Conflict Minerals

1. Conflict Minerals June 12, 2014

2. Agenda • What is Conflict Minerals? • How does a company ensure Conflict Minerals Compliance? • What is the impact CM Supply Chain & Suppliers? • Q & A

3. What is Conflict Minerals? (Dodd-Frank Section 1502) • The four conflict minerals, also referred to as “3TG metals” or “3TGs” are: • Tantalum • Tin • Tungsten • Gold • The SEC’s Conflict Minerals rule requires public companies to determine: • whether “conflict minerals” are contained in their products, and • if so, whether they are sourced from the DRC or surrounding countries (together, the “Covered Countries”). 3

4. Electronics Industry is in the middle this:

5. Conflict Minerals Rule Compliance Overview • First of the annual SEC filings is due no later than May 31, for previous calendar year. • Compliance requirements include: • Step 1: Determine whether each product is subject to conflict minerals rules • Yes, if conflict minerals are “necessary to production or functionality” of a product that we sell and that we manufacture or “contract to manufacture” • Step 2: Develop and conduct reasonable country of origin inquiry (“RCOI”) • If we know or have reason to believe that conflict minerals in our products originated in the covered countries, and did not come from scrap or recycled sources, must proceed to Step 3 (Supply Chain Due Diligence) • Step 3: Exercise due diligence on the source and chain of custody of our conflict minerals (follow recognized framework UN OECD) • Must ultimately determine whether our purchase of parts/components containing 3TGs is financing the rebel groups in the DRC

6. Step 1 -- Determining Product-Level Applicability The process of determining if products are covered under the conflict minerals rules involves multiple validations. Note – products that cannot be ruled out must be left in-scope. Product E Product C Product A Product D Product Applicability Considerations Product B • Product sold to a customer, during the reporting year • For service companies this is more difficult in that primarily services are being sold, Enter “Stream of Commerce”? Product D • If manufacture, or contract with a 3rd party to manufacture, a component or product, then it remains in scope and needs to be examined for conflict minerals. • If some influence over the manufacturing or design of any components or parts, they should remain in consideration. • If unknown whether components/products contain CM, then must inquire of suppliers (reasonable country of origin inquiry (RCOI)). Product A Product B Manufacture or Contract to Manufacture Product? Product B Product D • necessary to functionality; necessary to production: if the 3TG is contained in a product that we manufacture or that is manufactured for us, and is intentionally added, it is in scope. Contain 3TG? Product B In-Scope Products

7. Step 2 --Conducting Reasonable Country of Origin Inquiry • Companies are required to conduct and inquiry to the suppliers of the 3TG parts as to the source and status of the minerals. Requesting a response at the part levelis needed to know your source mineral for products sold.

8. Step 3 –Due Diligence – Smelter Certifications • As a result of the RCOI , companies who knew some or all of their mineral sources would list them. http://www.conflictfreesourcing.org/

9. Step 2 –Why Conflict Free is so hard to achieve Example : Part containing 3TG – Supplier response at Company Level This supply chain remains undetermined, this response is not for a part, rather for all the parts from a supplier. Even with the Smelters listed and Conflict Free, it still does not tell what sources and origins for a particular part.

10. Step 3 Due Diligence • We are required to perform due diligence on any suppliers responses that source from the DRC or adjoining countries according to a specific recognized framework. OECD DD Guidance is 5 step process. http://www.oecd.org/daf/inv/mne/GuidanceEdition2.pdf

11. 5 Steps

12. Independent Private Sector Audit (ISPA)* • Each company that is required to furnish a conflict minerals report must also obtain and furnish an independent audit of the report. (to start 2 yrs. for big, 4 yrs. for small cos. - no audit needed) • Option for an Attestation or Performance Audit (done by CPA or by certified non-CPA auditor) • „„Auditor to examine the design of the due diligence framework described is accordance with a nationally or internationally accepted framework and that the due diligence described is actually what the company undertook. * Intel is the only company I am aware of that had an ISPA. *

13. Wall Street Journal June 2, 2014 “Conflicted Disclosure” *expected no. to be 5,000 to 6,000 http://online.wsj.com/news/article_email/companies-detail-use-of-conflict-metals-1401751678-lMyQjAxMTA0MDAwNDEwNDQyWj

14. Conflict Minerals Impact on Supply Chain and Suppliers • Suppliers of Conflict Minerals must : • Comply with Company CM Policies • RFX will include CM Conflict Free parts as a requirement • Source Minerals from Certified Smelters • Participate in providing transparency even if not subject to rule • Project target date when conflict free souring is realized • Supply Chains will: • Begin to organize around conflict-free sources • Smelters not certified may lose business to certified

15. Q&A Final Rule: UN OECD Guidance: Conflict Free Initiative: (EICC/ GeSI Template and Smelter Program) http://www.oecd.org/daf/inv/mne/GuidanceEdition2.pdf http://www.conflictfreesourcing.org/conflict-minerals-reporting-template/ http://www.conflictfreesourcing.org/conflict-free-smelter-program/ http://www.sec.gov/rules/final/2012/34-67716.pdf