The Board Committees

The proper function of the corporate governance of a company requires that Board work be organized as efficiently as possible. For this reason the Company established an Audit and Financial Committee.

The Directors on the committees can concentrate on the matters delegated to the committee more extensively than the entire Board of Directors. The purpose of the committees is to enhance the efficient preparation of matters within the competence of the Board, increase transparency and ensure the quality and efficiency of the decision making of the Board.

The committees assist the Board by preparing matters falling within the competence of the Board. The Board remains responsible for the duties assigned to the committees. The committees have no autonomous decision-making power, and thus the Board makes the decisions within its competence collectively.

Taking into consideration the current composition and the number of Board members, the Board committees in the Company shall have at least two members appointed by the Board of Directors among its members, one of them being the Chairman of the respective committee.

A committee shall regularly report on its work to the Board. The reports shall include at least a summary of the matters addresses and measures taken by the committee.

The central duties and operating principles of the Audit and Financial Committee are described below. The Annual General Meeting decides on the compensation of the members of the Board committees and such compensations can be publicly reviewed from the Company's website at www.elektrobit.com.

Audit and Financial Committee

The Audit and Financial Committee has the following duties:

• to monitor the reporting process of financial statements;
• to supervise the financial reporting process;
• to monitor the efficiency of the Company's internal control, internal audit, if applicable, and risk management systems;
• to review the description of the main features of the internal control and risk management systems pertaining to the financial reporting process, which is included in the Company's corporate governance statement;
• to monitor the statutory audit of the financial statements and consolidated financial statements;
• to evaluate the independence of the statutory auditor or audit firm and particularly the provision of related services;
• to prepare the proposal for resolution on the election of the auditor.

The Chairman and the members of the Audit and Financial Committee are appointed by the Board of Directors of the Company. At least one committee member must be a financial expert who has significant knowledge and experience in accounting and accounting principles applicable to the Company. The members of the Audit and Financial Committee have been Staffan Simberg (chairman of the committee) and Seppo Laine, Authorised Public Accountant. Taking into consideration the composition and the number of Board members and the financial expertise held in particular by Seppo Laine, the assembly meeting of the Board held on March 31, 2011 resolved to depart from the recommendation concerning a minimum of three committee members by the Finnish Governance Code (Recommendation 22). Both members of the committee are independent of immediate interest of both the Company and significant shareholders of the Company and they have long-term experience in business management. 

In addition to committee members, other regular participants to the committee meetings are CEO and CFO of the Company and optionally external auditors. Further the committee members may meet the external auditors without the operative management being present in connection with such meetings. 

In 2011, the Audit and Financial Committee convened 6 times to ordinary meetings. In addition to the focus areas specified above, most important subjects during 2011 were cash flow monitoring and development of cash flow reporting; capitalization and financial modeling of sub-groups in accordance with the segment based management model; and costs of development projects and capitalizations related thereto. During the latter half of the year the Committee´s focus was on evaluating potential profit and balance sheet implications due to reorganization process of TerreStar Networks Inc. The Committee has actively participated on evaluating debt collecting and other related actions proposed by the operative management.

During 2012 the Committee´s focus areas are securing financing of business segments, in particular, by means of cash flow financing; functionality of risk management processes in the segment based management model; clarifying of internal control operating model and focusing internal control measures to business segments as well as enhancing financial modeling and follow-up of business undertakings.