22 Caribbean Utilities Company, Ltd.  2011  Annual Report Management’s Discussion and Analysis 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  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  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 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. 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  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. 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. of required solutions to address  identified issues. Phase II - Analysis and Development: Phase III - Implementation and Review: Phase I - Scoping and Diagnostics: