While all of IFC’s Performance Standards are applicable to this investment, IFC’s Environmental and Social (E&S) due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards: - PS 1: Social and Environmental Assessment and Management System; - PS 2: Labor and Working Conditions; - PS3: Pollution Prevention and Abatement; and - PS4: Community Health, Safety and Security The expansion at the existing facilities will take place on available land on Company’s existing premises. The new facility in Pune is being developed in an existing industrial structure acquired on lease. Land required for the future expansions and/or new facilities shall be procured in industrial areas close to the OEM manufacturers on willing-buyer willing seller basis and hence PS5 (Land Acquisition and Involuntary Settlement) does not apply. All the facilities are located in well developed urban/industrial areas and hence issues related to Biodiversity Conservation and Natural Resources Management (PS6) Indigenous Peoples (PS7) or Cultural Heritage (PS8) are not encountered.

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines. Environmental and social impacts associated with this project include: environmental and social management systems; HR policies and practices - including those for contract labor; management of occupational health and safety; resource consumption (water, energy); management of air emissions and liquid effluent discharges; solid and hazardous waste minimization and management; emergency management plans and community engagement, safety and security. During the appraisal Craftsman has demonstrated the capacity and the resources to implement comprehensive environmental, health, safety and quality management systems in line with industry good practices and consistent with IFC Performance Standards and relevant EHS guidelines.

The Company has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with the environmental and social requirements including: the host country laws and regulations; IFC’s Performance Standards; and the relevant environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the Company is summarized in the paragraphs that follow. PS 1: Social and Environmental Assessment and Management System - Environmental & Social Assessment: Expansion of Craftsman’s facilities primarily involved installation of new machines and construction of some new sheds at its existing premises. Local regulations did not require a formal EIA study for these facilities. However, Craftsman has procured all the necessary authorizations and clearances related to environment and safety from the local regulatory agencies and complies with the specified conditions therein (e.g. waste treatment facilities, monitoring etc.). In addition, Craftsman is currently undertaking a thorough review of the environmental aspects and impacts from its operations as a part of its environmental management system (EMS) described below. - Management Systems: Craftsman has articulated its Quality and EHS policies which are widely disseminated across all its facilities. All its operational facilities (except the foundry) are certified for ISO9001, TS 16949 (international quality management standard for the automotive industry) and AS9100 (quality management system standard for the aerospace industry). Also, the Company has started working towards the certification for ISO14001 based EMS. A full time team of 4 persons is constituted for this task, initial training has been completed and the documentation for EMS has been developed. Craftsman expects to achieve ISO14001 certification for all its facilities by end-2010. Accordingly, Craftsman shall submit to IFC the copies of EMS certification for its facilities by March 2011. - Organization: Craftsman has a dedicated team of professionals to oversee the environment and safety matters. At the corporate level, environment, health, safety (EHS) management is the responsibility of the General Manager (Quality) while at each facility the concerned person is under the respective HR department, and works closely with the corporate EHS team. In addition, an EMS coordinator has been assigned at each facility, to work with the corporate team for the development and implementation of management systems (i.e., ISO9001, TS16949 and AS9100). Going forward, the Company may reorganize the EHS functions as necessary, for an effective implementation of ISO14001 EMS and continual improvement. - Monitoring & Reporting: Craftsman has a formal EHS monitoring program in place for its operations based on local regulatory and ISO reporting requirements. Craftsman shall review its monitoring program and update as necessary in line with the IFC’s relevant environmental, health and safety guidelines and reporting requirements, as a condition of disbursement. PS 2: Labor and Working Conditions - Working Conditions: Craftsman has over 900 employees across all its facilities, including approx. 200 contract employees for non-critical activities such as loading, unloading, cleaning and canteen service. Craftsman has a formal and well documented HR policy and procedures manual, which articulates working conditions including working hours, salaries and allowances, leave rules, travel rules, grievance and internal communication systems, non-discrimination, performance appraisal employee recognition, safety etc. Each employee has an intranet account which provides access to all the HR related information. The HR policy and practices apply to both regular as well as contract employees. - Training All new employees undergo mandatory induction training which among others, covers aspects related to safety and quality. In addition, Craftsman has a training calendar based on the training needs of different employees and consists of internal, external and on-the-job trainings. The Company has a unique and structured program for its staff for progression and promotions over a five-year time horizon. Nearly 85% of the current managerial and supervisory positions are filled as a result of this program and hence staff turnover at Craftsman is low. - Occupational Health and Safety: Craftsman adheres to the national industrial safety standards for its workplace. It has a formal safety management team in addition to a number of trained EHS professionals at each facility to manage the day-to-day safety issues. Workers (including contract) are provided appropriate and personal protective equipment (PPE) commensurate with the nature of potential safety risks, which include shoes, gloves, ear plugs/muffs, goggles and masks. Craftsman requires through the contract clauses and regular monitoring that the PPE is provided to the staff of its contractors (especially construction contractors). Adequate first-aid and fire-fighting equipment is available at all facilities. Unit 3 in Coimbatore (the biggest among all the Craftsman facilities) has its own ambulance for any medical emergencies. Craftsman conducts regular safety briefings, trainings and awareness campaigns for its staff. Extensive safety signage is in place in all its facilities and an Accident Register is maintained in the security office. There have been no fatal or major accidents at any of its facilities in the past. Craftsman operates a small aluminum foundry, where molten metal is carried by the workers for casting. Appropriate safety precautions and PPE is used by the workers in the foundry. Moreover, Craftsman has plans to refurbish the existing foundry in near future, which would eliminate such potentially risky operation. Craftsman shall monitor noise levels, workplace air quality, temperature, and lighting levels to ensure that they comply with national and World Bank Group EHS guidelines for workplace environment. PS3: Pollution Prevention and Abatement Craftsman’s operations involve primarily machining and a small operation of an aluminum foundry. For machine shops, electricity procured from the grid is the major source of power and diesel generator sets are installed as backup power at all facilities. The foundry uses diesel as fuel. Water is primarily used for cooling and domestic and is sourced from respective municipal or industrial authorities. Craftsman has a system for regular monitoring of resource and water consumption and makes conscious efforts to minimize its resource consumption. For instance, with the selection of a very efficient compressor system, it has achieved 8-12% savings in electricity consumption over more conventional equipment. Similarly, by installing separate transformers for the lighting system (which accounts for 10% of total power consumption), Craftsman has achieved significant energy savings. The Company is now planning to undertake an energy audit of its facilities and develop an energy conservation program. For its new facility near Chennai which will be operational soon, the Company has implemented rainwater harvesting and is exploring the possibility of solar street lighting. Very small quantity of process wastewater is generated (coolant/oil and water mixture), which undergoes on-site primary treatment at each facility before disposal. Domestic wastewater is discharged to the municipal sewers. The main source of air emissions for Craftsman’s facilities are the diesel generators, which are only used as backup power supply and thus the emissions are not significant. All diesel generators are provided with acoustic enclosure and stacks. To control the fugitive emissions from the process and maintain indoor air quality, the powder coating operation has a cartridge system to collect dust, while the chimneys/stacks for phosphating operation (for surface treatment) and the aluminum foundry have scrubbers installed to treat the emissions and fumes containing volatile organic compounds and other hazardous air pollutants. The wastewater from the scrubber system is treated in the ETP. Process solid waste comprises mainly metal scrap, which is sold to scrap dealers. Waste oil and sludge from the ETP is sent to the government authorized hazardous waste treatment and disposal facilities. PS4:– Community Health, Safety and Security Transport of most of the raw materials and final products is by truck however the volume of this traffic is quite limited. Moreover, as most the Company’s facilities are located in industrial areas linked to well established road networks, the Company’s transport does not impact nearby communities. Emergency response teams comprising members from electrical, maintenance and first-aid teams have been established at each facility. A detailed On-site Emergency Response plan has been developed as a part of its EMS manual and is being rolled out across the various departments to minimize the risks to the neighboring communities. The Company contracts nationally certified security agencies for surveillance and protection of its facilities. On the basis of the above information, and by implementing the Environmental and Social Action Plan it is concluded that the Project will be operated in compliance with IFC’s Performance Standards and relevant environmental, health and safety guidelines.

Craftsman has been actively involved in Corporate Social Responsibility activities for the society at large. These activities include financial assistance for medical treatment of needy community members, donations to the youth welfare associations, organizing tree plantation activities etc. For its Unit No. 1 in Coimbatore which is located in the semi-residential area, Craftsman closely engages with its nearby residents. All the community members have access to the management in corporate office any time, and there is a regular two-way communication and ongoing joint initiatives. For instance, when concerns were raised by the neighboring community regarding the parking space in the neighborhood, Craftsman rented a parking lot in the near vicinity for parking the vehicles of the company and its staff, for the convenience of the neighboring community. Craftsman is currently working with the residents’ association and local government on a solid waste segregation project. In order to continue and further enhance the relationship with neighboring community, Craftsman will develop a community engagement program and a formal and documented disclosure and grievance mechanism, for the nearby community to address any concerns related to its operations. Similar appropriate EHS related information disclosure and grievance mechanism shall be implemented for its facilities located in the industrial zones and for any future facilities.

Craftsman will locally disclose this ESRS and the ESAP at the following address: Craftsman Automation Private Limited 15 LML Colony, Ammankulan Road, Coimbatore – 641 037 Tel: +91-422-3021000, 6615100 Fax: +91-422-6615156Email: mohan@craftsmanautomation.com, thiyagaraj@craftsmanautomation.com, kumaravel@craftsmanautomation.com