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Significant differences in Corporate Governance Standards

Significant Differences Directors.

According to NYSE requirements, listed companies must have a majority of "independent" directors. Argentine Law does not require a majority of "independent" directors. However, our Audit Committee must be composed of at least three Board members and at least two of those members must be independent.

Corporate governance. According to NYSE requirements, listed companies must adopt and disclose corporate governance guidelines. We must comply with Decree No 677/01 which established a Transparency Regime that incorporates the following principles: full disclosure, transparency, efficiency, protection to investors and equal treatment between investors.


We, as a subsidiary of a Spanish company, also follow the Olivencia Code of Good Governance and internal corporate governance rules, such as the Regulations on Information for Markets and Regulations on Registration, Communication and Control of Financial and Accounting Data. Code of ethics. Listed companies must adopt and disclose a code of business and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.


We have adopted, as required by the Sarbanes Oxley Act, a code of ethics that applies to our principal executive officer, principal financial officer and to our senior financial officers. We also have an Internal Code of Conduct for securities markets issues to prevent insider trading misconduct and to control possible conflicts of interest. Internal audit function. Listed companies must maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal control. A company may choose to outsource this function to a third party service provider other than its independent auditor. We have a General Internal Audit Department responsible for internal audit matters and for ensuring the efficiency of the internal audit control process of our different units. This General Internal Audit Department reports directly to the Audit Committee, thus guaranteeing the adequate performance of all its functions. Meetings of non-management directors.


According to NYSE requirements, the non-management directors must meet at regularly scheduled executive sessions without management. As a group, our non-executive directors do not meet formally without management present. Nominating/corporate governance committee. Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. Argentine Law does not require this committee. Audit Committee. Listed companies must have an audit committee of a minimum of three independent members. The members of the Audit Committee shall be knowledgeable on finance and accounting, and one member of the Committee shall be considered a financial expert due to his/her knowledge on (i) accounting rules and their application, (ii) analysis, preparation and audit of annual accounts, (iii) understanding of internal proceedings for the preparation and filing of financial information, and (iv) understanding of the functions of the Audit Committee. In case the company does not have a financial expert, the company shall have to explain the reasons thereof. We have an Audit Committee composed of three independent directors, who are literate in financial, accounting and corporate matters.


This committees functions and duties are similar to those required by the NYSE. Other Committees. We have a Disclosure Committee, which is in charge of the reception, classification and analysis of all corporate information in order to determine which information should be communicated to the markets, in the different ways, terms, and with the scope established in the relevant rules and regulations, whether local or international, applicable to us. CEO's certifications. Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.


According to Argentine Law, there is no such requirement, and this provision of the NYSE does not apply to foreign private issuers, such as Telefónica de Argentina S.A. Notification by the CEO to the NYSE of non-compliance with NYSE's corporate governance rules. Each listed company CEO must promptly notify the NYSE in writing after any executive officer the listed company becomes aware of any material non-compliance with any applicable provisions of Section 303A of the NYSE's Listed Company Manual (Corporate Governance Rules). According to the NYSE, all foreign private issuers, including Telefónica de Argentina S.A., must report to the NYSE when they become aware of a violation of the corporate governance listing standards.