1. Conflict Minerals
Vendor Training

2. Conflict Minerals Background
A new federal law imposes requirements related to “Conflict Minerals.” The law imposes reporting requirements on publicly - traded U.S. companies to identify the source of all Conflict Minerals in their products and report in an annual Conflict Minerals Report.
Like “blood diamonds”, Conflict Minerals are being used to fund armed conflict in the Congo.

3. Conflict Minerals Purpose of Legislation
Reduce exploitation and trade in Conflict Minerals by requiring affected U.S. companies to review their entire supply chain and disclose use of conflict minerals
Law does not prohibit use of Conflict Minerals
“Name and Shame” legislation – requires companies to publicly disclose if they use “conflict minerals”

4. Conflict Minerals Timetable
August 22, 2012 – Final Rules adopted
January 1, 2013 – Rules apply to conflict minerals used after this date
May 31, 2014 – First Conflict Minerals Report must be filed based on Conflict Minerals used in 2013
May 31, 2016 – Conflict Minerals Report must be audited

5. Companies Covered by Law
Conflict Minerals
Companies Covered by Law
All U.S. companies whose stock is traded on a stock exchange (“public companies”).
Ripple effect to suppliers throughout the supply chain, even if suppliers are not public companies or located in the U.S.

6. Conflict Minerals Covered by Law
Cassiterite – (Tin) Example: solder
Columbite – Tantalite (Tantalum) Example: electronics
Wolframite – (Tungsten) Example: electrodes
Gold – Example: electronics
Surprise! Components may contain minerals that you would never suspect (some plastics contain tin).
A. O. Smith products contain each of these minerals.

7. Conflict Minerals Covered Countries
The Democratic Republic of the Congo (“DRC”)
Angola
Burundi
Central African Republic
Republic of Congo
Rwanda
South Sudan
Tanzania
Uganda
Zambia

8. Conflict Minerals
Basic Obligation
Report Conflict Minerals if necessary for the functionality of a product manufactured or contracted to be manufactured by the Company
For AOS, direct spend suppliers covered; indirect spend are not

9. Conflict Minerals Three Step Process
Determine applicability
Conduct “reasonable country of origin inquiry”
Exercise due diligence on supply chain and file an audited Conflict Minerals Report

10. Conflict Minerals Guidance on How to Apply This Law
Applies to products manufactured by a U.S. Company even if production is overseas.
(Examples – China suppliers to Nanjing plant)
No exception for small amounts of Conflict Minerals
Products must “actually contain” Conflict Minerals. Minerals used as a catalyst that does not remain in the product, or in tools or equipment excluded.
Requires a company to make a reasonable good faith effort to inquire as to source of conflict minerals

11. A. O. Smith Plans for Compliance
Conflict Minerals
A. O. Smith Plans for Compliance
Step 1 – Survey our supply base utilizing the reporting template of the Electronic Industry Citizenship Coalition (“EICC”) (see following slide)
Free web based system allows users to download, complete Excel spreadsheet with information and send to AOS
Step 2 – Track and create reports
Step 3 – Self Assessment of Supplier information
Step 4 – Supplier Audits (to be completed at later date)