Transparency

One of the most difficult issues facing global companies is stakeholder concern about how the tax revenues and royalties they generate are used by host governments. Although there have been increasing demands by NGOs and the public, clearly no corporation has control over the actions of sovereign states. Nonetheless, Talisman believes the use of natural resource wealth should provide the basis for sustainable economic growth and development.

Talisman has been at the forefront of economic transparency since the release of our first Corporate Responsibility Report for the year ended December 31, 2000. Our reporting has steadily evolved from single-country disclosure to our current practice of providing a complete breakdown of fiscal contributions (royalties, taxes and material payments) to host governments wherever we operate. We believed then, as we do now, that an important first step in establishing greater economic transparency can be achieved through the public disclosure of revenue payments to host governments.

Talisman Commits to Extractive Industries Transparency Initiative ₅

On August 22, 2005, Talisman's President and CEO, James W. Buckee, officially confirmed Talisman's commitment to the principles of the Extractive Industries Transparency Initiative (EITI), a global multi-stakeholder initiative of developing country governments, donors, companies, investors, civil society organizations and international financial institutions seeking to increase transparency in the extractives sector in developing countries. Talisman is currently the only Canadian company to have committed to the EITI.

The EITI London Conference 2005 established an International Advisory Group (IAG) to guide the International EITI Secretariat in defining and refining proposals on the future of the EITI. The IAG consists of senior representatives from countries implementing EITI, companies, NGOs and donors. The two energy companies in the IAG have established an informal working group consisting of representatives from each of the 13 energy companies participating in EITI, including Talisman.

Talisman's Transparency Efforts Recognized

In March 2005, Save the Children UK released a report entitled: "Measuring revenue transparency: company performance in the oil and gas industries" that compared the revenue transparency efforts of 25 oil and gas companies from around the world, including Talisman. Based on Talisman's efforts to disclose all taxes, royalties and material payments to host governments in its Corporate Responsibility Reports, Save the Children UK concluded that Talisman "clearly leads the field in overall transparency", placing first in overall transparency. Visit www.savethechildren.org.uk to view the report.

1. Royalties represent cash payments and in certain foreign operations the entitlement of the respective governments to a portion of Talisman's share of production.
2. Taxes represent current tax expense and current production taxes.
3. Talisman paid freehold and gross overriding royalties of $188 million (2004 - $136 million; 2003 - $89 million) in North America and the UK.
4. Royalties and taxes paid to the Government of Malaysia include the Government of Vietnam's share of the PM-3 CAA royalties and taxes.
5. The majority of the 2005 taxes in other represent Barbados taxes, (2004 and 2003 represent Swedish taxes). For additional information see Note 1(g) (l) and 15 to Talisman Energy Inc's Consolidated Financial Statements for the year ended December 31, 2005.

There has been growing recognition that the way to improve the responsible use of these revenues is to increase the accountability of governments and companies. This has resulted in initiatives such as the Publish What You Pay campaign³ and the Extractive Industries Transparency Initiative. Save the Children UK

³ The Publish What You Pay Coalition calls for disclosure of payments to, and transactions with, governments by multinational natural resource companies, their subsidiaries and business partners. Additional information regarding the Publish What You Pay Coalition can be found online at www.publishwhatyoupay.org.