SARBANES-OXLEY ACT AND RELATED SEC RULES Implications Outside the U.S

1. SARBANES-OXLEY ACT AND RELATED SEC RULESImplications Outside the U.S Antonia E. Stolper Grupo Empresarial Antioque�o. February 2006

2. 2/23/2012 2 Overview Three years of Sarbanes-Oxley and related SEC and NYSE/NASDAQ rules New disclosure and corporate governance requirements implemented in stages substantially complete for U.S. companies most provisions applicable to foreign private issuers are also in place however Section 404 is not yet effective for foreign private issuers

3. 2/23/2012 3 Overview (continued) How has Sarbanes-Oxley impacted foreign private issuers Has Sarbanes-Oxley resulted in foreign private issuers delisting or looking to do IPOs elsewhere? Have foreign private issuers had difficulty complying? What has been the cost of compliance? In our experience, Sarbanes-Oxley requirements have not turned out to be the draconian measures some had predicted However, the full impact of Section 404 remains to be seen Section 404 already in place for U.S. issuers Perhaps the most costly part of Sarbanes-Oxley compliance

4. 2/23/2012 4 Topics for Discussion Background of the Act and Applicability to Foreign Private Issuers Implications for Foreign Private Issuers Corporate Governance and Corporate Responsibility Disclosure Controls and Procedures and Internal Controls Internal Control Report; Auditor�s Attestation Auditor Independence and Oversight Additional Disclosure Obligations

5. 2/23/2012 5 Topics for Discussion Considerations for Directors and Officers CEO / CFO Certifications CEO and CFO disgorgements Director and Officer Bars Document Destruction Pension Plan Blackout Trading Restrictions Signature of CEO on Tax Returns Documentation for Foreign Private Issuers

6. 2/23/2012 6 Background and Status Legislative and Regulatory Response Applicability to Non-U.S. Companies Current Status of SEC Rulemaking

7. 2/23/2012 7 Origin and Context of U.S. Corporate Governance Initiatives Aimed at preventing, or at least exposing, future corporate abuses by U.S. publicly held companies, and restoring investor confidence by providing mandatory disclosure standards, more severe penalties, etc.

8. 2/23/2012 8 Legislative and Regulatory Response Sarbanes-Oxley Act of 2002 Signed into law by President Bush on July 30, 2002 Act reflects sweeping reforms Corporate responsibility � codifies previous voluntary best practices Auditor oversight and independence � establishment of the Public Company Accounting Oversight Board (�PCAOB�) as a new administrative body with authority over public accounting firms Enhanced disclosure and SEC review Additional criminal and civil liabilities and sanctions, and enhanced enforcement powers for the SEC

9. 2/23/2012 9 Legislative and Regulatory Response Went beyond amending the securities laws and also resulted in amendments to criminal, bankruptcy and Employee Retirement Income Security Act of 1974 (�ERISA�) statutes SEC rulemaking Certain provisions of Sarbanes-Oxley directed the SEC to propose and adopt rules by specified deadlines NASDAQ and NYSE rulemaking NASDAQ and NYSE also proposed amendments to their listing requirements, primarily in regard to corporate governance

10. 2/23/2012 10 Legislative and Regulatory Response Criticized by some that it was drafted and enacted in haste (only 29 days after the Worldcom scandal became public) and as a knee-jerk reaction to the public outcry over the scandals � Oxley was quoted as saying �Summary executions would get about 85 votes in the Senate right now� Passed with near unanimous vote Some provisions effective upon enactment on July 30, 2005; others implemented by administrative action (mostly by the SEC) under an aggressive timetable Left many uncertainties, some of which still need to be clarified by the SEC Initial estimates for required time and money for compliance were grossly understated in the Act (5 hours and US$91,000)

11. 2/23/2012 11 Applicability to Non-U.S. Companies Act applies to any issuer that has: securities listed for trading in the U.S. securities registered with the SEC or is required to file reports under the Exchange Act filed a registration statement under the Securities Act that is not yet effective Unlike other initiatives of the SEC and the U.S. securities exchanges, Sarbanes-Oxley and related SEC rules do not afford a blanket exemption for non-U.S. companies In fact, there is not a single reference to foreign issuers anywhere in the Act

12. 2/23/2012 12 Applicability to Non-U.S. Companies However, SEC rules impose different requirements for U.S. and non-U.S. companies in line with long standing principles Moreover, the SEC has made certain accommodations for some country law or practice This presentation will not address provisions of the Act that relate only to U.S. companies, such as amendments to Section 16 of the Exchange Act for disclosure of purchases and sales of securities by directors and officers and Form 8-K filings, however it will discuss some of the stock exchange corporate governance reforms because these are implications for FPLs.

13. 2/23/2012 13 Current Status of SEC Rulemaking Sarbanes-Oxley SEC has already adopted most of rules required by Sarbanes-Oxley SEC will continue to adopt additional rules to implement Sarbanes-Oxley Section 404 and related rules the key requirements not yet applicable to foreign private issuers applies for first fiscal year ending after July 15, 2007 however, most foreign private issuers have at least begun the process of planning for Section 404 compliance

14. 2/23/2012 14 Implications for Foreign Private Issuers Corporate Governance and Corporate Responsibility Disclosure Controls and Procedures and Internal Controls Internal Control Report; Auditor�s Attestation Auditor Independence and Oversight Additional Disclosure Obligations

15. 2/23/2012 15 Disclosure Controls and Procedures Each reporting company must maintain disclosure controls and procedures designed to ensure that information required to be disclosed in SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC�s rules

16. 2/23/2012 16 Disclosure Controls and Procedures Each reporting company must maintain disclosure controls and procedures designed to ensure that reporting of information to the markets is timely, accurate and reliable Each reporting company should develop a process that is consistent with its business, internal management and supervisory practices

17. 2/23/2012 17 Disclosure Controls and Procedures SEC recommends that each reporting company appoint a disclosure committee to consider the materiality of information and to determine disclosure obligations on a timely basis Committee would report to the CEO and CFO, who bear express responsibility for designing, establishing, maintaining, reviewing and evaluating the company�s disclosure controls and procedures CEO and CFO participation in disclosure is critical

18. 2/23/2012 18 Disclosure Controls and Procedures New Item 15 in Form 20-F requires disclosure of: Conclusions of the CEO and CFO regarding the effectiveness of the company�s disclosure controls and procedures based on their evaluation of the controls and procedures within 90 days of the filing date of the report Whether or not there have been any significant changes in internal controls or other factors that could significantly affect these controls after the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses

19. 2/23/2012 19 Disclosure Controls and Procedures Internal communications and other procedures must operate so that important information flows to the appropriate collection and disclosure points in a timely manner.

20. 2/23/2012 20 Internal Control Report; Auditor�s Attestation For purposes of Section 404 of Sarbanes-Oxley, the SEC defines �internal control� as �internal control over financial reporting� [A] process designed by, or under the supervision of, the issuer�s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer�s board of directors, management and other personnel, to provide reasonable assurance that the company�s: transactions are properly authorized assets are safeguarded against unauthorized or improper use and transactions are properly recorded to permit preparation of financial statements in accordance with GAAP

21. 2/23/2012 21 Internal Control Report; Auditor�s Attestation Important aspects of internal control include: Maintenance of accounting records (which include internal memoranda and corporate reports) to accurately reflect transactions and dispositions of assets of the issuer Timely recording of transactions to permit preparation of financial statements in accordance with GAAP and ensure that receipts and expenditures are made only in accordance with proper authorization Prevention and detection of fraud, including unauthorized acquisition, use or disposition of the issuer�s assets that could have a material effect on the financial statements

22. 2/23/2012 22 Internal Control Report; Auditor�s Attestation The SEC definition of �internal control over financial reporting� does not cover compliance with laws and regulations, other than those that directly affect financial reporting, e.g., tax laws and the SEC�s regulations on financial reporting and disclosure under Regulation S-X and Regulation S-K

23. 2/23/2012 23 Internal Control Report; Auditor�s Attestation Each reporting company must include in its Form 20-F a management�s internal control report including: A statement of management�s responsibility for establishing and maintaining adequate internal control over financial reporting for the company A statement identifying the internal control framework used by management to evaluate the effectiveness of the company�s internal control over financial reporting Management�s assessment of the effectiveness of the company�s internal control over financial reporting as of the end of the company�s most recent fiscal year, including a statement as to its effectiveness A statement that the auditor has issued an attestation report on management�s assessment

24. 2/23/2012 24 Internal Control Report; Auditor�s Attestation Management may not qualify its conclusions in the internal control report by stating that the company�s internal control over financial reporting is effective, subject to certain qualifications or exceptions Management may not conclude that the company�s internal controls are effective if a material weakness has been identified If a material weakness is identified, and management concludes that internal control over financial reporting is not effective, it may still be able to conclude that its disclosure controls are effective (depending on the type of material weakness involved � not all controls over financial reporting affect disclosure, such as a requirement for two signatures for disbursements over a certain amount)

25. 2/23/2012 25 Internal Control Report; Auditor�s Attestation For purposes of preparing their attestation report, PCAOB Auditing Standard No. 2 requires the independent auditors to evaluate the company�s: Risk assessment processes Control environment, including the �tone at the top� Control activities, including compliance with laws and regulations Information and communication processes, including disclosure controls Monitoring process, including the effectiveness of the internal auditing function and effectiveness of the audit committee

26. 2/23/2012 26 Internal Control Report; Auditor�s Attestation The auditor providing the attestation report on internal controls must also audit the company�s financial statements The external auditor�s attestation report must be included in the Form 20-F, but it is technically �furnished,� and not �filed,� for purposes of liability under the securities laws If the auditor�s attestation report concludes that the company�s internal controls over financial reporting are not effective, the auditor may still be able to perform sufficient procedures to give a clean audit opinion on the financial statements

27. 2/23/2012 27 Auditing Standard No. 2 Material Weaknesses Restatement of previously issued financial statements to reflect the correction of a misstatement (due to error or fraud, not due to a change in accounting principle) Identification by the auditor of a material misstatement in financial statements in the current period that was not initially identified by the company�s internal control over reporting. (This is a strong indicator of a material weakness even if management subsequently corrects the misstatement.) Oversight of the company�s external financial reporting and internal control over financial report by the company�s audit committee is ineffective. Note: Rules for Auditor attestation are in the PCAOB Auditing Standard No. 2�what is required is an audit of a company�s internal controls and the goal is to determine whether there are any material weaknesses. I have detailed here what material weaknesses are because they may surprise you. They did me.Note: Rules for Auditor attestation are in the PCAOB Auditing Standard No. 2�what is required is an audit of a company�s internal controls and the goal is to determine whether there are any material weaknesses. I have detailed here what material weaknesses are because they may surprise you. They did me.

28. 2/23/2012 28 Auditing Standard No. 2 Identification of fraud of any magnitude on the part of senior managment. Significant deficiencies that have been communicated to management and the audit committee remain uncorrected after some reasonble period of time. For complex entitites in highly regulated industries, an ineffective regulatory compliance function The internal audit function of the risk assessment functon is ineffective at the company for which such a function needs to be effective for the company to have an effective monitoring of risk assessment component such as for very large or highly complex companies. An ineffective control environment SEC held roundtable on April 13, 2005 �strong demand from market place to get auditors to back off Small business affected discouraging new US listing by foreign firms Notes: What does this means for companies? We actually don�t know yet but there are a couple of issues that auditors that I have spoken to are focusing on. One is the audit committee � the auditors are preparing detailed agenda for the audit committees � audit committees must ask questions, understand the company and be fully engaged. The auditors are also recommending to boards and directors that sensitive issues � choice of policy; critical accounting estimates; commitments and contingencies; off-balance sheet items � be addressed with the audit committee and the auditors before the audit or limited review � anything the auditors have to fix later could be a reportable event even if the company readily accepts the auditors� changes. Focus on risk, both in the company�s internal controls and the company�s accounting policies � every judgment call is now subject to second guessing.Notes: What does this means for companies? We actually don�t know yet but there are a couple of issues that auditors that I have spoken to are focusing on. One is the audit committee � the auditors are preparing detailed agenda for the audit committees � audit committees must ask questions, understand the company and be fully engaged. The auditors are also recommending to boards and directors that sensitive issues � choice of policy; critical accounting estimates; commitments and contingencies; off-balance sheet items � be addressed with the audit committee and the auditors before the audit or limited review � anything the auditors have to fix later could be a reportable event even if the company readily accepts the auditors� changes. Focus on risk, both in the company�s internal controls and the company�s accounting policies � every judgment call is now subject to second guessing.

29. 2/23/2012 29 Internal Control Report; Auditor�s Attestation To ensure independence: The auditors are permitted to provide only limited assistance to management in documenting internal controls and making recommendations for changes The PCAOB requires audit committee pre-approval for all internal control-related services, whether or not they are classified as �audit� or �non-audit� services

30. 2/23/2012 30 Establishment of and Role of PCAOB Establishment of Public Company Accounting Oversight Board PCAOBUS � Auditing the Auditors Now establishes auditing standards Global impact on the regulation of auditors Note: I want to stop here for just a minute because I get the sense that this new regulatory body, set up as a not-for-profit corporation, will have a big impact. It will be responsible both for promulgating new accounting standards and for supervising the auditors. [There is a concept release out, pursuant to a mandate from Sarbanes-Oxley, to move the U.S. from a rules based accounting regime to a principles based accounting regime on the theory that the rules based regime has resulted in highly technical accounting decisions by companies that at the end of the day, hide reality and that somehow principles based � which in theory International Financial Reporting Standards (IFRS) are, will result in better statements at the same time maintaining comparability � I�m skeptical about what this is going to mean in the end but I am sure it is a discussion you are having here as local accounting standard setters struggle with the US and IFRS standards.] Note: I say this because we have already seen auditors requiring companies that report in the U.S. to waive, to the fullest extent permitted by law, any confidentiality of their audit-related work papers. Note: I want to stop here for just a minute because I get the sense that this new regulatory body, set up as a not-for-profit corporation, will have a big impact. It will be responsible both for promulgating new accounting standards and for supervising the auditors. [There is a concept release out, pursuant to a mandate from Sarbanes-Oxley, to move the U.S. from a rules based accounting regime to a principles based accounting regime on the theory that the rules based regime has resulted in highly technical accounting decisions by companies that at the end of the day, hide reality and that somehow principles based � which in theory International Financial Reporting Standards (IFRS) are, will result in better statements at the same time maintaining comparability � I�m skeptical about what this is going to mean in the end but I am sure it is a discussion you are having here as local accounting standard setters struggle with the US and IFRS standards.] Note: I say this because we have already seen auditors requiring companies that report in the U.S. to waive, to the fullest extent permitted by law, any confidentiality of their audit-related work papers.

31. 2/23/2012 31 Establishment of and Role of PCAOB Once registered, an audit firm is subject to PCAOB audit Sarbanes Oxley requires the PCAOB to conduct annual inspections of registered accounting fims that audit more than 100 public companies. The PCAOB has brought to the SEC�s attention mistakes in audited financials discovered in connection with auditor reviews resulting in restatements Note: I don�t know how many of you have been paying attention to the PCAOB since, if you are a company or working with companies, you may not know very much, but this is a powerful regulatory body whose reach will go way beyond the auditors. The most important result in my view was the PCAOB. If the PCAOB identifies possible departures from GAAP in the course of reviewing an audit firm�s performance on selected audits if it deems it to be material, it will report the issuer to the SEC (although not make it public in the report). This process may result in an issuer restating its financial statements. The PCAOB in its report noted that some issuers have publicly described recent restatements as related to issues raised by the PCAOB in reviewing the issuer�s audits.Note: I don�t know how many of you have been paying attention to the PCAOB since, if you are a company or working with companies, you may not know very much, but this is a powerful regulatory body whose reach will go way beyond the auditors. The most important result in my view was the PCAOB. If the PCAOB identifies possible departures from GAAP in the course of reviewing an audit firm�s performance on selected audits if it deems it to be material, it will report the issuer to the SEC (although not make it public in the report). This process may result in an issuer restating its financial statements. The PCAOB in its report noted that some issuers have publicly described recent restatements as related to issues raised by the PCAOB in reviewing the issuer�s audits.

32. 2/23/2012 32 Internal Control Report; Auditor�s Attestation For non-accelerated foreign private issuers, the internal control report obligations are effective beginning the first fiscal year ending after July 15, 2007

33. 2/23/2012 33 Corporate Governance and Corporate Responsibility Audit Committee Financial Expert Code of Ethics Prohibition on Loans Attorney Conduct Rules Whistleblower Protections

34. 2/23/2012 34 Audit Committee Rules require reporting companies to comply with specified audit committee standards in order to list their securities on a U.S. securities exchange: Each member of the audit committee must be a member of the board and otherwise independent of management, subject to certain exceptions Audit committee must be directly responsible for the appointment, compensation, retention, and oversight of the company�s external auditors Audit committee must establish procedures for addressing complaints received by the company regarding accounting controls or auditing matters (including providing for the confidential, anonymous submission of complaints by the company�s employees) Audit committee must have the authority to engage independent counsel and other advisors to assist the committee in meeting its obligations Company must provide appropriate funding for the audit committee to pay for its legal and accounting advisors

35. 2/23/2012 35 Audit Committee The rules are not intended to conflict with or override any home country legal or listing requirement for shareholders to elect, approve or ratify the selection of the company�s external auditors. If the company recommends or nominates an external auditor, the audit committee must make the recommendation or nomination The Act grants the SEC the power to compel the delisting of a company if its audit committee fails to meet the specified criteria

36. 2/23/2012 36 Audit Committee Foreign issuers must include disclosure in their Form 20-F indicating that they have an audit committee and identifying its members, or indicating that the entire board of directors is acting as the audit committee To be considered independent, an audit committee member may not: Accept any consulting, advisory, or other compensatory fee from the company or its affiliates, other than in the capacity as a board or committee member (effectively rules out company advisors such as lawyers banks, accountants and consultants); or Be an affiliate (generally 10% ownership) of the company or any subsidiary thereof, or a director, executive officer, partner, principal, member or designee of an affiliate)

37. 2/23/2012 37 Audit Committee - Members The following exemptions from the independence requirements are available for foreign private issuers: One member who is an �affiliated person� if that one member: is the beneficial owner of more than 50% of the voting equity of the issuer or is a representative of such an owner or group of owners; has only observer status on, and is not the chair of, the audit committee; and is not an executive officer of the company; or is a representative of a foreign government entity that is an affiliate of the company, and is not an executive officer of the company

38. 2/23/2012 38 Audit Committee - Members An employee who is not an executive officer, if the employee is elected to the board or to the audit committee pursuant to home country legal or listing requirements A foreign private issuer will not be subject to the independence and the oversight of outside auditor requirements if it has a board of auditors (or statutory auditors) separate from the full board that is established pursuant to home country legal or listing provisions and is independent of management � company is required to file an exhibit to the Form 20-F stating that it is doing so If a company chooses to do so, or fails to form a separate committee, the full board would constitute the audit committee, in which case the independence requirements, among others, would apply to the full board

39. 2/23/2012 39 Audit Committee - Members Reliance on such an exemption would need to be disclosed in the Form 20-F, as well as an assessment of whether, and if so, how, such reliance would materially adversely effect the ability of the audit committee to act independently and to satisfy the other requirements of the rules

40. 2/23/2012 40 Financial Expert Each reporting company must disclose in Form 20-F that the board of directors has determined that the audit committee either: Includes at least one financial expert (as defined), who must be identified by name, or Does not include a financial expert, in which case an explanation is required

41. 2/23/2012 41 Financial Expert An audit committee financial expert must have the following attributes: An understanding of GAAP and financial statements Experience with U.S. GAAP is not necessary � rather, experience with principles used in preparing primary financial statements (home country GAAP/International Accounting Standards) is required An ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves Broad experience preparing, auditing, analyzing or evaluating financial statements, or experience actively supervising persons engaged in such activities An understanding of internal financial controls; and an understanding of audit committee functions

42. 2/23/2012 42 Each reporting company must disclose whether or not (and if not, why not) it has adopted a written code of ethics for its principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions

43. 2/23/2012 43 Code of Ethics Code must be reasonably designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the SEC, and in other public communications compliance with applicable governmental laws, rules and regulations the prompt internal reporting of violations to a person identified in the code

44. 2/23/2012 44 Code of Ethics Code must be made public (by filing it as an exhibit to Form 20-F; by posting it on the Internet; or by undertaking to provide a copy without charge upon request) Company must disclose any amendments to, and waivers of, the code of ethics

45. 2/23/2012 45 Prohibition on Loans All reporting companies are prohibited from directly or indirectly: Extending or maintaining credit Arranging for the extension of credit or Renewing an extension of credit in the form of a personal loan to any director or executive officer Loans in existence as of July 30, 2002 are exempted, provided that there is no material modification and they are not extended or renewed Applies to both foreign issuers and U.S. companies Lack of clarity on the definition of �personal loan� Exemption for foreign banks has now been implemented similar to US banks. Subject to comprehensive regulation and disclosure in home market

46. 2/23/2012 46 Whistleblower Protections Reporting companies and their employees are prohibited from taking adverse employment action against an employee for engaging in protected conduct �Adverse employment action� includes discharging, demoting, suspending, threatening, harassing or in any other manner discriminating against an employee �Protected conduct� includes: Providing information or assisting in an investigation regarding any conduct that an employee �reasonably� believes violates U.S. Federal mail, wire, bank and/or securities fraud statutes or SEC rules Filing, testifying, participating in, or otherwise assisting in a proceeding relating to violations of U.S. Federal mail, wire, bank and/or securities fraud statutes or SEC rules

47. 2/23/2012 47 Whistleblower Protections The Act grants employees of public companies a private right of action for claims of retaliation, including dismissal or other types of discrimination by the employer due to whistleblowing activities, provided the information was provided to a federal regulatory or law enforcement agency or other similar entities with the authority to investigate Maximum criminal penalty of a fine, 10 years in prison, or both for retaliation against individuals providing information relating to the commission (or possible commission) of an federal offense

48. 2/23/2012 48 Attorney Conduct Rules An attorney �appearing and practicing before the SEC� who finds evidence of a material violation of U.S. Federal or state securities laws, including violations of disclosure requirements in filed documents, or breach of fiduciary duty or similar violation must report �up-the-ladder�: To the company�s chief legal officer (�CLO�) or to the CLO and the chief executive officer or If these officers do not respond appropriately, to the company�s audit committee, or the full board of directors if the company does not have an audit committee The attorney may report to the Qualified Legal Compliance Committee of independent directors instead, if the reporting company has such a committee

49. 2/23/2012 49 Attorney Conduct Rules Rules do not apply to attorneys admitted to practice outside the U.S. who do not give advice on U.S. law or do so in consultation with U.S. counsel Safe harbor exempts attorneys practicing outside the U.S. to the extent that compliance is prohibited by applicable foreign law SEC has requested further comments on the previously proposed �noisy withdrawal� provision, which would require attorneys to resign, disaffirm filed documents and notify the SEC under certain circumstances in the absence of an appropriate response to the �up the ladder� report In-house attorneys would not be required to resign but would be required to disaffirm to the SEC An alternate proposal would require attorneys to report withdrawal only to the company, which would then be required to report to the SEC In-house attorneys would be required to cease participation in the matter and to notify the company No action would be required for attorney if prohibited by local rules after seeking leave to withdraw or cease participation

50. 2/23/2012 50 Auditor Independence and Oversight Overview PCAOB Prohibited Non-Audit Services Audit Committee Pre-Approval of Permissible Services Audit Partner Rotation Auditor Employment and Compensation Improper Influence on Conduct of Audits Auditor Reporting Failure to Maintain Audit Records Accountants� Fees and Services

51. 2/23/2012 51 Overview The SEC�s rules on auditor independence are based on the following principles, violations of which would impair the auditor�s independence: An auditor cannot audit his or her own work An auditor cannot function in the role of management An auditor cannot serve in an advocacy role for his or her client and An auditor should not promote the company�s stock or other financial interest

52. 2/23/2012 52 PCAOB The PCAOB was established as a �watchdog� for public accounting firms PCAOB operates under the general oversight of the SEC Section 103 of the Act requires all registered public accounting firms to comply with the auditing, quality control and independence standards to be set by the PCAOB PCAOB to actively inspect, investigate and, when appropriate, discipline registered public accounting firms for violations of the PCAOB�s rules

53. 2/23/2012 53 Prohibited Non-Audit Services Auditors cannot perform the following non-audit services for audit clients (some of which were previously prohibited by the SEC): Bookkeeping or services regarding accounting records or financial statements Financial information systems design and implementation Appraisal or valuation services, fairness opinions, or contribution-in-kind reports Actuarial services Internal audit outsourcing services Management functions Human resources Broker or dealer, investment adviser, or investment banking services Legal services Expert services unrelated to the audit

54. 2/23/2012 54 Audit Committee Pre-Approval of Permissible Services All audit and permissible non-audit services, including tax services, must be pre-approved by the audit committee in one of the following ways: Explicit pre-approval by the audit committee Pre-approval by one or more independent audit committee members to whom authority has been delegated (provided such members inform the full audit committee of each decision) or Pre-approval pursuant to detailed pre-approval policies and procedures established by the audit committee Provided that they are detailed as to the particular service, the audit committee is informed of each service and there is no delegation of responsibility to management

55. 2/23/2012 55 Audit Committee Pre-Approval of Permissible Services If a company does not have an audit committee or equivalent body, then the entire board of directors is deemed to be the audit committee and responsible for the pre-approval process A de minimis exception is available for permissible non-audit services in the rare circumstance where: The aggregate of all such services is no more than 5% of the total amount paid to external auditors during the fiscal year; Such services were not recognized at the time of the engagement to be non-audit services and Such services are approved by the audit committee prior to completion

56. 2/23/2012 56 Audit Partner Rotation Each audit engagement team �lead� and �concurring� audit partner must rotate off the engagement after five consecutive fiscal years, and then becomes subject to a five-year �timeout� period Other significant �audit engagement team partners� must rotate off the engagement after seven consecutive years and then become subject to a two-year �timeout� period Specific transition periods are established for audit partners with U.S. firms For audit partners with non-U.S. firms, the rules became effective as of the beginning of the reporting company�s first fiscal year ending after May 6, 2003, which will constitute the first year of service for purposes of the rule

57. 2/23/2012 57 Auditor Employment and Compensation There is a one-year �cooling-off period� during which members of an audit engagement team may not take a position and serve in a financial reporting oversight role at an audit client without compromising the audit firm�s ability to perform the audit Applies to any audit team member who provides more than 10 hours of audit, review or attest services for the company An �audit partner� may not receive compensation based on procuring non-audit engagements from the audit client (beginning with the first fiscal year of the audit firm that commences after May 6, 2003)

58. 2/23/2012 58 Improper Influence on Conduct of Audit Rules prohibit officers and directors, and persons acting under their direction, from fraudulently influencing, coercing, manipulating or misleading the auditor for the purpose of rendering the financial statements materially misleading Rules cover: President Vice president Secretary Treasurer or principal financial officer Comptroller or principal accounting officer and Those who normally perform these functions

59. 2/23/2012 59 Improper Influence on Conduct of Audit Examples of prohibited activity include pressuring the accountant to: Issue an inaccurate report Omit to perform specified audit and review procedures Fail to withdraw a previously issued report Fail to communicate relevant information to to the issuer�s audit committee

60. 2/23/2012 60 Auditor Reporting Each accounting firm that audits a reporting company�s financial statements must report to the audit committee prior to filing the related audit report with the SEC The report, whether oral or in writing, must address: All critical accounting policies and practices, including critical accounting estimates, used by the accounting form in performing the audit All material alternative accounting treatments that have been discussed with management, including the effect of such alternative treatments and the treatment preferred by the auditor Other material written communications between management and the auditors that would facilitate auditor and management oversight by the audit committee

61. 2/23/2012 61 Failure to Maintain Audit Records The Act provides that any accountant who conducts an audit of a public company may be charged with a federal crime, punishable by up to 10 years in prison, for failure to maintain all audit/review workpapers for five years from the end of the period in which the audit/review was conducted Extended to seven years by the SEC

62. 2/23/2012 62 Accountants� Fees and Services Each reporting company must disclose in its Form 20-F: The aggregate fees billed for each of the audit, audit-related, tax and all other services provided by its external auditor for each of the last two fiscal years A qualitative description of the types of services provided other than audit services The audit committee�s policies and procedures for pre-approval of audit and permissible non-audit services by the external auditors

63. 2/23/2012 63 Additional Disclosure Obligations Non-GAAP Financial Measures Off-Balance Sheet Arrangements Aggregate Contractual Obligations Material Correcting Adjustments

64. 2/23/2012 64 New Disclosure Items: Non-GAAP Financial Measures Use of non-GAAP financial measures (e.g., EBITDA) is restricted and regulated under Regulation G Some are prohibited completely Others, if used, require reconciliation to GAAP measures Non-U.S. companies have limited exemptions for information released outside as well as in the U.S. Use of non-GAAP measures in a Form 20-F filing requires reconciliation and explanation

65. 2/23/2012 65 Non-GAAP Financial Measures � Regulation G Regulation G applies to all public disclosures, such as press releases, analysts� presentations or SEC filings, that contain non-GAAP financial measures Companies that release non-GAAP financial measures in any public disclosure must include: A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and A reconciliation of the differences between the non-GAAP financial measures and the most directly comparable GAAP financial measures

66. 2/23/2012 66 Non-GAAP Financial Measures � Regulation G If a non-GAAP financial measure is released orally, telephonically, in a webcast, broadcast or by similar means, a company would be permitted to provide the required accompanying information by: Posting it on the company�s website; and Disclosing the location of the required accompanying information during its presentation

67. 2/23/2012 67 Non-GAAP Financial Measures � Regulation G Regulation G does not apply to public disclosure of a non-GAAP financial measure by a foreign private issuer if: The securities are listed or quoted on a non-U.S. exchange The measure is based on non-U.S. GAAP financial data and The disclosure is made in (or contained in a communication released in) the U.S. as well as outside the U.S., provided that it is released in the U.S. at the same time or after its release outside the U.S. and is not targeted at U.S. residents

68. 2/23/2012 68 Non-GAAP Financial Measures � Form 20-F If a company includes non-GAAP financial measures in the Form 20-F, it must provide: A presentation, with at least equal prominence, of the most directly comparable GAAP financial measures A reconciliation (by schedule or other clearly understandable method) of the non-GAAP and GAAP measures A statement describing the reasons why the company�s management believes such non-GAAP financial measures provide useful information to investors and If material, a statement disclosing any additional purposes for which the company�s management uses the non-GAAP financial measure presented

69. 2/23/2012 69 Non-GAAP Financial Measures � Form 20-F Five types of non-GAAP financial measures are prohibited in Form 20-F, unless required or expressly permitted by home country GAAP Excluding from liquidity measures charges or liabilities that required, or will require, cash settlement, or would have required cash settlement absent an ability to settle in another manner, other than EBIT and EBITDA Adjusting a non-GAAP performance measure to eliminate or smooth items identified as non-recurring, infrequent or unusual, when the nature of the charge or gain is such that it is reasonably likely to recur within two years, or there was a similar charge or gain within the prior two years Presenting non-GAAP financial measures on the face of the company�s financial statements prepared in accordance with GAAP or in the accompanying notes Presenting non-GAAP financial measures on the face of any pro forma financial information required to be disclosed by Article 11 of Regulation S-X and Using titles or descriptions of non-GAAP financial measures that are the same as, or confusingly similar to, titles or descriptions used for GAAP financial measures.

70. 2/23/2012 70 Non-GAAP Financial Measures � Form 20-F Foreign private issuers that disclose non-GAAP financial measures in press releases or similar public disclosures that are exempt from Regulation G need to identify and consider aligning non-GAAP financial measures included in such documents and the contents of the Form 20-F

71. 2/23/2012 71 New Disclosure Items: Off-Balance Sheet Arrangements Companies must disclose, in a separately captioned section of MD&A, all material off-balance sheet arrangements that are reasonably likely to have a current or future effect on the company�s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors However, note that required disclosure is similar to prior SEC guidance Disclosure not required in interim financial reports submitted on Form 6-K, unless required to be included in an SEC registration statement (e.g., a shelf registration statement) or incorporated by reference at the election of the company

72. 2/23/2012 72 Off-Balance Sheet Arrangements Disclosure threshold: Management must assess the likelihood of the occurrence of a known trend, demand, commitment, event or uncertainty that could affect an off-balance sheet arrangement If management concludes that the trend is not reasonably likely to occur, no disclosure is required, but if management cannot make that determination, disclosure is required unless the trend would not have a material adverse effect on the company�s financial condition

73. 2/23/2012 73 Off-Balance Sheet Arrangements Required disclosure: The nature and business purpose of the arrangements The importance of the arrangements in respect of the company�s financial condition Insight into the overall magnitude of the arrangements and the material impact of the arrangements on the company and Such other information necessary for an understanding of the arrangements

74. 2/23/2012 74 New Disclosure Items: Aggregate Contractual Obligations Disclosure, in tabular format, in the MD&A, of payments due by specified periods for known contractual obligations aggregated by specified categories substantially in the form provided in the rules No new tabular disclosure requirement for contingent liabilities and commitments. Companies should comply with existing SEC guidance and applicable accounting rules Disclosure not required in interim financial reports submitted on Form 6-K unless required to be included in an SEC registration statement (eg., a shelf registration statement) or incorporated by reference at the election of the company

75. 2/23/2012 75 New Disclosure Items: Material Correcting Adjustments Disclosure required in �periodic reports� (such as Form 20-F) of all material correcting adjustments identified by the company�s registered public accounting firm The term �adjustment� is not defined in the Act

76. 2/23/2012 76 Considerations for D&Os CEO / CFO Certifications CEO and CFO disgorgements Director and Officer Bars Document Destruction Pension Plan Blackout Trading Restrictions Signature of CEO on Tax Returns

77. 2/23/2012 77 CEO / CFO Certifications Sarbanes-Oxley imposes two certification requirements 906 Certification: Applies to Form 20-F, but not to current reports on Form 6-K CEO and CFO must certify that: Report fully complies with the Exchange Act Information in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer Imposes criminal penalties under U.S. Criminal Code Up to US$1 million, 10 years in prison or both Up to US$5 million, 20 years in prison or both if willful

78. 2/23/2012 78 CEO / CFO Certifications 302 Certification: Applies to Form 20-F, but not current reports on Form 6-K Certification must be in the exact form specified by the SEC CEO and CFO must provide certifications relating to the: Material correctness and completeness of the report Fair presentation of the financial statements and information Effectiveness of the company�s disclosure controls and procedures (including those relating to financial reporting) and Deficiencies in the company�s internal financial controls Exchange Act imposes civil and criminal penalties, but not specifically related to the 302 certification

79. 2/23/2012 79 CEO / CFO Certifications Liability: CEO and CFO acting in good faith without knowledge of materially misleading statement (fraud) should not have increased exposure Both before and after Sarbanes-Oxley, need to have knowledge (or reckless disregard) to establish liability If there is fraud, certifications will make personal liability and convictions easier to enforce Liability for prospectus/registration statement doesn�t change, although certifications will be incorporated by reference in prospectus if and when the Form 20-F is so incorporated

80. 2/23/2012 80 CEO and CFO Disgorgements If a company is required to prepare an accounting restatement due to material non-compliance of the company, as a result of misconduct, with any financial reporting requirement, the CEO and CFO must disgorge: Any bonus or other equity or incentive-based compensation received from the company during the 12-month period following the first public issuance or filing with the SEC of the document containing the noncompliant financial information and Any profits realized from the sale of the company�s securities during the same 12-month period

81. 2/23/2012 81 Director and Officer Bars The SEC may issue an order prohibiting any person found guilty of violating certain provisions of the U.S. securities laws from acting as an officer or director of a public company if determined to be unfit to serve The Act cites specific examples of violations of Section 10(b) of the Exchange Act and Section 17(a)(1) of the Securities Act (both relating to fraud) that could lead to a determination of unfitness Previous standard required a finding of substantial unfitness

82. 2/23/2012 82 Document Destruction The Act provides that any person who knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record with the intent to impede, obstruct or influence the investigation or proper administration of any matter by an agency or department of the U.S. government may be charged with a federal crime, punishable by up to 20 years in prison The Act also provides separately that the destruction of documents or other evidence in connection with an �official proceeding� is punishable by a fine, up to 20 years in prison, or both

83. 2/23/2012 83 Pension Plan Blackout Trading Restrictions Also referred to as Regulation BTR (Section 306 of the Act) Directors and executive officers are prohibited from, directly or indirectly, buying or selling company equity securities acquired in connection with service or employment during any plan blackout period Companies must timely notify directors and executive officers and the SEC of any plan blackout periods Blackout period is generally defined as any period of more than three consecutive days in which the ability of at least 50% of the participants or beneficiaries of the company�s plans to purchase or sell their interest in the company�s equity is suspended

84. 2/23/2012 84 Pension Plan Blackout Trading Restrictions These rules apply to foreign private issuers only if the 50% test is satisfied and the number of U.S. participants subject to the trading prohibitions either represents more than 15% of the worldwide workforce of the company and its consolidated subsidiaries or exceeds 50,000 personnel

85. 2/23/2012 85 Signature of CEO on Tax Returns Section 1001 of the Act provides that the company�s federal income tax return should be signed by the CEO

86. 2/23/2012 86 Regulation AC Regulation AC requires investment bank research analysts to make certifications in connection with research reports and public appearances to the effect that: The views stated accurately reflect the personal views of the analyst and No part of the analyst�s compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed

87. 2/23/2012 87 Enforcement Mechanisms The Act provides that the SEC may: Petition a court to freeze certain extraordinary payments to officers, directors and employees of a company under investigation by the SEC (initial 45-day period that can be extended for an additional 45-day period) Prohibit any person who violates the federal securities laws from acting as an officer or director of any public company Seek any equitable relief it deems appropriate or necessary for the benefit of investors, including increased oversight and monetary remedies The Act substantially increases the SEC�s budget, particularly with respect to the SEC�s enforcement program

88. 2/23/2012 88 Enforcement Mechanisms The Act extends the statute of limitations for civil securities fraud claims to the earlier of (i) two years after discovery of the violation and (ii) five years after the violation The Act provides that the discharge of debts under the U.S. Bankruptcy Code may be disallowed if the debts result from the debtor committing federal securities law violations, fraud, deceit or manipulation relating to the sale or purchase of securities

89. 2/23/2012 89 Enforcement Mechanisms Under the Act, individuals may be charged with a federal crime for fraudulent conduct in connection with the securities of a public company. Penalties include fines or up to 25 years in prison The Act treats an attempt or conspiracy to commit criminal mail fraud the same as the actual underlying crime in terms of penalties Increased maximum penalties for willful Exchange Act violations to 20 years in prison, US$5 million fine for individuals and US$25 million fine for companies Increased maximum prison terms for wire and mail fraud to 20 years Increased maximum ERISA fraud penalties to 10 years in prison, US$100,000 in fines for individuals and US$500,000 for companies

90. 2/23/2012 90 Documentation for Foreign Private Issuers The following is a list of corporate governance documents responsive to the requirements of Sarbanes-Oxley and the SEC, the NYSE and NASDAQ: SOX/SEC NYSE NASDAQ Code of Ethics CEO & Financial Officers X Directors, Officers and Employees X Corporate Governance Guidelines X Audit Committee Charter X X Compensation Committee Charter X Nominating/Corporate Governance Committee Charter X The current NYSE and NASDAQ rules do not require the foregoing documentation from foreign private issuers. However, NYSE requires annual corporate governance certification and disclosure of the differences between NYSE corporate governance rules and home country rules and NASDAQ requires opinion of counsel that company complies with home country rules.

91. 2/23/2012 91 Documentation for Foreign Private Issuers In addition to the required and recommended corporate governance documents, foreign private issuers should consider the following additional documents that support the implementation of the new rules. Disclosure Controls and Procedures Description Document Retention Policy Audit Committee Policies and Procedures for Pre-Approval of Audit and Permissible Non-Audit Services Audit Committee Procedures for Complaints and Whistleblowing Audit Committee Procedures for Approval of Related Party Transactions Board and Committees Annual Evaluation Questionnaire Directors� and Officers� Questionnaire Directors� Questionnaire on Independence, Financial Literacy, and Expertise Procedures for Attorneys Reporting Violations and QLCCs (if formed)