Corporate governance 2007-2008

Corporate Governance Statement of Vaahto Group Plc Oyj for 2007-2008 fiscal year

Applicable regulations

Vaahto Group’s administration is based on the Finnish Companies Act and the Articles of Association of the Group’s parent company, Vaahto Group Plc Oyj.

The company follows the NASDAQ OMX Helsinki recommendations on corporate governance for listed companies.

Annual General Meeting

The company’s highest decision-making body is the Annual General Meeting. This is called by the Board of Directors. Shareholders are invited to the Annual General Meeting through a meeting invitation published in a national newspaper selected by the previous Annual General Meeting. The invitation provides the shareholders with the necessary information about the issues to be addressed at the meeting.

The Annual General Meeting must be held no more than six months after the end of the company’s fiscal year. The AGM makes decisions on the issues falling under its mandate as determined by the Companies Act, including the verification of the financial statements, the payment of dividends, the discharge from liability of the Board members and the CEO, and the selection and fees of the Board members and the auditors.

The Annual General Meeting is attended by the CEO and a majority of the Board members. A person running for a position on the Board for the first time attends the AGM that decides on the selection.

Supervisory Board

The company has no Supervisory Board.

Board of Directors

Duties and rules of procedure of the Board

The Board of Directors of the parent company, which also acts as that of the Group, is responsible for the Group’s administration and appropriate operation, and it decides on issues that are highly significant in light of the scope of the Group’s operations.

Issues are handled at Board meetings in accordance with an agenda prepared for each meeting. The Group’s chief executive officer acts as secretary of the Board. The minutes of each Board meeting are commented upon and accepted at the next meeting.

Members of the Board

According to the Articles of Association, the Board of Directors has a minimum of three and a maximum of six members, whose term of office ends at the end of the first full Annual General Meeting following the election. The Board members are selected by the Annual General Meeting. The chairman and vice-chairman of the Board are selected by the Board from among its members.

The names of candidates proposed for Board positions are published in the invitation to the Annual General Meeting where the candidate is supported by shareholders holding a minimum of 10% of the votes as determined by the number of shares and if the candidate has accepted the candidacy. Names of candidates nominated after publication of the AGM invitation are published separately. A person selected as a Board member must meet the qualifications for the position and have the opportunity to allocate enough time to handle the position.

Board members’ right to receive information and obligation to provide information

The presenter at Board meetings is the company’s CEO or one of the Group’s personnel authorized by the CEO. The CEO is responsible for providing the Board with sufficient information for assessing the Group’s operations and financial situation. The CEO is also responsible for implementing the Board’s decisions and reports on this to the Board.

The Board members are obliged to provide the Board with sufficient information for assessment of their qualifications and level of independence and to report any changes to this information.

Board committees

No committees are part of the Board.

CEO

The Board appoints the parent company’s CEO, who acts as the Group’s president. The CEO is responsible for day-to-day management of the Group in accordance with the Finnish Companies Act, the Articles of Association, and instructions from the Board of Directors. The CEO is neither chairman nor vice-chairman of the Board.

Business organization

The Group’s operations have been separated into two divisions. The activities and results of these are the responsibility of the Group subsidiaries, whose CEOs report to the parent company’s CEO. The company has no separate management team.

Compensation

Compensation of the Board members

The compensation for Board members is determined each year by the Annual General Meeting. The Board members have not received shares in the company as compensation. The company currently has no stock option plan.

Compensation of the CEO and other members of the company’s management

The CEO’s salary and other financial benefits are decided by the Board. The CEO’s employment contract has no specific terms addressing the CEO’s retirement, pension benefits, or dismissal.

Compensation for other members of the management is decided upon by the CEO and the chairman of the Board.

The Group has an incentive program for the top management and other key persons. The program includes compensation systems for the management, sales, production, and support functions. The application and principles of the system are determinate each year by the parent company’s Board of directors.

The CEO and other members of the company’s management have not received shares of the company as compensation. The Group currently has no stock option plan.

Internal monitoring, risk management, and internal auditing

The Group’s business and administration are primarily monitored and controlled by means of the Group’s management system. The Group has a financial reporting system whose purpose is to provide the Group and profit center management with sufficient information for planning, control, and monitoring of operations.

Business-related risks of material, consequential, and liability losses are covered by appropriate insurance policies.

The Group has no internal audit unit.

Insider administration

Vaahto Group Plc Oyj follows the NASDAQ OMX Helsinki Insider Guidelines. The public insider register includes statutory insiders and insiders as determined by the Board of Directors of the company. In accordance with the Securities Markets Act, permanent insiders comprise the company’s Board members, CEO, and auditors. In addition, the company has defined as insiders those members of the company’s top management who regularly receive insider information and are entitled to make decisions concerning developments and business arrangements related to the issuer of shares. Subsidiary-specific insider registers include persons who regularly receive insider information in the course of their duties.

Vaahto Group Plc Oyj’s public and subsidiary-specific insider registers are maintained by the company. The insider register can be seen at the company’s head office.

The company’s insiders are not allowed to trade in shares of the company within the 21 days before publication of a financial statement or interim report.

Audit

In accordance with the Articles of Association, the company’s statutory audit is performed by one or two qualified auditors, who must be auditors or auditing firms certified by Finland’s Central Chamber of Commerce. The auditors’ term ends at the end of the first full Annual General Meeting after the election.

The Board’s proposal for auditor(s) is indicated in the invitation to the Annual General Meeting, or, if an auditor candidate is not known to the Board at the time the invitation is published, the name of the candidate(s) shall be published separately.

Information

Each year, the company publishes an annual report and an interim report in both Finnish and English. The interim report is published for the first six months of the fiscal period. For Q1 and for Q1–Q3 of the fiscal period, the company publishes an interim management statement instead of an interim report.

Information about financial statements, interim reports, and interim management statements is published in exchange reports. The annual report is sent by mail to the shareholders of the company and to certain organizations and individuals according to the mailing list maintained by the company. The interim report is distributed in accordance with a separate mailing list. In addition, the annual report and interim report are published on the company’s Web site www.vaahtogroup.fi. The company’s other press releases are also available on the Web site.

DEVIATIONS FROM THE RECOMMENDATIONS FOR THE CORPORATE GOVERNANCE STATEMENT AND INFORMATION FOR THE 2007 – 2008 FISCAL YEAR

The Annual Gneral Meeting of December 14, 2007, elected four members to the Board of Directors:  Seppo Jaatinen, Martti Unkuri, Antti Vaahto, and Mikko Vaahto. At its organization meeting of December 14, 2007, the Board elected Seppo Jaatinen as chairman and Mikko Vaahto as vice-chairman.

Board member Antti Vaahto is employed by the company and is also a major shareholder. Mikko Vaahto, employed by the company since November 13, 2008, is also a major shareholder of the company. Seppo Jaatinen and Martti Unkuri do not own any of the company’s shares, nor do they have interdependence with the company in any other way.

In the 2008–2009 fiscal year, the Board met 15 times. The members’ attendance rate was 98%.

The Annual General Meeting of December 14, 2007, decided to pay Board members employed by the company an attendance fee of 450 euros per meeting, and members not employed by the company annual compensation of 19,000 euros for the chairman and 15,000 euros for other members.

In addition, Board members are entitled to a per diem and travel allowance in accordance with the Group’s general travel regulations. No attendance fees are paid to persons employed by Vaahto Group for membership of a subsidiary’s board of directors.

The Annual General Meeting of December 14, 2007, selected public auditing firm Ernst & Young Oy as the company’s auditor, with Pauli Hirviniemi, CPA, as chief auditor.

Board of Directors

Chairman

Seppo Jaatinen

M.Sc. (Econ.), b. 1948

Senior Partner, Foxhill Oy

Member and chairman of the Vaahto Group Plc Oyj Board of Directors since 2000

Previous work experience:

Interpolator Oy CEO and executive vice president

Amer Group Plc’s development director

Most significant positions of trust:

Ixonos Oyj, member of the board

 

Vice-Chairman

Mikko Vaahto

b. 1963, with vocational qualifications in business and administration

Member of the Vaahto Group Plc Oyj Board of Directors since 1994

 

Martti Unkuri

M.Sc. (Tech.), b. 1936

Member of the Vaahto Group Plc Oyj Board of Directors since 2000

Previous work experience:

CEO of Rauma Oy

 

Antti Vaahto

M.Sc. (Econ.), M.Sc. (Tech.), MBA, b. 1947

CEO of Vaahto Group Plc Oyj since 1984

Member of the Vaahto Group Plc Oyj Board of Directors since 1984

Most significant positions of trust:

Mutual insurance company Fennia: member of the board

Insurance company Fennia Life: member of the board

 

Auditors

Ernst & Young Oy

Chief Auditor

Pauli Hirviniemi, CPA

Group Management

Chief Executive Officer Antti Vaahto, b. 1947

M.Sc. (Econ.), M.Sc. (Tech.), MBA

 

Chief Financial Officer Anssi Klinga, b. 1965

M.Sc. (Econ.)

Secretary of the Board of Directors since 2004

Subsidiaries

AP-Tela Oy

Managing Director Pekka Viitasalo, b. 1955

Technician

 

Japrotek Oy Ab

Managing Director Torsten Lassfolk, b. 1946

Basic Business Degree

 

Stelzer Rührtechnik International GmbH

Managing Director Christian Kessen, b. 1963

M.Sc. (Tech.)

 

Vaahto Roll Service Oy

Managing Director Anssi Klinga, b. 1965

M.Sc. (Econ.)

 

Vaahto Oy

Managing Director Antti Vaahto, b. 1947

M.Sc. (Econ.), M.Sc. (Tech.), MBA

 

Vaahto Pulp & Paper Machinery Distribution (Shanghai) Co., Ltd.

Managing Director Timo Kerola, b. 1960

M.Sc. (Tech.)

 

Compensation of the CEO and other members of the company’s management and the auditors’ fees in the 2007 – 2008 fiscal period

CEO 10,080 euros

members of the Board:

Jaatinen Seppo 19,000 euros

Unkuri Martti 15,000 euros

Vaahto Antti 5,400 euros

Vaahto Mikko 5,400 euros

The members of the Group management have no specific terms addressing the CEO’s retirement, pension benefits, or dismissal. The members of the Group management have not received shares in the company as compensation. The Group currently has no stock option plan.

Auditors’ fees from the Group in the 2007–2008 fiscal period totaled 91,359 euros, of which audit fees accounted for 71,354 euros, with consulting and other fees accounting for the remaining 20,005 euros.

The management holdings are detailed in item 35 of the Notes to the Consolidated Financial Statements, ”Shares and shareholders.”