Resources Global Professionals Conflict Minerals – Understanding Dodd-Frank Section 1502

2 Learning Objectives After today’s session you will be able to answer the following questions: What is the conflict minerals regulation and who is impacted? What does it take to comply with the regulation? What are companies doing today to comply? What does the audit process entail? What are the lessons learned so far?

3 About Resources Global Professionals PROJECT CONSULTING Project scoping, approach, management and execution PROJECT SUPPORT Subject matter or functional expertise for specific projects OPERATIONAL SUPPORT Management level expertise for daily operations We are a publicly-traded, global professional services firm with a Big Four heritage.  Founded in 1996 as part of Deloitte, IPO (2000). NASDAQ: RECN  Global organization with global talent and best practices, serving local markets  Practice areas: Supply Chain, Governance, Risk & Compliance, Finance & Accounting, Information Management, Human Capital, Legal & Regulatory, Corporate Advisory & Restructuring, Strategic Communications We partner with business leaders and their teams to plan and execute initiatives as well as support day-to-day operations. Working collaboratively with our clients, we provide: $572M REVENUE IN FISCAL YEAR 2012 ▪ 3,000+ PROFESSIONALS SERVING CLIENTS IN OVER 66 COUNTRIES YEARS EXPERIENCE FOR OUR PROFESSIONALS ▪ 88% OF THE FORTUNE 50 HAVE BEEN OUR CLIENTS 74% OF THE FORTUNE GLOBAL 50 HAVE BEEN OUR CLIENTS ▪ 100% OF OUR TOP 50 CLIENTS HAVE REMAINED SO FOR 4 YEARS RUNNING

Overview 4  Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)  Passed into law on July 21, 2010; Conflict Minerals rules adopted August 22, 2012  Dodd-Frank widely viewed as an instrument for financial reform  “Conflict Minerals” Section 1502 imposes new requirements on much broader base of companies  Requires SEC registrants to report on their use of “conflict minerals” annually 2010 July 21, 2010 Dodd-Frank Act became law Dec 2010 Proposed draft rules released by SEC OECD releases Due Diligence for Responsible Supply Chains guidelines Oct 2011 – Dec SEC holds public Conflict Minerals Roundtable and extends deadline for final SEC rules passes 2014 Aug 22, 2012 SEC adopts final Conflict Minerals rules Jan 31, 2013 Date for inclusion of conflict minerals in the supply chain 2013 May 31, 2014 Initial filing date for Conflict Minerals applicable issuers Jan 1, 2013 – Jan 1, 2014 First year of compliance

What are “Conflict Minerals”? 5 WW WOLFRAMITE TUNGSTEN Sn CASSITERITE TIN Au GOLD Ta COLUMBITE-TANTALITE TANTALUM Minerals originating in Democratic Republic of Congo (DRC) and/or adjoining countries which, when refined or extracted become tantalum, tin, tungsten, or gold (3T & G). Their use may contribute to funding groups responsible for violence, repression and various human and other rights violations. Map of DRC and Covered Countries

Products that Contain Conflict Minerals 6 These ores and their derivatives are used in various consumer and industrial electronics and other goods, including cell phones, computers, and televisions. These ores and their derivatives are used in various consumer and industrial electronics and other goods, including cell phones, computers, and televisions. Cell PhonesX-Ray Machines Food Packaging Cell TowersSolderCircuit Boards Satellites PackagingSpecialty Glass Zippers & Fittings

Impacted Companies 7  Applies to any SEC 13(a) or 15(d) registrant for which conflict minerals are “necessary to the functionality or production” and contained in the final product manufactured, or contracted to be manufactured  Includes domestic, foreign, and voluntary issuers regardless of size; IPO issuers allowed a grace period  No “de minimis” use exception  SEC estimates about 6,000 (or roughly half) of all SEC registrants will be impacted  Non-public entities that are suppliers of such products to SEC registrants will be impacted through requirements to vet and certify their supply chains  Packaging and service equipment are not included as product Regulation intentionally broad due to pervasive nature of Conflict Minerals use Regulation intentionally broad due to pervasive nature of Conflict Minerals use

Why is Conflict Minerals Important Human rights It’s the law Consumer activism

Understanding the Regulations 9 The final SEC rule does not define the phrases “contract to manufacture,” “necessary to the functionality”, and “necessary to the production” of a product but provides guidance to aid understanding and applicability. “Contract to Manufacture”  While the SEC did not to specifically define the term in the final rules, guidance provided helps determine applicability  Regulations extend to contract manufacturers to ensure broad applicability of the regulations  Key to understanding applicability is determining level of influence exerted by the SEC registrant over the materials, parts, ingredients or components to be included in the product  Products and components available through retail sources not subject to regulation  Affixing a company’s logo, brand or label to a generic product does not meet the standard  Excluded are issuers who service, maintain, or repair a product manufactured by a third party

Understanding the Regulations 10 “Necessary to functionality or production”  Rules will generally be applicable if the following are applicable:  A conflict mineral is necessary to the product’s generally expected function, use or purpose  A conflict mineral is contained in and intentionally added and is not a naturally occurring by-product  A conflict mineral is incorporated in the product for purposes of ornamentation, decoration or embellishment, whether the primary purpose of the product is ornamentation or decoration  A conflict mineral must be both contained in the product and necessary to the product’s production

11  Conflict minerals “outside the supply chain” before January 31, 2013 are not subject to the rules  “Outside the supply chain” defined as:  After smelting of columbite-tantalite (tantalum), cassiterite (tin), and wolframite (tungsten) minerals  After gold has been fully refined  After any conflict mineral that have not been smelted or fully refined are physically located outside the Covered Countries “Outside the supply chain” Understanding the Regulations

The Compliance Process 12

Does the issuer file reports with the SEC 13(a) or 15(d) of the Exchange Act? Does the issuer manufacture or contract to manufacture products? Are conflict minerals necessary to the functionality or production of the product manufactured or contracted to manufactured? YES NO Were the conflict minerals outside the supply chain prior to January 1, 2013? NO YES Based on a reasonable country of origin inquiry (RCOI), does the issuer know or have reason to believe that the conflict minerals may have originated in the DRC or an adjoining country (the covered countries)? NO, if newly minedNO, if potentially scrap or recycled Based on the RCOI, does the issuer know or reasonably believe that the conflict minerals come from scrap or recycled? NO YES NO Exercise due diligence on the source and chain of custody of its conflict minerals following a nationally or internationally recognized due diligence framework, if such framework is available for a specific conflict material. In exercising this due diligence does the issuer determine the conflict minerals are not from the covered countries or are from scrap or recycled? Exercise due diligence on the source and chain of custody of its conflict minerals following a nationally or internationally recognized due diligence framework, if such framework is available for a specific conflict material. In exercising this due diligence does the issuer determine the conflict minerals are not from the covered countries or are from scrap or recycled? YES File a Form SD with a Conflict Minerals Report as an exhibit, which includes a description of the measures the issuer has taken to exercise due diligence. In exercising the due diligence, was the issuer able to determine whether the conflict minerals financed or benefited armed groups? File a Form SD with a Conflict Minerals Report as an exhibit, which includes a description of the measures the issuer has taken to exercise due diligence. In exercising the due diligence, was the issuer able to determine whether the conflict minerals financed or benefited armed groups? NO Rule does not apply File a Form SD that discloses the issuer’s determination and briefly describes the RCOI and the results of the Inquiry The Conflict Minerals Report must also include an independent private sector audit report, which expresses an opinion or conclusion as to whether the design of the issuer’s due diligence measures is in conformity with the criteria set forth in the due diligence framework and whether the description of the issuer’s due diligence measures is consistent with the process undertaken by the issuer. Also include a description of the products that have not been found to be DRC Conflict Free, the facilities used to process the necessary conflict minerals in those products, the country of origin of the minerals and the efforts to determine the mine or location of origin of those minerals with the greatest possible specificity. File a Form SD that discloses the issuer’s determination and briefly describes the RCOI and due diligence measures taken and results thereof Is it less than two years after effectiveness of the rule (four years for Smaller Reporting Companies)? NO YES NO The Conflict Minerals Report must also include a description of products that are “DRC Conflict Undeterminable” and the steps taken or that will be taken, if any, since the end of the period covered in the last Conflict Minerals Report to mitigate the risk that the necessary conflict minerals benefit armed groups, including any steps to improve due diligence. No audit is required. YES Flow Diagram based on information provided by the SEC YES

High-Level SEC Compliance Roadmap 14 STEP 2 Due Diligence  Are you an SEC 13(a) or 15(d) “Issuer”?  Do you manufacture, or contract to manufacture products containing conflict minerals?  Are conflict minerals necessary to the functionality or production of the product manufactured by or for you?  Conduct a Reasonable Country of Origin Inquiry (RCOI)  Using an acceptable framework (i.e. Organization for Economic Cooperation and Development (OECD)), determine source and chain of custody of conflict minerals  Determine whether conflict minerals are from Covered Countries, scrap or recycled; describe methods and results  Prepare either a Form SD or a Conflict Minerals Report AND a Form SD describing the measures taken in Due Diligence  Obtain and certify an independent 3 rd party audit and report on methods and results  Disclose conflict minerals determination through filing Form SD and posting on publicly available company website STEP 3 Compliance Reporting STEP 1 Determine Applicability

Area of Focus for Most Companies Where are Companies Today? 15  Organizational readiness  Policies and procedure reviews  System and data review  Impacted product and vendor data collection  Organizational readiness  Policies and procedure reviews  System and data review  Impacted product and vendor data collection Prepare for the RCOI  Supplier education  RCOI survey process  Supplier response sufficiency review  Aggregated response analytics  Supplier education  RCOI survey process  Supplier response sufficiency review  Aggregated response analytics RCOI & Due Diligence  Prepare draft Form Specialty Disclosure (Form SD)  Prepare draft Conflict Minerals Report (CMR)  Prepare draft website disclosure language  Develop policy language  Prepare draft Form Specialty Disclosure (Form SD)  Prepare draft Conflict Minerals Report (CMR)  Prepare draft website disclosure language  Develop policy language Compliance Reporting Companies are progressing at different rates through the compliance process, but a number of companies are preparing for or are in the midst of their Reasonable Country of Origin Inquiry (RCOI) process.

Reasonable Country of Origin Inquiry (RCOI) 16

Reasonable Country of Origin Inquiry (RCOI) 17  Consistent with other areas, the SEC chose to leave term undefined  General guidance provided:  Must be reasonably designed to determine whether the conflict minerals originated in a Covered Country (or came from scrap or recycled sources)  Performed in good faith  Not necessary to hear back from ALL suppliers if it made a good faith inquiry and has a reasonable basis for concluding, based on the responses that it did receive, that its conflict minerals did not originate in a Covered Country  Specific steps “depend on each issuer’s particular facts and circumstances”  Disclose description of efforts and results on new Form SD, filed annually by May 31

Representations from Facilities and Suppliers 18  Company may meet its RCOI by asking facilities and suppliers for representations  Must have a reason to believe that the representations are true given the facts and circumstances  Cannot ignore warning signs or red flags  Requires more than simply “trusting” your supplier  A “conflict-free” designation by a recognized industry group that requires a private sector audit may suffice

Following the Reasonable Country of Origin Inquiry 19  File a Report on Form SD (disclose determination and briefly describe the inquiry process), but no need to file the Conflict Minerals Report if you determine for each Conflict Mineral that:  The conflict mineral did not originate in a Covered Country or came from recycled or scrap sources.  There is no reason to believe that the conflict mineral originated in a Covered Country or reasonably believes that the conflict mineral came from scrap.  Conduct Due Diligence (Step 2) if you determine either of the following:  The conflict mineral originated in a Covered Country and is not from recycled or scrap sources.  There is reason to believe that the conflict mineral may have originated in a Covered Country and has reason to believe the conflict mineral may not have come from recycled or scrap sources.

Due Diligence 20  If company determines based on the “reasonable country of origin inquiry” that the minerals originated in the DRC and did not come from recycled/scrap sources, or has reason to believe that they have may originated in DRC, conduct due diligence  Conduct due diligence on the source and chain of custody of the conflict minerals  Use a nationally or internationally recognized due diligence framework  Currently, only the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, and OECD Supplement for Gold (collectively, “Guidance”) are nationally or internationally recognized frameworks for due diligence

OECD Guidelines 21  Published Due Diligence Guide for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas in 2011  Published Supplement on Gold in 2012 which provides specific guidance on supply chain due diligence of gold from conflict-affected and high-risk areas  Distinguishes between the roles of and the corresponding due diligence recommendations addressed to upstream companies and downstream companies in the supply chain  “… supplier engagement approach … where issuers use a range of tools and methods … to determine if the further work outlined in the OECD guidance – due diligence – is necessary” – appears to be appropriate

OECD Due Diligence Framework 22 The SEC final regulation endorsed a Conflict Minerals Due Diligence framework developed by the OECD IDENTIFY AND ASSESS RISKS IN THE SUPPLY CHAIN DESIGN & IMPLEMENT A STRATEGY TO RESPOND TO IDENTIFIED RISKS 3RD PARTY AUDIT OF SMELTER/REFINER’S DUE DILIGENCE PRACTICES REPORT ANNUALLY ON SUPPLY CHAIN DUE DILLIGENCE ESTABLISH STRONG COMPANY MANAGEMENT SYSTEMS

 Purpose:Provide information on the due diligence the company has performed to ascertain its use of conflict minerals.  Content:Description of the due diligence measures taken, and the conflict minerals determination.  Consistency:OECD framework provides a standard which enables readers to assess the sufficiency of the company’s due diligence efforts. 23 Conflict Minerals Report DRC conflict free DRC conflict undeterminable Not DRC conflict free Conflict Minerals Report has specific requirements based on due diligence determination

24  DRC Conflict Free  Disclose inquiry and due diligence process  Obtain an independent private sector audit of its Conflict Minerals Report  Certify that it obtained such an audit  Include the audit report as part of the Conflict Minerals Report  Identify the Auditor  Not DRC Conflict Free  Disclose inquiry and due diligence process  Describe products that are not conflict free, facilities used to process them, the country of origin, efforts to determine the mine or location Due Diligence Determination

25  DRC Undeterminable  Temporary category for 2 years (4 years for smaller companies) if the company cannot determine whether the products are DRC Conflict Free  Describe products whose origin is undeterminable  Describe the facilities used to process the conflict minerals, the country of origin and the efforts to determine the mine or location of origin  Describe the steps taken, or that will be taken to mitigate the risk that the necessary conflict minerals benefited armed groups, including any steps to improve due diligence  No audit requirement necessary  After temporary period, undeterminable minerals will be presumed “Not DRC Conflict Free” Conflict Minerals Report must be posted on the company’s website

Independent Audit Requirement 26  The audit report and certification are part of the Conflict Minerals Report  Generally Accepted Government Auditing Standards (GAGAS) established by the GAO (the Yellow Book) should be applied  Audit report to express an opinion covering:  Appropriateness of the design of the due diligence framework in conformity with a nationally or internationally recognized framework  Accuracy of the description of the due diligence measures  Audit could be either:  Attestation audit  Performance audit (not required to be conducted by a CPA firm)  Include a statement that the company obtained the audit and identify the auditor  Other consulting firms (like Resources Global Professionals) can perform audits using the GAO Performance audit standards

Liability for Form SD and Conflict Minerals Reports 27  Form SD and Conflict Minerals Reports are “filed”  Liability for false or misleading material statements  Standard defense if company can prove it acted in good faith and had no knowledge that the statement complained of was false or misleading  Form SD must be signed by an executive officer, but not by the company’s directors

Conflict Minerals 28  Cost Estimate  SEC estimates that the initial costs of complying with the new rule is approximately $3 - $4 billion  Effective Date  All companies, regardless of their fiscal year ends, are required to provide a calendar year report  First report (excepting the 2 – 4 year deferral noted above) is due May 31, 2014 for the calendar year ended December 31, 2013

Challenges 29  Multiple layers of suppliers located in multiple countries makes tracing back to original source difficult  Minerals may be circulated through elaborate international channels  Supplier responses challenging to obtain  Supplier responses often inadequate Intel did a survey in 2009 on the origin of minerals used in their supply chain  Great variance in the amount of information suppliers knew about minerals in their supply chain  Verification systems needed to be implemented at the smelters  On-site conflict minerals reviews are necessary  Worked with Electronic Industry Citizenship Coalition and the Global e-Sustainability Initiative to develop process for independent 3 rd party smelter audits  Making information public to recognize those smelters that are processing conflict-free minerals Intel did a survey in 2009 on the origin of minerals used in their supply chain  Great variance in the amount of information suppliers knew about minerals in their supply chain  Verification systems needed to be implemented at the smelters  On-site conflict minerals reviews are necessary  Worked with Electronic Industry Citizenship Coalition and the Global e-Sustainability Initiative to develop process for independent 3 rd party smelter audits  Making information public to recognize those smelters that are processing conflict-free minerals

What Should Companies Be Doing Now? 30  Start with data collection  Familiarize yourself with OECD guidance  Review sourcing policies – they will be required to be disclosed  Review purchase, supply and manufacturing contracts – consider contractually obligating suppliers to ensure their products are conflict-free  Remember, any product manufactured in 2013 will be subject to the first report – so make sure process includes procedures for tracking the date of manufacture  Review disclosure controls and procedures  If you have operations or sell product into the EU, keep tabs on the EU Commission legislation