SIA in US Conflict Minerals Update WSC ESH TF - Shanghai February 2011 Molly Gavin QUALCOMM

Agenda  Background  Legislation  Securities and Exchange Commission (SEC) Rulemaking  EICC-GeSI Extractives Working Group  Conflict Free Smelter Program  Supply Chain Due Diligence Tool  International Developments incl. OECD Due Diligence Guidance  Questions 2

Democratic Republic of the Congo (DRC) Data source: US Geological Survey 3Ts (Sn, Ta, W), gold (Au) and Cobalt (Co) are all mined in the DRC. There is ongoing conflict is in eastern DRC provinces where the 3Ts and gold are mined. Mining activity is crucial to the DRC economy. However, some mines are controlled by parties that are causing serious social and human rights violations in the region. These minerals are not unique to the DRC. The majority of the global supply of these minerals originates outside of the Great Lakes Region. 3

4 “Conflict Minerals” MineralMetal Derivatives Related Products DRC Market Share Annual Conflict Value Columbite–tantalite (coltan)Tantalum (Ta)Capacitors15-20% $11M CassiteriteTin (Sn)Solder in PCBs and other components; cans 6-8% $115M WolframiteTungsten (W)Wiring, circuits LCD screens, drill bits 2-4% $8M GoldGold (Au)PCBs, connectors 1% $50M

Usage of the 3 T’s and Gold  These metals are used widely in electrical products (including automobiles and appliances)  Phase-out / substitution of some of these metals is not currently cost effective, or technically feasible  The amount of these metals used in a typical electronic product are in the order of about 0.7 grams for tantalum, 10 grams for tin, grams for tungsten, and 0.3 grams for gold Electrical Non-electrical Tin (Sn)Tantalum (Ta) Tungsten (W)Gold (Au) 5

NGO Public Affairs Campaign  Numerous NGOs active and monitoring companies  Extensive news coverage 6

7 Regulatory Timeline  Draft regulations issued in December 2010  Comments due to SEC March 2nd, 2011  SEC must issue final rules by April 15th, 2011  Companies subject to SEC reporting must report on first fiscal year that begins after promulgation of rules

8 Conflict Minerals Legislation SEC Rulemaking Proposal Requirements Determine whether products contain “conflict minerals” produced in DRC or adjoining countries by a “reasonable country of origin inquiry” Determine whether products contain “conflict minerals” produced in DRC or adjoining countries by a “reasonable country of origin inquiry” Descriptions of: measures to exercise due diligence on source and chain of custody of minerals And of any products that are not “DRC conflict free” facilities used to process those conflict minerals (i.e., smelter) country of origin of those conflict minerals Descriptions of: measures to exercise due diligence on source and chain of custody of minerals And of any products that are not “DRC conflict free” facilities used to process those conflict minerals (i.e., smelter) country of origin of those conflict minerals 123 (a) Issuer that files reports under Securities and Exchange Act? and (b) If any conflict mineral (or metal derivative) is “necessary” for the production or functionality of a product that you “manufacture” (a) Issuer that files reports under Securities and Exchange Act? and (b) If any conflict mineral (or metal derivative) is “necessary” for the production or functionality of a product that you “manufacture” Submit annual SEC disclosure? If yes or do not know, submit report Determine if covered July 2010: Legislation Passed Dec 2010: SEC Rule Proposal April 2011: SEC Promulgation of Rules FY2012 Compliance

9 EICC and GeSI Approach to Responsible Sourcing In Region Sourcing Conflict Free Smelter Program Due Diligence Finished Product MINE SMELTER/REFINERY OEMS

Example Gold Supply Chain Requirements  Due Diligence  Smelter certification  Mines of Origin  Supply Chain 3 rd party audits  Reporting  Disclosure Mine #1 Mine #2 Mine #3 Smelter Gold Chemical Mfg Gold Part Mfg Electronic Component Mfg Final Electronic Product Mfg Shanghai Gold Exchange US Conflict Minerals Regulatory Obligation 10

Conflict-Free Smelter Program  What: Multi-stakeholder developed audit process to assess whether smelters are sourcing DRC conflict-free minerals  Why: Given minerals lose traceability after processing, smelter /refinery most practical place to validate conflict-free sources of Tantalum, Tin, Gold, Tungsten  How:  Addressing each metal separately, but simultaneously  Order of priority is Tantalum, Tin, Tungsten, Gold  Validation protocol for each metal  Smelter must have: policy, tracing mechanism back to origin, documentation showing purchased materials from non-conflict sources; for minerals sourced from DRC, material must be verified through credible in-region chain of custody tracing scheme  Audits conducted by independent third party auditor  Names of compliant smelters will be published  Electronic component and final product manufacturers will have option to direct suppliers to source material compliant smelters 11

12 Conflict-Free Smelter Program: Industry Milestones for Tantalum, Tin, Tungsten, Gold MilestoneTantalum Schedule Tin Schedule Tungsten Schedule Gold Schedule Initial Meeting of Supply Chain Sept 2009May 2010NoneN/A Smelter Visits and gaps identified Feb 2010Sept 2010Dec 2010Mar 2011 Validation checklist finishedJune 2010Feb 2011TBD Smelter Gaps closedOct 2010Mar 2011TBD Smelter 3 rd party validation completed Mar 2011May 2011TBD Smelter list publically available Mar 2011June 2011TBD Goal is to have first round of validations across all metals done by end of Q3 2011

11 EICC-GeSI Due Diligence Efforts  Purpose  Define company due diligence processes that align with SEC due diligence reporting regulations to allow companies to consistently interface with their supply chains, create efficiencies and industry standard tools  Accomplishments to date  Draft Due Diligence Tool that aligns with current SEC proposed rules  Proposed Pilot Plan and Schedule (under review)  Challenges  Vagueness of exactly what ‘due diligence’ is in the US legislation and the proposed SEC rules.  Varying opinions of companies on assumptions of what ‘due diligence’ might be.

12 International Developments  OECD “Due Diligence Guidance for Responsible Supply Chain Management of Minerals from Conflict- Affected and High-Risk Areas”  States in region, NGOs, and business groups provide guidance on best practices, and help harmonize cross- sectoral expectations for best practices  Endorsed recently by UN  Likely to be highly influential with SEC  Five steps:  Strengthening company management systems  Identifying and assessing risk in the supply chain  Designing and implementing a strategy to respond to identified risks  Ensuring independent third-party audits  Publicly disclosing supply chain due diligence and findings  Some early indications that EU considering also action to require due diligence for conflict minerals

Backup SIA Legislative Update, WSC ESH TF, Kobe

Decision Tree on Proposed SEC Rules Source: PWC January