under the Canadian rules as an issuer that: (i) has a class of securities registered with the SEC under Section 12 of the US Securities Exchange Act of 1934, as amended (the “Exchange Act”); or (ii) is required to file reports under Section 15(d) of the Exchange Act. The Company is currently not an SEC Issuer. Therefore, on June 6, 2011 Fortis Inc. filed an application with the OSC seeking relief, pursuant to National Policy 11-203 - Process for Exemptive Relief Applications in Multiple Jurisdictions, to permit Fortis Inc. and its reporting issuer subsidiaries (of which CUC is one) to prepare their financial statements in accordance with US GAAP without qualifying as an SEC Issuer (“the Exemption”). On June 9, 2011 the OSC issued its decision and granted the Exemption for financial years commencing on or after January 1, 2012 but before January 1, 2015, and interim periods therein. The Exemption will terminate in respect of financial statements for annual and interim periods commencing on or after the earlier of: (a) January 1, 2015; or (b) the date on which the Company ceases to have activities subject to rate regulation. 

The Company’s application of Canadian GAAP currently references US GAAP for guidance on accounting for rate regulated activities. The adoption of US GAAP in 2012 is, therefore, expected to result in fewer significant changes to the Company’s accounting policies as compared to accounting policy changes that may have resulted from the adoption of IFRS. US GAAP guidance on accounting for rate-regulated activities allows the economic impact of rate- regulated activities to be recognised in the financial statements in a manner consistent with the timing by which amounts are reflected in customer rates. CUC believes that the continued 

application of rate regulated accounting, and the associated recognition of regulatory assets and liabilities under US GAAP, accurately reflects the impact that rate regulation has on the Company’s financial position and results of operations. The Company has received approval from the ERA for the use of US GAAP during the exemption period. 

Fortis Inc. as project lead has developed a three-phase plan to adopt US GAAP effective January 1, 2012. CUC is an active participant in this project with focus on the impact to the Company. The following is an overview of the activities under each phase and their current status. 

## Phase I - Scoping and Diagnostics: 

Phase I consisted of project initiation and awareness; project planning and resourcing; and identification of high-level differences between US GAAP and Canadian GAAP in order to highlight areas where detailed analysis would be needed to determine and conclude as to the nature and extent of financial statement impacts. External accounting and legal advisors were engaged during this phase to assist the Company’s internal US GAAP conversion team and to provide technical input and expertise as required. Phase I commenced in the fourth quarter of 2010 and was completed during 2011. 

## Phase II - Analysis and Development: 

Phase II consisted of detailed diagnostics and evaluation of the financial statement impacts of adopting US GAAP based on the high- level assessment conducted under Phase I; identification and design of any new, or changes to, operational or financial business processes; initial staff training and audit committee orientation; and development 

of required solutions to address identified issues. 

Phase II of the plan commenced in January 2011 and was essentially completed during 2011. Based on the research and analysis completed to date, and the Company’s continued ability to apply rate-regulated accounting policies under US GAAP, the differences between US GAAP and Canadian GAAP are not expected to have a material impact on earnings and are expected to be mostly limited to changes in balance sheet classifications and additional disclosure requirements. The impact on information systems and internal controls over financial reporting is expected to be minimal. 

## Phase III - Implementation and Review: 

Phase III is currently ongoing and involves the implementation of financial reporting systems and internal control changes required by the Company to prepare and file its financial statements prepared in accordance with US GAAP beginning in 2012, and the communication of associated impacts. 

The Company will prepare and file, in accordance with Canadian GAAP, its annual audited financial statements for the year ending December 31, 2011 and the comparative period. The Company intends to voluntarily prepare and file, in accordance with US GAAP, its annual audited financial statements for the year ended December 31, 2011 with 2010 comparatives. The Company’s voluntary filing of audited US GAAP financial statements for the year ended December 31, 2011, subsequent to the filing of its audited Canadian GAAP financial statements for the year ending December 31, 2011, has been approved by the OSC and is expected to be completed by 

