Equity Market Capitalisation – Bermuda’s domestic equity market is relatively small with only some 350 securities listed, with a total market capitalisation of some $US 160 million. Unfortunately, a breakdown of controllers as sought in this question is not available.

Effective Corporate Governance – The Bermuda Stock Exchange ("BSX") promotes effective corporate governance through the BSX Listing Regulations for Domestic Issuers, a copy of which is enclosed. In particular the Regulations contained in chapter 6, Issuers Continuing Obligations in each of Sections 2, 3 & 4. The BSX is supervised and regulated by the Bermuda Monetary Authority ("BMA") under the Bermuda Stock Exchange Company Act 1992. The BSX is a self-regulatory organisation. It has the statutory authority to adopt rules governing the conduct of its Trading Members and listed issuers and to enforce those regulations by bringing disciplinary proceedings. All the rules and regulations of the BSX are subject to the prior approval of the BMA.

The BMA was established by the Bermuda Monetary Authority Act 1969 as a body corporate, with a Board of Directors who are responsible for the policy of the Authority and the general administration of its affairs and business. The objectives of the BMA include the following:

To supervise, regulate and inspect any financial institution which operates in and from within Bermuda;

To promote the financial stability and soundness of financial institutions;

To supervise, regulate or approve the issue of financial instruments by financial institutions or by residents;

To foster close relations between financial institutions themselves and between the financial institutions and the Government; and

To advise and assist the Government and public bodies on banking and other financial and monetary matters.

Special Governance Rules – The Companies Act 1981 ("CA") applies to all bodies corporate in Bermuda and sets out the corporate governance rules in general and with special provisions for the governance of mutual funds. There are no specific provisions for state owned companies or for banks.

The Rights of Shareholders

Basic Rights afforded to shareholders: The CA provides for specific shareholder rights as outlined in later questions, however, there is no general codification of shareholder rights in the CA. Subject to CA and to common law, rights of shareholders are in accordance with the bye-laws of the Company or the memorandum of association.

Ownership Registration and Transfer of Shares:

Shares are registered in the company's register of members and may be in certificate or book-entry form. The BSX introduced in 2001 the Bermuda Securities Depository ("BSD") which permits the holding of securities in book entry form (through a central securities depository) and the electronic clearing and settlement of market trades. The BSD is the clearing, settlement and depository service which enables the seamless trading and settlement of dematerialized securities. Trades executed on the BSX are settled on their due date by the transfer of interests in securities from the account of the seller to the account of the buyer by book entry movement.

The register of members is normally open for inspection daily at each company’s registered office (it may be closed for a maximum of 30 days in a year after the giving of notice by advertisement in an appointed newspaper, e.g. when a dividend is payable). It is possible for shares to be held in the name of nominees, as a result of which the ultimate beneficial ownership may not be known to the company concerned or its shareholders.

There are no general provisions. However, foreign ownership of local companies is restricted to a maximum of 40%.

Participation and Voting in General Shareholder Meetings:

Yes. Five (5) days written notice is to be given along with information regarding the general nature of the business to be considered. (CA. s.70,71)

Yes. Any shareholder may present questions to the board at shareholder meetings. Additionally, shareholders representing at least one tenth (1/10) of paid-up capital, or in the case of a company not having share capital one tenth (1/10) of the total voting rights, may requisition the directors to hold a special general meeting. The requisition must state the purposes of the meeting, must be signed by the requisitionists and deposited at the registered office of the company. (CA. S.74)

Yes. Shareholders may vote by proxy in accordance with the bye-laws of the Company. Telephonic, electronic or other communication facilities which permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously may be used unless the bye-laws otherwise provide. (CA.s.75A)

Fundamental Corporate Changes

Change of name

Yes. All fundamental changes must be approved by a meeting of the shareholders or a written resolution signed by all shareholders prior to the change.

Yes.

Shareholder meeting or written resolution signed by all shareholders.

Yes, special meetings may be held (see 6(b) above). However, there are no special majorities required. A simple majority of votes cast will determine the outcome unless there are specific restrictions in the bye-laws or memorandum of association.

Acquisition of Corporate Control: If anyone makes any material investments outside of the ordinary and usual course of business of the issuer (being any investments equal to or greater than 20% of the higher of the book value of the consolidated net tangible assets or trading profits of the group) or the purchase of long term assets for a significant amount, this must be disclosed in the interim report and annual report. [BSX Listing Regulations Section IIA, 6.13(2)(ii)].

Shareholder Arrangements: The legislation does not specifically deal with this. However, rights would have to be defined in the bye-laws of the Company or the memorandum of association, and be disclosed to all shareholders.

The Equitable treatment of Shareholders

Voting Rights

Shareholder Meetings

(a) and (b) Five days written notice. Notice must include the place, the day and hour of the meeting and general nature of the business to be considered. There are annual general meetings which have to be held annually. All other meetings other than annual general meetings may be called as required and are called special meetings. (CA s.71)

(c) No.

Special general meetings can be requisitioned where shareholders representing at least 10% of the shares so determine. Under section 110 the Minister has powers to appoint an inspector to investigate the affairs of a company in relation to concerns brought to him by any members and to direct the company to take particular actions if he believes the company is carrying on its affairs in a manner detrimental to the members. Under section 111 of the Companies Act the Registrar or the Minister may petition the court for relief where there is evidence of prejudicial or oppressive conduct. If for any reason it is impracticable to call a meeting in any manner in which meetings of that company may be called, or to conduct the meeting of the company in manner prescribed by the bye-laws or this Act, the Court may, either of its own motion or on the application of any director of the company or member of the company who would be entitled to vote at the meeting, order a meeting of the company called, held and conducted in such a manner as the Court thinks fit, and where any such order is made give such ancillary or consequential directions as it thinks expedient. (CA s 76(1))

By written resolution signed by all members of the company. (CA. s.77A)

Dispute Resolution

Application to the Court.

No formal provision, but alternative dispute resolution arrangements are well developed in Bermuda.

Insider Trading –Regulation 6 of the BSX’s Trading Membership Regulations provides that the BSX has the authority to investigate and review any alleged breach of these Regulations or other misconduct on the part of a trading member and to impose such penalty with respect to any such breach or misconduct as is proved to its satisfaction as it deems appropriate in the circumstances. Misconduct includes, among other things, insider trading. There is currently no general prohibition against insider trading. However, the Bermuda Government intends to introduce legislation in 2002. The IBA, General Business Conduct and Practice Code of Conduct sets out the high standards of integrity and fair dealing in the conduct of investment business and includes a prohibition against insider dealing for licensed entities.

Conflicts of Interest

There is a prohibition of loans to directors without the consent of the members. Without the consent of any member or members holding in the aggregate not less than nine-tenths of the total voting rights of all the members having the right to vote at any meeting of the members, it shall not be lawful for a company to make a loan to any person who is its director or a director of its holding company, or to enter into any guarantee or provide any security in connection with a loan made to such person as aforesaid by any other person. (CA s96). Every officer of a company in exercising his powers and discharging his duties is also required to act honestly and in good faith with a view to the best interests of the company; and exercise the care, diligence and skill that a reasonable prudent person would exercise in comparable circumstances. (CA s97).

Yes.

Yes.

Yes.

Yes. The BSX Listing Regulations describe the various disclosable events in Section IIA, 6.13 and 6.144(2)(ii) and (iii).

Stakeholder participation in corporate governance: The legislation does not specifically address this issue. However, it is in accordance with the bye-laws of the Company or the memorandum of association.

Protection of stakeholder interests: Any stakeholder can apply to the courts for protection.

The financial and operating results of the company: Company law requires the laying of financial statements before the members of a company in an annual general meeting. There is a provision to waive this requirement but only if all shareholders agree. Section 84 of the Companies Act sets out the matters which must be included within the financial statements. Financial statements are to accompany all forms of prospectus offering securities to the public. If the Company holds an IBA licence, the financial information must be disclosed to the BMA. All public companies, private companies meeting the size requirement and companies that hold client assets under the IBA must have their statements audited by an auditor from an "approved" list of auditors.

Company objectives are in the bye-laws of the Company or the memorandum of association.

Major share ownership (the names of all shareholders of the issuer who own or control, directly or indirectly, 5% or more of the shares of the issuer and their respective shareholdings) is to be disclosed in the Form of Letter of Application [BSX Listing Regulations, Section IIA, Appendix 1, s(2)(vi)]. Voting rights are to be disclosed in the contents of the prospectus. [BSX Listing Regulations, Section IIA, Appendix 2, s(19)(1)].

Members of the board and key executives are disclosed in the interim financial report and the annual report [BSX Listing Regulation, Section IIA, 6.9(2)(x)(a) and 6.13(2)(vii)].

Material foreseeable risk factors are disclosed in the interim financial report and the annual report [BSX Listing Regulation, Section IIA, 6.9(2)(xi)].

Material issues regarding employees and other stakeholders are disclosed in the interim financial report and the annual report [BSX Listing Regulation, Section IIA, 6.9(2)(xi) and 6.13(2)(i)].

Governance structures and policies are disclosed in disclosed in the interim financial report and the annual report [BSX Listing Regulation, Section IIA, 6.13(2)(vi)].

18. Financial Statements and Audits:

All auditors must use Generally Accepted Accounting Principles ("GAAP") and Generally Accepted Auditing Standards (‘GAAS") which are applicable in Canada and Bermuda, the U.S., the U.K. or International Accounting Standards. Under these standards financial statements are always to be prepared on the going concern basis unless otherwise stated. All notes in the financial statements or the Management Discussion and Analysis ("MD&A") in the Annual Report are also subject to these high levels of auditing standards and accounting principles.

Yes.

By the members of the company at the annual general meeting.

Yes. Generally Accepted Auditing Standards ("GAAS") which are followed in Canada and Bermuda establish the auditing standards and ensure auditors’ independence and responsible professional conduct. The Minister of Finance may appoint the GAAS of any other jurisdiction as well.

The auditor cannot be an officer or employee of the company or an affiliated company or a partner, employer or employee of any such officer or employee. Auditors’ independence requirements are set out by the rules of the Institute of Chartered Accountants of Bermuda (ICAB) which are those of the Canadian Institute of Chartered Accountants (CICA).

Each Company may use its own method of sharing information with its stakeholders pursuant to the memorandum or bye-laws of company. This may be in paper form via mailings or via the internet.

N/A.

21. Structure of the Board –

The shareholders in the annual general meeting.(CA s.91)

Pursuant to Memorandum or bye-laws of the company .

By remaining directors if a quorum is maintained or by shareholders in general meeting in the absence of a quorum

Yes. Publicly available at the registered office of the company.

Yes.

Any person being an undischarged bankrupt is not to take part in the management of a Company. (CA s94). In addition, the Court may order that a convicted person shall not take part in the management of the affairs of a company. (CA s95).

There are no maximum terms; and no separate classes of board members.

No (other than in the case of certain regulated financial service businesses).

Compensation of the Board: Yes. Pursuant to the bye-laws of the Company.

Structure and Functioning of the Board: Pursuant to the bye-laws of the Company.

Functioning of the Board

Items i to vii are normal board functions.

(i) All officers, including directors, owe a duty of care in discharging their duties and may be sued for a breach of their duty of care.

(ii) Yes.

(iii) Yes.

No.

(c) Every officer of a company in exercising his powers and discharging his duties shall act honestly and in good faith with a view to the best interests of the company; and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. (CA s94).

Board Independence

(a) No. Details of the election of directors are found in CA s91.

(b) Yes. These are governed by the bye-laws of the Company.

There are no limitations on the number of board positions that a member may hold.

Board access to relevant information

It is part of proper corporate governance that the Board is to have access to any relevant information which they may need to make corporate decisions. Details of what information needs to be disclosed is described in the BSX Listing Regulations.

The Responsibilities of the Supervisory Board

Bermuda does not have provisions for a two-tier board system.

N/A.