                              confidential complaints directly to H&M. It will
                                                                                                                                                                                                                                                                                              be a mobile number that the workers can call
                                                                                                                                                                                                                                                                                              or SMS. The mobile number will be printed on
                                                                                                                                                                                                                                                                                              business cards that will be provided to the
                                                                                                                                                                                                                                                                                              workers during worker interviews.




6. Health and Safety
Employers will provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked
with, or occurring in the course of work or as a result of the operation of employer facilities.
Evacuation Procedure                                                    All applicable legally required or recommended elements Facility has no personnel with first aid                                                                                                                      The factory should ensure that in each           4/1/2007          Already Fixed Last                                      completed            completed                Documentation        Completed                                         Documentation              Corrected: It was noted that about 17 workers         Documents review (First Aid Certificates)
                                                                        of safe evacuation (such as posting of evacuation plans, certificate.                                                                                                                                                 workshop there are a sufficient number of                          year November.                                                                                        review.                                                                                           had been trained and qualified for first aid by local
                                                                        unblocked aisles/exits, employee education, evacuation                                                                                                                                                                staff present during working hours who are                                                                                                                                                                                                                                 hospital.
                                                                        procedures, etc.) shall be complied with and workers                                                                                                                                                                  trained in first aid.
                                                                        shall be trained in proper safety, first aid, and evacuation
                                                                        procedures.


Evacuation Procedure                 Art. 14.6 of PRC Fire              All applicable legally required or recommended elements Aisles are not marked with red lines or yellow                                                               Factory tour                                     H&M requires the factory to maintain safety in 12/1/2006           Already prescribed!                                     pending              no progress              n/a..                Completed                                         visual inspection          Corrected: It was noted that all aisles were          Factory Tour
                                     Prevention Law:                    of safe evacuation (such as posting of evacuation plans, arrows.                                                                                                                                                      the work premises according to local law and                                                                                                                                                                                                                               marked with yellow arrows.
                                     Keep the evacuations               unblocked aisles/exits, employee education, evacuation                                                                                                                                                                our Code of Conduct. The workers should be
                                     passages and exits clear.          procedures, etc.) shall be complied with and workers                                                                                                                                                                  able to easily evacuate the premises in case
                                     Set up the safety                  shall be trained in proper safety, first aid, and evacuation                                                                                                                                                          of emergency, and the building is to be
                                     demarcation in accordance          procedures.                                                                                                                                                                                                           considered as safe. The factory premises
                                     with national standards.                                                                                                                                                                                                                                 should be equipped with enough and well
                                                                                                                                                                                                                                                                                              maintained fire extinguishers. The workers
                                                                                                                                                                                                                                                                                              should at regular intervals receive training on
                                                                                                                                                                                                                                                                                              how to use the fire extinguishers.




PPE                                  Art. 37 of PRC Work Safety         Workers shall wear appropriate protective equipment        Workers in one sewing section did not wear                                                                Factory tour                                     The workers should be provided with relevant 12/1/2006             We already Give                                         on-going             progress: workers were   visual inspection.   Completed                                         visual inspection          Corrected: It was noted that all workers in the       Factory Tour
                                     Law: Production and                (such as gloves, eye protection, hearing protection,       ear plugs although noise was tested to be                                                                                                                  personal protective equipment depending on                         workers PPE for                                                              wearing                                                                                                                    sewing section were provided with ear plugs, all
                                     business units shall provide       respiratory protection, etc.) to prevent unsafe exposure above 85dBs.                                                                                                                                                 work process, along with education both                            keeping out the                                                                                                                                                                                         workers were wearing earplugs while working in
                                     their employees with PPE           (such as inhalation or contact with solvent vapors, noise,                                                                                                                                                            orally and in writing in their native language on                  Noise, but they                                                                                                                                                                                         the sewing section.
                                     that are up to national            dust, etc.) to hazardous elements including medical                                                                                                                                                                   how to use it.                                                     don't want to put
                                     standards or industrial            waste.                                                                                                                                                                                                                                                                                   them on. We will
                                     specifications, and they shall                                                                                                                                                                                                                                                                                              educated them to
                                     give instruction to their                                                                                                                                                                                                                                                                                                   put it on
                                     employees and see to it that
                                     they wear or use these PPE
                                     in accordance with the rules
                                     for their use.


Machinery Maintenance                Art. 32 of Regulation of        All production machinery and equipment shall be                  Five sewing machines were missing pulley                                                               Factory tour                                     The machines should be provided with              12/1/2006        Already Fixed last                                      completed            completed                visual inspection.   Completed                                         visual inspection          Not Corrected: It was noted that about 5 sewing Factory Tour                                       We will communicate this violation to the
                                     Factory Safety and Sanitary: maintained, properly guarded, and operated in a safe                guards and all sewing machines were missing                                                                                                             relevant protective equipment depending on                         year November.                                                                                                                                                                                          machines were missing pulley guards and all                                                        factory and require they
                                     Hazardous parts like            manner.                                                          needle guards.                                                                                                                                          work process, along with education both                                                                                                                                                                                                                                    sewing machines were missing needle guards.                                                        1: Set up a effective system for checking the
                                     mechanical belt, gear,                                                                                                                                                                                                                                   orally and in writing in their native language on                                                                                                                                                                                                                                                                                                                             use of necessary protective devices and;
                                     grinding wheel, electric saw,                                                                                                                                                                                                                            how to use it.                                                                                                                                                                                                                                                                                                                                                                2: Strengthen education for workers regarding
                                     belt pulley and flywheel, etc.,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        this issue. HM will follow up this issue in future
                                     shall be equipped with                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 audit.
                                     protective devices.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            Completion date: Nov-2008

Sanitation in Facilities             Art. 68 of PRC Factory             All facilities including factory buildings, toilets, canteens, No toilet paper or soap is available in the                                                           Factory tour                                     We require that the restrooms should be kept 12/1/2006             Due to the Limited                                      pending              no progress              visual inspection.   not supplied in time when toilet paper and soap   visual inspection          Corrected: It was noted that the factory had          Factory Tour
                                     Safety and Sanitary                kitchens, and clinics, shall be kept clean and safe and be bathrooms.                                                                                                                                                 and maintained clean. Soap should be                               diathesis of                                                                                                               used up.                                                                     provided toilet paper and soap in the bathrooms.
                                     Regulations: The factory           in compliance with applicable laws.                                                                                                                                                                                   available. We have suggested the factory to                        workers, our head
                                     should be equipped with                                                                                                                                                                                                                                  appoint one person to be responsible to                            officer will pay
                                     bathroom, toilet, dressing                                                                                                                                                                                                                               ensure that cleanliness is maintained in the                       attention to this; will
                                     room, retiring room and                                                                                                                                                                                                                                  restrooms on a daily basis.                                        educate them on
                                     female workers’ restroom if                                                                                                                                                                                                                                                                                                 during the
                                     needed.                                                                                                                                                                                                                                                                                                                     meetings.
                                     Restrooms and other
                                     facilities described above
                                     should be maintained clean
                                     and functional.


7. Freedom of Association and Collective Bargaining
Employers will recognize and respect the right of employees to freedom of association and collective bargaining.
Freedom of Association: FLA                                       FLA Comment: The Chinese constitution guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          The workers should be free to form
Comment                                                           Freedom of Association; however, the Trade Union Act                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      associations of their own choosing, and to
                                                                  prevents the establishment of trade unions independent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    bargain collectively. We don't accept any
                                                                  of the sole official trade union – the All China                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          disciplinary actions from the factory against
                                                                  Federation of Trade Unions (ACFTU). According to the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      workers who choose to peacefully and lawfully
                                                                  ILO, many provisions of the Trade Union Act are                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           organize or join an association. In addition,
                                                                  contrary to the fundamental principles of freedom of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      during our audits we put effort on building
                                                                  association, including the non-recognition of the right to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                effective communication channels between
                                                                  strike. As a consequence, all factories in China fall                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     workers and management.
                                                                  short of the ILO standards on the right to organize and
                                                                  bargain collectively. Recently, however, the
                                                                  government has introduced new regulations that could
                                                                  improve the functioning of the labor relations
                                                                  mechanisms. Trade Union Act of October 2001 does
                                                                  The Amended
                                                                  stipulate that union committees have to be
                                                                  democratically elected at members’ assemblies and
                                                                  trade unions must be accountable to their members.
                                                                  The trade union has the responsibility to consult with
                                                                  management on key issues of importance to their
                                                                  members and to sign collective agreements. It also
                                                                  grants the trade union an enhanced role in dispute
                                                                  resolution. In December 2003,the Collective Contracts
                                                                  Decree introduced the obligation for representative
                                                                  trade unions and employers to negotiate collective
                                                                  agreements, in contrast to the previous system of non-
                                                                  negotiated administrative agreements.

Policy                                                                                                                                                                               Facility has no                                         Documentation review                             The workers should be free to form            On-going             Already constituted,                                    pending              no progress              n/a                  Policy posted and worker informed.                visual inspection          Corrected: It was noted that policy related to        Factory tour and documents review (Factory
                                                                                                                                                                                     written policy                                          and management                                   associations of their own choosing, and to                         and posted on the                                                                                                                                                                                       Freedom of Association was included in the            Rule Summary)
                                                                                                                                                                                     related to                                              interview                                        bargain collectively. We don't accept any                          workshops wall.                                                                                                                                                                                         "Factory Rule Summary" and posted in the
                                                                                                                                                                                     Freedom of                                                                                               disciplinary actions from the factory against                                                                                                                                                                                                                              production area.
                                                                                                                                                                                     Association.                                                                                             workers who choose to peacefully and
                                                                                                                                                                                                                                                                                              lawfully organize or join an association.
                                                                                                                                                                                                                                                                                              During our audits and discussions with the
                                                                                                                                                                                                                                                                                              factory, we will encourage the factory to
                                                                                                                                                                                                                                                                                              develop a functioning dialogue system
                                                                                                                                                                                                                                                                                              between the workers and the management in
                                                                                                                                                                                                                                                                                              the factory.




8. Wages and Benefits
Employers recognize that wages are essential to meeting employees’ basic needs. Employers will pay employees, as a
base, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and will provide
legally mandated benefits.
Legal Compliance for                 Art. 51. of PRC Labor Law:         Workers will be paid for holidays and leave as required       Employees did not receive wages for legal                                                              Documentation review                             Paid national holidays, annual leave,           At next audit.     Reissued already                                        pending              no progress              n/a..                Payment for the mentioned three days              payrolls                   Not Corrected: It was noted that the employees        Management interview, Workers interview      We will communicate this violation with the
holiday/leave                        The employer shall pay             by law.                                                       holidays (May 1st to 3rd).                                                                             and management                                   maternity leave, sick leave and casual leave                                                                                                                                                  documented and checked.                                                      did not receive wages for official public holidays.   and documents review (Payroll & time         supplier and the factory and again stress the
                                     wages to laborers in                                                                                                                                                                                    interview                                        should be given to all workers according to                                                                                                                                                                                                                                                                                      Records)                                     importance of correct payment to the workers.
                                     accordance with law when                                                                                                                                                                                                                                 the law without discrimination. We will follow-                                                                                                                                                                                                                                                                                                                               We will keep monitoring this issue in future
                                     they have legal holiday, take                                                                                                                                                                                                                            up on this point at next audit.                                                                                                                                                                                                                                                                                                                                               audits.
                                     leaves during periods of
                                     marriage or mourning, and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Completion date: Nov-2008
                                     participate in social activities
                                     in accordance with law.




Timely Payment                       Article 7 of Interim            All compensation shall be paid in a timely manner.               [Workers interviewed] stated that once they                                                            Employee interview and                           All wages should be paid regularly, no longer    At next audit.    The adjustment                                          pending              no progress              n/a..                Salary paid at the end of the month, 25th-30th, if payrolls and management   Corrected: It was noted that all workers were         Workers Interview and documents review
                                     Regulation for the Payment                                                                       received the wage 7 to 8 days later than the                                                           management interview                             than 30 days after the work-period ended.                          between Bank and                                                                                                           payment should be delayed, the factory will        talk                      paid on time within 30 days after working period.     (Payroll Records)
                                     of Wages (Chapter V:                                                                             agreed payment day.                                                                                                                                     We will carry out an investigation to find the                     our Financial Dept                                                                                                         communicate with the workers.
                                     Wages):                                                                                                                                                                                                                                                  cause of this delay and discuss with the                           was not Smooth.
                                     Wages shall be paid on the                                                                                                                                                                                                                               factory how to adopt measures in order to                          This case will not
                                     date agreed between                                                                                                                                                                                                                                      ensure that future payments can be ensured                         happen again.
                                     employing units and laborers.                                                                                                                                                                                                                            to be correct and timely.
                                     If payday falls on a holiday or
                                     rest day, wages shall be paid
                                     in advance on the nearest
                                     workday. Wages shall be
                                     paid at least once per month.
                                     Employing units utilizing
                                     weekly, daily or hourly pay
                                     system may pay wages
                                     weekly, daily, hourly.




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2
                                                                                                                                                                         IEM Findings                                                                                                                            Remediation                                                      [Status]                      Updates (28-Aug-2007)                             Updates (21-Feb-2008)                                                     Third-Party Verification                                                    Company Verification Follow up
FLA Code/ Compliance issue   Country Law/Legal   FLA Benchmark                                               Non-compliance                               Risk of Non-    Evidence of   If not corroborated,   Sources/Documentation    Notable       PC         PC Remediation plan                         Target            Factory Response     Company follow     Documenta Completed; Pending;   Company Follow up      Documentation   Company Follow up                       Documentation       External Verification (Date)                    Documentation                             Company Follow up (Cite date of planned or      Documentation
                             Reference                                                                                                                    compliance     Non-           explain why            used for corroborating   Features      Internal                                               Completion        (Optional)           up (Cite date of   tion      On-going                                                                                                                 Independent External Verification was                                                     follow up visit, if appropriate)
                                                                                                                                                                         compliance                                                     implemented   audit                                                  Date                                   follow up)                                                                                                                                            conducted by Level Works on March 27-28,
                                                                                                                                                                         (uncorroborate                                                 by Factory    findings                                                                                                                                                                                                                                            2008
                                                                                                                                                                         d)                                                             Management    (Optional)
                                                                                                                                                                                                                                        or Company

Wage and Benefits Posting                        All notices that are legally required to be posted in the   Labor related laws or regulations were not                                                        Factory tour                                     We will encourage the factory to develop      12/1/2006        Already informed &                                 completed            completed              documentation   completed                               visual inspection   Not Corrected: It was noted that no labor related Factory Tour and management interview   As we encourage the factory to set up internal
                                                 factory work areas will be posted. All legally required     observed posted in the facility                                                                                                                    internal regulations in line with our Code of                  definitely on the                                                                              review.                                                                     laws or regulations were posted in the facility.                                          policies in line with our code of conduct and
                                                 documents, such as copies of legal code or law, will be                                                                                                                                                        Conduct and local legislation and to clearly                   workshops wall.                                                                                                                                                                                                                                                      local laws, we will communicate with the
                                                 kept at the factory and available for inspection                                                                                                                                                               communicate these to all workers, both orally                                                                                                                                                                                                                                                                                       supplier and the factory to make it clear that
                                                                                                                                                                                                                                                                and in writing posted on the wall.                                                                                                                                                                                                                                                                                                  this information must reach all workers. We will
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    follow up on this issue in future audits.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Completion date: Nov-2008




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 3
                                                                                                                                                                                                IEM Findings                                                                                                                                Remediation                                                         [Status]                      Updates (28-Aug-2007)                                       Updates (21-Feb-2008)                                                      Third-Party Verification                                                           Company Verification Follow up
FLA Code/ Compliance issue          Country Law/Legal               FLA Benchmark                                                Non-compliance                                  Risk of Non-    Evidence of   If not corroborated,   Sources/Documentation     Notable       PC         PC Remediation plan                           Target             Factory Response        Company follow     Documenta Completed; Pending;   Company Follow up      Documentation        Company Follow up                            Documentation        External Verification (Date)                    Documentation                                    Company Follow up (Cite date of planned or      Documentation
                                    Reference                                                                                                                                    compliance     Non-           explain why            used for corroborating    Features      Internal                                                 Completion         (Optional)              up (Cite date of   tion      On-going                                                                                                                            Independent External Verification was                                                            follow up visit, if appropriate)
                                                                                                                                                                                                compliance                                                      implemented   audit                                                    Date                                       follow up)                                                                                                                                                       conducted by Level Works on March 27-28,
                                                                                                                                                                                                (uncorroborate                                                  by Factory    findings                                                                                                                                                                                                                                                             2008
                                                                                                                                                                                                d)                                                              Management    (Optional)
                                                                                                                                                                                                                                                                or Company

9. Hours of Work
Except in extraordinary business circumstances, employees will (I) not be required to work more than the lesser of (a) 48
hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by the law of the country of
manufacture or, where the laws of such country will not limit the hours of work, the regular work week in such country plus
12 hours overtime; and (ii) be entitled to at least one day off in every seven day period.
Overtime Limitations                Art. 41 of PRC Labor Law:                                                                    In average, the overtime hours of the factory                                                        Time records and worker                           We require the factory to provide true          On-going          We will try our best                                  pending              no update              attendance records   further efforts needed                       attendance records   Not Corrected: It was noted that the overtime      Documents review (time records from           HM will continue to monitor its improvement
                                    Employees should not be                                                                      are 3.5 to 4 hours per day and 50 hours per                                                          interviews                                        documentation on salaries and working hours.                      to improved, and                                                                                                                                                                         hours for several sampled workers in the factory   February 2007 to March 2008)                  and require the factory set up a long term plan
                                    allowed to work more than                                                                    month, both of which exceed the legal                                                                                                                  The aim is to, through dialogue with the                          will advise factory                                                                                                                                                                      was 3 to 7.5 hours per day and 46 to 239 per                                                     regarding controlling OT in a sustainable
                                    three overtime hours per day                                                                 limitations established by PRC labor law.                                                                                                              factory, establish a system to reduce the                         to arrange the work                                                                                                                                                                      month, both exceeded the PRC labor law                                                           manner.
                                    and 36 overtime hours per                                                                                                                                                                                                                           overtime in a sustainable manner. The long-                       more smoothly !                                                                                                                                                                          requirements.
                                    month.                                                                                                                                                                                                                                              term aim is to, through improved production                                                                                                                                                                                                                                                                                                                 Completion date: May-2010
                                                                                                                                                                                                                                                                                        planning and efficiency, steadily reduce the
                                                                                                                                                                                                                                                                                        overtime hours in order to meet the legal limit
                                                                                                                                                                                                                                                                                        of overtime hours per month. In the short
                                                                                                                                                                                                                                                                                        term, we require the factory to make sure
                                                                                                                                                                                                                                                                                        that they can ensure that the workers may
                                                                                                                                                                                                                                                                                        have one day off per week, and reduce the
                                                                                                                                                                                                                                                                                        number of overtime hours in the weekdays.
                                                                                                                                                                                                                                                                                        H&M will carry out an unannounced audits in
                                                                                                                                                                                                                                                                                        order to monitor the development.




Overtime Limitations                                                Except in extraordinary business circumstances,              From January to August 2006, about 30% of                                                            Time records and worker                           We require the factory to provide true          On-going          We will try our best                                  pending              no update              attendance records   further efforts needed                       attendance records   Not Corrected: It was noted that the total weekly Documents review (time records from            HM will continue to monitor its improvement
                                                                    employees will (I) not be required to work more than the     the weeks' total working hours are over 60                                                           interviews                                        documentation on salaries and working hours.                      to improved, and                                                                                                                                                                         working hours for sampled workers were over 60 February 2007 to March 2008)                      and require the factory set up a long term plan
                                                                    lesser of (a) 48 hours per week and 12 hours overtime        hours per week and the maximum overtime                                                                                                                The aim is to, through dialogue with the                          will advise factory                                                                                                                                                                      hours (required by FLA benchmarks) and the                                                       regarding controlling OT in a sustainable
                                                                    or (b) the limits on regular and overtime hours allowed by   hours per week reached 74 hours in                                                                                                                     factory, establish a system to reduce the                         to arrange the work                                                                                                                                                                      longest one was 94 hours in January 2008                                                         manner.
                                                                    the law of the country of manufacture or, where the laws     February, which is not in compliance FLA                                                                                                               overtime in a sustainable manner. The long-                       more smoothly !                                                                                                                                                                          (factory peak months).
                                                                    of such country will not limit the hours of work, the        standards.                                                                                                                                             term aim is to, through improved production                                                                                                                                                                                                                                                                                                                 Completion date: May-2010
                                                                    regular work week in such country plus 12 hours                                                                                                                                                                     planning and efficiency, steadily reduce the
                                                                    overtime; and (ii) be entitled to at least one day off in                                                                                                                                                           overtime hours in order to meet the legal limit
                                                                    every seven day period. An extraordinary business                                                                                                                                                                   of overtime hours per month. In the short
                                                                    circumstance is a temporary period of extra work that                                                                                                                                                               term, we require the factory to make sure
                                                                    could not have been anticipated or alleviated by other                                                                                                                                                              that they can ensure that the workers may
                                                                    reasonable efforts.                                                                                                                                                                                                 have one day off per week, and reduce the
                                                                                                                                                                                                                                                                                        number of overtime hours in the weekdays.
                                                                                                                                                                                                                                                                                        H&M will carry out unannounced audits in
                                                                                                                                                                                                                                                                                        order to monitor the development.




Rest Day                            Art. 38 of PRC Labor Law:       Except in extraordinary business circumstances,            Production employees worked 20 consecutive                                                             Time records and worker                           We require the factory to provide true          On-going          We will try our best                                  pending              no update              attendance records   further efforts needed                       attendance records   Not Corrected: It was noted that most sampled      Documents review (time records from           HM will continue to monitor its improvement
                                    Employer shall guarantee        employees will (I) not be required to work more than the days without one day off in July and August                                                              interviews                                        documentation on salaries and working hours.                      to improved, and                                                                                                                                                                         workers worked 30 consecutive days in              February 2007 to March 2008)                  and require the factory set up a long term plan
                                    that its laborers have at least lesser of (a) 48 hours per week and 12 hours overtime      2006.                                                                                                                                                    The aim is to, through dialogue with the                          will advise factory                                                                                                                                                                      December 2007 and January 2008.                                                                  regarding controlling OT in a sustainable
                                    one day off per week.           or (b) the limits on regular and overtime hours allowed by                                                                                                                                                          factory, establish a system to reduce the                         to arrange the work                                                                                                                                                                                                                                                                       manner.
                                                                    the law of the country of manufacture or, where the laws                                                                                                                                                            overtime in a sustainable manner. The long-                       more smoothly !
                                                                    of such country will not limit the hours of work, the                                                                                                                                                               term aim is to, through improved production                                                                                                                                                                                                                                                                                                                 Completion date: May-2010
                                                                    regular work week in such country plus 12 hours                                                                                                                                                                     planning and efficiency, steadily reduce the
                                                                    overtime; and (ii) be entitled to at least one day off in                                                                                                                                                           overtime hours in order to meet the legal limit
                                                                    every seven day period. An extraordinary business                                                                                                                                                                   of overtime hours per month. In the short
                                                                    circumstance is a temporary period of extra work that                                                                                                                                                               term, we require the factory to make sure
                                                                    could not have been anticipated or alleviated by other                                                                                                                                                              that they can ensure that the workers may
                                                                    reasonable efforts.                                                                                                                                                                                                 have one day off per week, and reduce the
                                                                                                                                                                                                                                                                                        number of overtime hours in the weekdays.
                                                                                                                                                                                                                                                                                        H&M will carry out an unannounced audits in
                                                                                                                                                                                                                                                                                        order to monitor the development.




10. Overtime Compensation
In addition to their compensation for regular hours of work, employees will be compensated for overtime hours at such
premium rate as is legally required in the country of manufacture or, in those countries where such laws will not exist, at a
rate at least equal to their regular hourly compensation rate.
OT Compensation                     Art.13 of Interim Regulation The factory shall comply with applicable law for premium Piece-workers receive 100% of the regular                                                                   Documentation review                              When working overtime, the workers should        On-going         will try to reach the                                 completed            completed              payrolls.            completed                                    payrolls.            Not Corrected: It was noted that piece-rated        Management interview, workers interview and According to internal follow up audit and         payrolls and
                                    on the Payment of Wages:       rates for overtime compensation.                       wage for all OT hours, which violates the PRC                                                               and management                                    be compensated according to the legal                             legal requirement.                                                                                                                                                                       workers were paid only 100% of normal piece         documents review ( Payroll records from     communication with the factory, it was found      attendance
                                    Piece workers who are                                                                 Labor laws.                                                                                                 interview                                         overtime rates. We will initiate a dialogue with                                                                                                                                                                                                           rate for all overtime hours, which violates the PRC February 2007 to January 2008)              that some workers were on piece rate, who         records
                                    required to work overtime                                                                                                                                                                                                                           the factory on how to ensure that overtime                                                                                                                                                                                                                 Labor Law.                                                                                      were paid, firstly, 100% of piece rate for both
                                    after they finished production                                                                                                                                                                                                                      compensation will be paid to the workers in                                                                                                                                                                                                                                                                                                                normal and OT working hours; then if,
                                    quotas must be paid no less                                                                                                                                                                                                                         the future.                                                                                                                                                                                                                                                                                                                                                compared with hourly rate, workers' piece rate
                                    than 150% (regular work                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        wages were lower than the hourly rate one,
                                    days), 200% (days of rest),                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    balance was paid to compensate all workers
                                    or 300% (on statutory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          for all working hours (including legal OT rates).
                                    holidays) of the normal piece-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 In this case, workers were not only paid the
                                    rate during regular working                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    minimum wage but also OT compensation,
                                    hours.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         which is actually in line with China Labor
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Contract Law.


Miscellaneous




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