SIDLEY AUSTIN BROWN & WOOD

AND AFFILIATED PARTNERSHIPS

BEIJING CHICAGO DALLAS GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE TOKYO WASHINGTON D.C

JULY 30, 2002

NON-U.S. COMPANIES AND THE SARBANES-OXLEY ACT OF 2002

President George W. Bush today signed into law the Sarbanes-Oxley Act of 2002 (the “Act”). This
legislation has the stated purpose of protecting U.S. investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the U.S. federal securities laws.

Many provisions of the Act have direct and immediate consequences for non-U.S. companies that file reports with the SEC.
In its haste to pass the new law and send it to the President for signature, Congress did not respond to
suggestions that the legislation contain appropriate exemptions for foreign companies.

Provisions of the Act that are immediately effective

Effective immediately, non-U.S. companies that file reports with the SEC1 are subject to the following new
requirements and prohibitions:

Officer certifications. Each 20-F report and each 6-K report containing financial statements must be
certified by the company’s chief executive officer and chief financial officer. The certification must state
that the report “fully complies” with the SEC’s reporting requirements and that it “fairly presents,” in all
material respects, the company’s financial condition and results of operations. Criminal penalties are
specified for knowing or willful inaccurate certifications.

The SEC is also required to adopt within 30 days rules that will require similar – but not identical –
certifications of “each annual or quarterly report” filed with the SEC. Since non-U.S. companies do not
file quarterly reports, it may be that the SEC rules will not require officers of non-U.S. companies to
certify their 6-K reports. It would appear, however, that the certification requirements described in the
preceding paragraph will still apply to 6-K reports that contain financial statements.

Loans to directors or executive officers. The Act makes it unlawful for a company to make personal
loans to directors or executive officers. Loans currently outstanding may be maintained, but they may
not be renewed or extended or materially modified.

The prohibition extends to loans made by a subsidiary and to the arranging of loans by other persons.

1 This does not include companies that provide “home country” information to the SEC pursuant to Rule 12g3-2(b). It applies only to

companies that have entered the SEC’s reporting system by listing their securities on the NYSE or NASDAQ or that have made a
public offering in the United States registered under the Securities Act of 1933. In addition, certain provisions of the Act apply to
companies that are not yet required to file reports with the SEC but that have filed a registration statement under the Securities Act of
1933 that has not yet become effective.

The affiliated firms, Sidley Austin Brown & Wood LLP, a Delaware limited liability partnership, Sidley Austin Brown & Wood, an Illinois general
partnership, Sidley Austin Brown & Wood, an English partnership, and Sidley Austin Brown & Wood, a New York general partnership, are referred
to collectively as “Sidley Austin Brown & Wood.”
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AND AFFILIATED PARTNERSHIPS

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There are exceptions for certain loans that financial services companies may make to their directors or
executive officers. These include specified types of consumer credit, margin loans and credit cards, but
the exceptions are expressed in terms of regulations that apply to U.S. financial services companies. It is
not clear that loans made pursuant to parallel non-U.S. regulations would qualify for the exceptions.

Bonus and other forfeitures in event of restatements. If a company “is required to prepare an
accounting restatement” because of its “material noncompliance, as a result of misconduct,” with any
SEC financial reporting requirement, the company’s chief executive officer and chief financial officer
must reimburse the company for any bonus or equity-based compensation they received from the
company during the 12-month period following the public issuance or filing of the document containing
the information that had to be restated.

In addition, the chief executive officer and chief financial officer must reimburse the company for any
profits they realized from the sale of the company’s securities during that 12-month period.

It is not clear when a company will be deemed to have been “required” to make a restatement (as
opposed, for example, to a voluntary restatement) or what type of “misconduct” will be sufficient to
trigger the forfeiture requirement. A company announcing a restatement should consider addressing
these factors in its public statement explaining the reasons for the restatement.

The SEC may exempt any person from the forfeiture requirements. It is not clear whether the SEC
believes it has the authority to adopt rules exempting classes of companies (e.g., non-U.S. companies) or
restatements (e.g., restatements required by “home country” law) from the forfeiture requirements or
whether it will proceed on a case-by-case basis.

“Whistleblower” protections. The Act makes it unlawful for a reporting company to retaliate against
an employee or “agent” who has provided information about possible fraud or violations of U.S.
securities laws to U.S. federal law enforcement authorities, members of Congress, committees of
Congress or persons with supervisory authority over the employee or agent. The same prohibition
applies where the employee or agent has filed or is participating in a proceeding related to fraud or
violations of U.S. securities laws.

An employee or agent claiming a violation of the “whistleblower” protection provisions is entitled to be

“made whole,” including reinstatement, back pay and compensation for special damages (including
attorneys’ fees).

Provisions of the Act that are to become effective in the future

Other provisions of the Act become effective only after the adoption of SEC rules, which will be the
subject of notice and public opportunity for comment, or other action by the SEC. Non-U.S. companies
should be alert to the SEC’s publication of proposed rules and should consider urging the SEC to create
appropriate exemptions or exclusions for non-U.S. companies or otherwise to provide reasonable
accommodation for non-U.S. companies.

This newsletter has been prepared by Sidley Austin Brown & Wood for informational purposes only and does not constitute legal advice. This
information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without
seeking professional counsel.
 SIDLEY AUSTIN BROWN & WOOD
AND AFFILIATED PARTNERSHIPS

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Audit committee organization and responsibilities. The Act requires the SEC to adopt within 270
days a rule that will require the NYSE and NASDAQ to prohibit the listing of any company’s securities
unless the company has an audit committee that:

- is directly responsible for the appointment, compensation and oversight of the

company’s independent public accounting firm, which must report to the audit
committee;

- is made up entirely of directors who are “independent,” as defined in the Act;

- has procedures for receiving confidential complaints or concerns from employees or

others about the company’s accounting;

- has the authority to engage independent counsel and other advisers; and

- has available adequate funding to compensate the company’s independent accounting

firm and any advisers retained by the audit committee.

The Act also requires the SEC to adopt within 180 days rules that will require reporting companies to
disclose whether or not (and if not, why not) at least one member of the audit committee is a “financial
expert” as defined by the SEC.

Independence of accounting firm. Beginning 180 days after the startup of the Public Company
Accounting Oversight Board (the “Board”), an accounting firm may not contemporaneously perform
any of eight specified non-audit services for a reporting company (plus any non-audit services that the
Board determines by regulation to be impermissible). Other non-audit services, including tax services,
may be performed only if preapproved by the audit committee.

Registration of U.S. and non-U.S. accounting firms with Board. Beginning 180 days after the
startup of the Board, it will be unlawful for an accounting firm to prepare or issue an audit report for a
reporting company2 – or to “participate” in the preparation or issuance of an audit report -- unless the
accounting firm is registered with the Board. The Act provides explicitly that non-U.S.
accounting firms that prepare or issue an audit report are subject to the registration requirement. In
addition, a non-U.S. accounting firm that does not issue audit reports but that under Board rules “plays
such a substantial role in the preparation and furnishing of such reports for particular issuers” may be
required to register with the Board.

Consequences of registration. An accounting firm registered with the Board must consent to
cooperate with the Board and comply with requests for testimony or documents. The Board is
authorized to conduct inspections of registered accounting firms, either on its own initiative or at

2 This requirement also extends to an audit report for a company that is not yet required to file reports with the SEC but that has

filed a registration statement under the Securities Act of 1933 that has not yet become effective.

2This requirement also extends to an audit report for a company that is not yet required to file reports with the SEC
but that has filed a registration statement under the Securities Act of 1933 that has not yet become effective.
This newsletter has been prepared by Sidley Austin Brown & Wood for informational purposes only and does not constitute legal advice. This
information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without
seeking professional counsel.
 SIDLEY AUSTIN BROWN & WOOD
AND AFFILIATED PARTNERSHIPS

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the request of the SEC. The Board is also authorized to conduct investigations and disciplinary
proceedings involving registered accounting firms and may require the production of audit
workpapers or any documents in the possession of any other person, including any client, of a registered
accounting firm.

Audit workpapers of unregistered non-U.S. accounting firms. If a non-U.S. accounting firm issues
an opinion “or otherwise performs material services” that an accounting firm registered with the Board
relies upon in issuing an audit report, the non-U.S. accounting firm is “deemed to have consented” to
produce its audit workpapers for the Board or the SEC in connection with any investigation relating to
the audit report. In addition, a registered accounting firm that relies upon the opinion of a non-U.S.
accounting firm “shall be deemed” to have consented to producing the audit workpapers of the non-U.S.
accounting firm in response to a request from the Board or the SEC and to have secured the agreement
of the non-U.S. accounting firm to such production as a condition of its reliance upon the opinion of the
non-U.S. accounting firm.

Disclosure of material correcting adjustments. Each financial report that contains financial
statements and that is required to be prepared in accordance with U.S. “gaap” (or to be reconciled to
U.S. “gaap”) and filed with the SEC must reflect all “material correcting adjustments” identified by the
company’s independent accounting firm. This requirement does not become effective until the
independent accounting firm has become “registered” with the newly-created Public Company
Accounting Oversight Board.

Codes of ethics for senior financial officers. The Act requires the SEC to adopt within 180 days rules
to require reporting companies to disclose whether or not (and if not, why not) the company has
adopted a code of ethics for senior financial officers. Changes in the code of ethics are to be publicly
disclosed, as are any waivers of the code.

Internal controls assessments. The Act requires the SEC to adopt rules requiring each annual report
by a reporting company to contain an internal control report, which must contain an assessment of the
effectiveness of the company’s internal control structure and procedures for financial reporting. The
company’s independent accounting firm must attest to and report on the company’s assessment.

Off-Balance sheet transactions. The Act requires the SEC to adopt within 180 days rules providing
for the disclosure of all material off-balance sheet transactions and other relationships with
unconsolidated entities that may have a material current or future effect.

Pro forma financial information. The Act requires the SEC to adopt within 180 days rules providing
that pro forma financial information included in any SEC filing or in any public disclosure or press
release be presented in a manner that is not false or misleading and that contains a reconciliation with the
company’s financial condition and results of operations under U.S. “gaap.”

This newsletter has been prepared by Sidley Austin Brown & Wood for informational purposes only and does not constitute legal advice. This
information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without
seeking professional counsel.
 SIDLEY AUSTIN BROWN & WOOD
AND AFFILIATED PARTNERSHIPS

Page 5

Status of reports of personal securities transactions of directors and executive officers

The Act dramatically shorts the time by which a reporting company’s directors, executive officers and
10% stockholders must make public disclosure of their transactions in the company’s equity securities.

An SEC rule has for many years exempted directors, executive officers and 10% stockholders of non-
U.S. reporting companies from the requirement that they disclose such transactions, provided that the
company meets the SEC’s definition of “foreign private issuer.” This SEC rule is still in place and would
not appear to have been affected by the Act. We understand that the SEC staff agrees with this
interpretation.

* * *

We would be pleased to discuss any aspect of the Act’s application to non-U.S. companies that you or
your company may consider to be important.

For this purpose, or for more information on the Act, please call the lawyer or lawyers at Sidley Austin
Brown & Wood with whom you customarily discuss corporate or securities matters.

This newsletter has been prepared by Sidley Austin Brown & Wood for informational purposes only and does not constitute legal advice. This
information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without
seeking professional counsel.

NY1 5233949v1 July 30, 2002 (07:51pm)