Public offering – Auditing Committee

1. Auditing Committee. Deadline for the initiation of the procedure to implement the Auditing Committee

By May 27, 2003 all companies making public offer of their stock should have initiated the procedure to implement the Auditing Committee as required by Section 15 of Decree No 677/2001.

This deadline was established by General Resolution No 401 (modified by the General Resolution No 402) of the Comisión Nacional de Valores (“CNV” – Argentine Securities Commission), which implements Decree No 677/2001.

By May 27, 2003, the following acts must have taken place:

(i) drafting of the structure of the Auditing Committee and of the minimum requirements to qualify as a member of the Auditing Committee;

(ii) drafting of a plan with the principal measures to be taken by the Auditing Committee and the means necessary for it to function;

(iii) drafting of a training program for the Auditing Committee members;

The following briefly explains the main issues concerning the creation of the Auditing Committee and its functions.

1.1 General Points

Section 15 of Decree No 677/2001, that regulates the Transparency System of the Public Offer, states that the companies making public offer of their stock must create an Auditing Committee. Said Section also states that the Auditing Committee must be constituted by three or more members of the Board of Directors. The majority must be independent, as this term has been defined by the CNV.

Section 13 of General Resolution of the CNV No 400/2002 states that, except otherwise provided in the company’s by-laws, the Auditing Committee members shall be elected by simple majority of the members of the Board of Directors. The Auditing Committee members must have experience in corporate, financial and accounting issues.

The above mentioned Section 13 also states that the appointment of the members of the Auditing Committee, as well as every subsequent change, must be notified by the company to the CNV and to the stock exchange entities where they are listed, within three days of the occurrence or knowledge of such appointment or change.

The obligation of the creation of the Auditing Committee is applicable only for the companies that makes public offer of their stock and not for companies making public offer of other securities.

1.2 Rights and Obligations of the Auditing Committee

Section 15 of Decree No 677/2001 and section 16 of the General Resolution of the CNV No 400/2002 state the following rights and obligations of the Auditing Committee:

(a) To express an opinion on the Board of Directors’ proposal to appoint the external auditors of the company and to supervise their independence;

(b) To monitor the correct functioning of the internal control systems and the administrative-accounting system and its trustworthiness, as well as the trustworthiness of all of the financial data or any other relevant information to be filed with the CNV or to the stock exchange entities in compliance with the applicable informative regime;

(c) To monitor the use of policies related to information on the company’s risk management;

(d) To disclose to the market complete information concerning the transactions where there is a conflict of interests with the company's authorities or with a controlling shareholder ;

(e) To express an opinion about the proposals made by the Board of Directors on Directors’ fees and stock option plans;

(f) To express an opinion on the fulfillment of legal requirements as well as on the reasonability of the terms and conditions of stock or securities convertible into stock in case of a capital increase excluding or limiting preemptive rights;

(g) To supervise the fulfillment of applicable rules of conduct;

(h) To express a founded opinion in respect of transactions with related parties in those cases foreseen by Decree No 677/2001. To express a founded opinion and communicate it to the stock exchange entities as determined by the CNV, when a conflict of interests exists or may exist;

(i) To review the plans of the external and internal auditors, to evaluate their performance and to express an opinion on it at the time of presentation and publication of the annual financial statements. The report must make reference to the external auditors’ policies related to the independence of their structure to assure the fulfillment of their obligations;

(j) To submit a report on the treatment given to matters indicated by Section 15 of Decree No 677/2001 as matters of its competence, at least each time the annual financial statement must be filed with the relevant authorities;

(k) To publish the information detailed in points (a), (d), (f), and (h) mentioned above.

Notwithstanding the foregoing, Section 15 of Decree No 677/2001 states that the Auditing Committee must draft an annual plan of action for each relevant fiscal year, and notify such plan to the Board of Directors and the Supervisory Committee.

2. Exception to the Creation of the Auditing Committee. Small and Medium companies

Section 17 of the General Resolution No 400/2002 provides for an exception to the obligation to create the Auditing Committee.

The first paragraph of said section provides that Limited Liability Companies that qualify as Small and Medium Companies, in terms of Ministry of Economy’s Resolution No 401/1989 as amended, are not obliged to create the Auditing Committee.

To use the mentioned exception and qualify as a Small and Medium Company, at its first meeting of each fiscal year the Board of Directors must state in an affidavit that the company fulfill all requisites for this qualification. Within the following five days the company must submit copy of such minute to the CNV and to the stock exchanges where they are listed. The non compliance of such requisite will cause the lost of the exception for the corresponding accounting year.

Section 2 of Ministry of Economy’s Resolution No 401/1989 provides that the condition of Small and Medium Company will be determined considering the following issues in each "productive unit":

(a) For industrial sector:

(i) personnel;

(ii) amount of total annual sells at a constant price, excluding VAT and the applicable excise tax if any; and

(iii) the value of productive assets, revalued and net from depreciation; and

(b) For commercial and services sector:

(i) personnel;

(ii) amount of total annual sells at a constant price, excluding VAT and the applicable excise tax if any; and

(iii) net worth adjusted by inflation.

The above mentioned resolution and the Ministry of Economy’s Resolution No 208/93 set out the guidelines that should be followed to consider said listed items in order to determine if a "productive unit" falls within the category of Small and Medium Company.

3. Period for the creation of the Auditing Committee

Section 4 of General Resolution of the CNV No 402/2002, provides that rules related to the Auditing Committee will be applicable to every fiscal year beginning January 1, 2004. Moreover, the creation of the Auditing Committee must take place on or before May 28, 2004.

Notwithstanding the foregoing, the minimum requirements listed in the first chapter of this report must be fulfilled prior to May 28, 2003.

The creation and duties of the Auditing Committee must be contemplated in the Internal Regulations of the company (“Reglamento Interno”) or in its By-Laws.