April 19, 2005

1. April 19, 2005 A CPE-Qualified Web Seminar: Jobs Creation Act Section 965: Repatriation BDO Seidman, LLP Speakers: Shawn Carson, Partner International Tax Consulting Group Daniel McMann, Partner International Tax Consulting Group Robert Pedersen, Partner International Tax Consulting Group The Royal Bank of Scotland Speaker: Michael Anthony, Managing Director Corporate Derivatives & Foreign Exchange Sales

2. About this Seminar... This interactive seminar will be divided into two sections. Part I which will be presented today and Part II which will be presented on Tuesday, April 26th. Part I of this interactive seminar will cover dividend repatriations under Section 965 with focus on: • Calculating Qualifying Dividends; • An Overview of the Domestic Reinvestment Plan; • Permitted and Non-Permitted Investments; • Funding the Distribution and Related Issues; and • Documentation and Audit Trail.

3. About this Seminar... Part II of this interactive seminar will cover dividend repatriations under Section 965 with focus on: • Identifying Appropriate Earnings Pools; • Tax Efficient Repatriation Methods; • State and Local Tax Implications; and • Calculating U.S. Tax and FAS 109 Implications

4. AMERICAN JOBS CREATION ACT OF 2004 Overview of the American Jobs Creation Act of 2004 – Section 965 • Signed Into Law On October 22, 2004 • Repealed Previous Tax Incentive Regimes • Allows a temporary elective 85% dividends received deduction for cash dividends paid by CFCs to U.S. corporate shareholder • Effective for amounts received during the last taxable year beginning before October 22, 2004 or the first taxable year beginning during the one-year period starting on October 22, 2004

5. AMERICAN JOBS CREATION ACT OF 2004 Today’s Topics • Calculating Qualifying Dividends • Overview of the Domestic Reinvestment Plan • Permitted and Non-Permitted Investments • Funding the Distribution and Related Issues • Documentation and Audit Trail

6. Calculating Qualifying Dividends Presented by Robert Pedersen, BDO Seidman, LLP

7. AMERICAN JOBS CREATION ACT OF 2004 Calculating Qualifying Dividends – An Overview • CFC dividends must be cash only • CFC dividends must exceed the “base period amount” • Upper limit on dividends eligible for dividends received deduction • Time frame: for calendar year taxpayers in 2004 or 2005 • Form 8895

8. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends • Must be paid in cash - This includes cash in U.S. and foreign currency, as well as, cash amounts included in gross income as dividends under Sections 302 and 304 • Subpart F inclusions will qualify provided the associated previously taxed income is repatriated to the U.S. company before the close of the election period (i.e., if a CFC has $100 of PTI and $50 of taxable E&P, the CFC must distribute $150 in order to have $50 of eligible dividends).

9. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends • Not eligible for deduction - Cash Equivalents • Investments in U.S. property by CFCs (section 956) • Deemed dividends on the disposition of CFC stock (section 1248) • Subpart F inclusions, in general • Most amounts included in the gross income of a U.S. company under section 367 (with exception for certain cash inbound liquidations) • Amounts treated as dividends under section 78 gross-up (subject to Technical Corrections Bill)

10. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends – Base period • The base period comprises the 3 taxable years which are among the 5 most recent tax years of the U.S. company ending on or before June 30, 2003 (disregarding the year for which such total amount is the highest and the lowest among such 5 years). • Eligible dividends are limited to the excess (if any) of the dividends received during the taxable year over the annual average for the base period of years of: • The dividends received during each base period year by such shareholder from CFCs; • The amounts includible in such shareholder’s gross income for each base period year for CFC’s with respect to investment of earnings in U.S. property; and • The amounts that would have been included for each base period year but for previously taxed earnings and profits with respect to CFCs.

11. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends – Upper limit • Deduction is limited to the greater of - $500 million; - the earnings reported on the company’s financial statement certified on or before June 30, 2003, as permanently reinvested outside the U.S.; or - in the case of failure to show earnings but shows a specific amount of U.S. tax liability attributable to such earnings, the amount of such tax liability divided by 35% • The amount of dividends eligible for the deduction is reduced by any increase in related-party debt on the part of the CFC between October 3, 2004 and the close for the tax year for which the deduction is being claimed (all CFCs with respect to which the taxpayer is a U.S. shareholder are treated as a single CFC).

12. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends Dividends to intermediary pass-through entities (Notice 2005-10) • If CFC distributes dividend to pass-through, the same amount needs to be remitted to U.S. shareholder in order to qualify • Loan from hybrid to parent does not qualify as “dividend” – any obligation to repay is not a distribution of cash • Unclear on whether a pass-through which uses a CFC dividend to “pay down” pre-existing debt will qualify.

13. AMERICAN JOBS CREATION ACT OF 2004 Eligible Foreign Dividends – Other Considerations Cash dividend not reduced • May not be reduced by expenses or deductions of the taxpayer, including foreign withholding tax and U.S. federal, state or local income tax imposed

14. Domestic Reinvestment Plan Presented by Daniel McMann, BDO Seidman, LLP

15. AMERICAN JOBS CREATION ACT OF 2004 General Requirements - Procedural The plan must • Be in writing and approved by the company’s president, CEO or comparable officer before any dividend is paid; • Be subsequently approved by the company’s board or similar body;

16. AMERICAN JOBS CREATION ACT OF 2004 - Content • Describe specific anticipated U.S. investments in reasonable detail and specificity; • State a reasonable time period during which the company anticipates completion of the investments; • State the total dollar amount for each principal investment (precise amounts for each component is not necessary); • Invest the gross amount of qualified cash dividend (i.e., taking into consideration any withholding tax at time dividend is paid); • Provide for alternative investments to be made in the event the principal investments specified cannot be made.

17. AMERICAN JOBS CREATION ACT OF 2004 Amendments to Plan • Generally, plan may not be modified or amended after payment of the dividend • Transition rule allowed for amendments through March 14, 2005 for plans approved prior to January 13, 2005

18. AMERICAN JOBS CREATION ACT OF 2004 Segregation or Tracing of Funds • Tracing or segregation is not required although strongly suggested for purposes of accounting for repatriated funds • Non-permitted investments made during the Plan period generally will not affect the eligibility of the dividend under Section 965

19. Permitted and Non-Permitted Investments Presented by Shawn Carson, BDO Seidman, LLP

20. AMERICAN JOBS CREATION ACT OF 2004 Permitted Investments Funding of worker hiring, training and other compensation • Compensation-related expenditures (other than executive compensation) for existing and newly hired workers; and • Funding a qualified employee benefits plan (within meaning of section 401(a)) • Expenses must be borne by taxpayer • Full compensation and withholding taxes borne by the employee should be a permitted investment • Employer’s payroll taxes are NOT permitted investments

21. AMERICAN JOBS CREATION ACT OF 2004 Infrastructure and Capital Investments • Expenditures incurred to purchase, develop, rent, license or improve physical installations and facilities; and • Other assets integral to conduct of a business (i.e. property, plant & equipment, communications & distributions systems, computer hardware & software, databases,and supporting equipment) • Routine maintenance is not allowed • Sales tax paid upon purchase is not a permitted expenditure

22. AMERICAN JOBS CREATION ACT OF 2004 Research and Development • Expenditures incident to the development or improvement of products as defined under Section 174 • Must be attributable to services performed in the U.S. • Workers are not required to be employees of taxpayer • Expenditures reimbursed through cost-sharing and similar arrangements are not permitted • If R&D costs are permitted investments, they may not qualify for the R&D credit

23. AMERICAN JOBS CREATION ACT OF 2004 Financial Stabilization of the Corporation for the Purposes of Job Retention or Creation • Repayment of debt (other than intercompany obligations) No transitory debt allowed • Qualified plan funding (payments to fund a qualified employee benefits plan within the meaning of Section 401(a)) • Other * At time the domestic reinvestment plan was approved, it is the reasonable business judgment of the taxpayer that such expenditure will be a positive factor in its ability to retain and create jobs

24. AMERICAN JOBS CREATION ACT OF 2004 Acquisitions of Interests in Business Entities • Acquisitions of interests in domestic or foreign business entities to the extent that (i) the percentage of the total value of the business entity’s assets (owned directly or indirectly) would be a permitted investment under the Notice, if acquired directly, and (ii) the taxpayer directly or indirectly owns at least 10% of the value of such business entity • Need to look to assets and determine if direct acquisition of assets would have been okay

25. AMERICAN JOBS CREATION ACT OF 2004 Advertising and Marketing • Expenditures for advertising and marketing with respect to enhancing the corporation’s trademarks, trade names, brand names, or similar intangible property

26. AMERICAN JOBS CREATION ACT OF 2004 Intangible Property • Expenditures to purchase or license rights to intangible property to the extent the rights to the intangible property are used in the U.S.

27. AMERICAN JOBS CREATION ACT OF 2004 Non-Permitted Investments In General • Executive compensation; • Intercompany distributions, obligations and transactions • Dividends and distributions with respect to the taxpayer’s stock; • Stock Redemptions • Investments in less-than-10%-owned business entities; • Acquisitions of debt instruments; and • Payments of federal, state, local, or foreign taxes,including interest and penalties and foreign withholding tax

28. AMERICAN JOBS CREATION ACT OF 2004 Executive Compensation • Compensation paid, directly or indirectly, by or on behalf of, the taxpayer, to any current or former employee, in exchanges for services performed by the taxpayer, if the individual is- • An employee subject to Section 16(a) of the Securities Exchange Act of 1934 • An employee who would be subject to such requirements if the taxpayer were an issuer of equity securities referred to in such section; or • A former employee who was described above at the time of his severance from employment

29. AMERICAN JOBS CREATION ACT OF 2004 Other Practical Issues • Segregation of funds • Accounting and coordination with general ledgers

30. Funding the Distribution and Related Issues Presented by Michael Anthony, The Royal Bank of Scotland

31. Steps to Consider • Decide Amount to Repatriate • Decide if Funding is Needed • Choose Type of Funding • Foreign Exchange and Risk Management Issues

32. Funding Considerations • Credit Capacity • Rating • Credit Enhancements • Thin Cap Rules • Projected Cash Flow

33. Background on the US Dollar • With the passing of the Homeland Investment Act (HIA), a number of corporations will have the need to buy USD/sell foreign currency over the course of this year • Since the start of 2005, we have seen a general uptrend in the US dollar, meaning that, from an FX perspective, repatriating foreign funds to the US is becoming increasingly expensive • Factors that will lend to more USD strength: • The Fed’s promise to continue raising rates • Promises of a shrinking trade deficit • Plans to cut the budget deficit in half

34. Basic Hedging Solutions • SPOT CONTRACT • You may buy USD/sell currency for settlement in two days • Implications: • Provides no protection against market movements until trade is transacted • Zero-Cost • FORWARD CONTRACT • You may buy USD / sell currency to settle at a future date • Rate is “locked in” • Implications: • Provides a “worst case scenario” rate • Unlimited upside if USD appreciates • Unlimited downside if USD depreciates • Zero-Cost

35. Basic Hedging Solutions (con’t) • VANILLA OPTIONS CONTRACT (USD Call/CURRENCY Put): • Gives you the right but not the obligation to buy USD at a predetermined strike rate • Implications: • Unlimited upside if USD appreciates (exercise option) • Unlimited upside if USD depreciates (buy USD/sell currency in the spot market) • Cost: Option Premium

36. Tailored Hedging Solutions • COLLAR: • Provides you with a hedge range (e.g. 1.26 -1.33 in the EUR) • Implications: • You may sell EUR at 1.26 (your worst case scenario rate) anywhere below 1.26 • You may benefit in the spot market and sell EUR anywhere between 1.26 and 1.33 • Anywhere above 1.33, you are required to sell EUR at 1.33 • Zero-cost • 50% PARTICIPATING FORWARD: • Implications: • Like a forward in that it provides a worst case hedge rate and unlimited upside if USD appreciates • Unlike a forward, if USD depreciates, you are only 50% exposed and may buy the other 50% at the more advantageous spot rate • Zero-cost

37. Execution Strategy & Risk Management • Execution Strategy: • Large Transaction – view driven • Average in over time • Risk Management: • Subsidiary is now more levered • Weigh business risk vs. financial risk • U.S. Corporate is buying back debt • Re-measure fixed / float mix

38. Documentation and Audit Trail Presented by Daniel McMann, BDO Seidman, LLP

39. AMERICAN JOBS CREATION ACT OF 2004 Documentation Making the Election • Complete Form 8895 and file with timely filed tax returns (including extensions) • If election made prior to issuance of Form 8895, election is made by attaching a statement to the taxpayer’s timely filed tax return (including extensions)

40. AMERICAN JOBS CREATION ACT OF 2004 Annual reporting requirements • A statement that the attachment is submitted as required • A general description of any permitted investment made pursuant to the plan, including a calculation showing the percentage of completion • A reconciliation of the specific expenditures for each investment • A statement that indicates the use, if any, of alternative investments • Any additional applicable items

41. AMERICAN JOBS CREATION ACT OF 2004 To be provided to IRS upon request • Records with reasonable detail of the amounts invested in the U.S. pursuant to the plan • A copy of the plan and supporting documents

42. AMERICAN JOBS CREATION ACT OF 2004 Safe harbor provided if- • Substantively, expenditures of at least 60 percent of the amounts committed to permitted investments have been made; or • are subject to a commitment entered into with an unrelated party; • by the end of the second taxable year following Section 965 election year; and • constitute permitted investments. • In addition, the taxpayer must satisfy the annual reporting requirements.

43. AMERICAN JOBS CREATION ACT OF 2004 Forthcoming guidance • Issues to be addressed in future notices include clarification relating to foreign tax credits and expense allocation, adjustments for the calculation of the base period amounts to take into account mergers, acquisitions, and spin-offs, and rules regarding controlled groups • Technical Corrections Act of 2004: has been introduced but not yet finalized

44. AMERICAN JOBS CREATION ACT OF 2004 Please join us April 26th for Part II of Section 965 Repatriation which will cover: • Identifying and qualifying appropriate earnings pools • Tax efficient repatriation methods • State and local tax implications • Calculating U.S. tax and FAS 109 implications

45. Robert C. Pedersen, CPA, JD, LL.M. Partner, International Tax Consulting Group BDO Seidman, LLP, New York City Areas of Specialization Taxation for multinational companies. Consulting with companies both in the U.S. and overseas relating to the creation of tax efficient structures for inbound and outbound financing. Experience Robert Pedersen has over 18 years of public accounting experience which includes 13 years of experience in the taxation area. He has been a member of the International Tax Consulting Group of the New York office for over 11 years. Robert's primary role is advising clients regarding multinational reorganizations and formation of foreign enterprises. His focus is advice relating to creating tax efficient structures for both inbound and outbound financing. Education • LL.M., Taxation, New York University School of Law • Juris Doctor, Fordham University School of Law • Bachelor of Arts in Accounting (with Honors), Rutgers University Professional Affiliations • NYS Bar Association - Tax Section; Active Member of Committees for Inbound and Outbound Transactions • American Institute of Certified Public Accountants • International Fisc Association (NY Branch) rpedersen@bdo.com (212) 885-8398

46. DanielMcMann, Jr., CPA Partner, International Tax Consulting Group BDO Seidman, LLP, Detroit Experience Dan has more than 15 years of experience in the international tax arena. He has assisted both U.S. and foreign multinationals in developing tax efficient cross-border structures and strategies to reduce their worldwide effective tax rate. These strategies include the use of off-shore holding companies, intangible companies and hybrid entities. Dan has assisted U.S. multinationals in the implementation of tax efficient supply chain management structures through the use of commissionaire and contract manufacturing arrangements. He has also worked with U.S. companies in developing tax effective repatriation plans to minimize double taxation through foreign tax credit planning and transfer pricing analysis. Prior to joining BDO Seidman in 2003, Dan spent nine years with Ernst and Young working in the international tax arena and four years with KPMG, including a two-year rotational assignment in Frankfurt, Germany. Dan is a member of the International Tax Specialty Group at BDO Seidman, LLP. Education • M.S., Taxation, University of Toledo • B.B.A., University of Toledo Professional Affiliations • American Institute of Certified Public Accountants • Ohio Society of Certified Public Accountants • International Fiscal Association • Association for Corporate Growth dmcmann@bdo.com (248) 244-6507

47. Shawn N. Carson, ACA Partner, Head of BDO’s National Tax Office BDO Seidman, LLP, New York Areas of Specialization International tax consulting for corporate clients. Particularly U.S. - European investment, both inbound and outbound. Individual taxation issues affecting employees, and owners of closely held companies. Experience With over sixteen years’ experience in international taxation, Shawn is experienced in all forms of international structuring, restructuring, financing and M&A work. His primary focus is advising on tax efficient structures for U.S. companies investing overseas (particularly into Europe), and European companies investing into the U.S. Shawn also has significant experience in transfer pricing, having worked on projects with several major U.S. and U.K. multi-nationals to implement or defend pricing policies including APA’s as well as international real estate taxation where his clients have included several U.K. public property companies, and German and U.S. investment funds. Prior to joining the New York office of BDO Seidman, LLP full time in 1996, Shawn split his time between London and New York, gaining expertise in the tax systems of Europe as well as the U.S. Education • BS, Mathematics, University of Warwick, UK • MS, Mathematics, University of Warwick, UK Professional Affiliations Institute of Chartered Accountants in England and Wales British American Business Inc. scarson@bdo.com (212) 885-8447

48. Michael D. Anthony Managing Director Head of Corporate Derivatives and Foreign Exchange Sales RBS Greenwich Capital Markets Experience Michael D. Anthony is a Managing Director with RBS Greenwich Capital Markets. He is currently the Group Head of Corporate Derivatives and Foreign Exchange sales in North America. Previously, he spent 15 years with JPMorgan. Before JPMorgan, Mike served as an Engineer Officer in the U.S. Army with assignments in Germany, Virginia and North Carolina. Following his active duty service, he worked as a civil engineer for Turner Construction Company. Education • B.S. Degree in Engineering from the United States Military Academy, West Point • M.B.A from the Johnson School of Management, Cornell University. anthonm@gcm.com (203) 618-6305

49. Thank you… Shawn Carson, Partner BDO Seidman, LLP International Tax Consulting Group Daniel McMann, Partner BDO Seidman, LLP International Tax Consulting Group Michael Anthony, Managing Director RBS Corporate Derivatives & Foreign Exchange Sales Robert Pedersen, Partner International Tax Consulting Group