Componenta Oyj — Governance Information 2014

Feb 17, 2014

Table of contents

Governance

Corporate Governance
General Meeting	5
Board of Directors	6
Board Committees	8
President and CEO	9
Corporate Executive Team	10
Remuneration	11
Risk management and control	14
Audit	16
Communications	17

Governance

Administration and management of Componenta

The parent company of Componenta Group is Componenta Corporation, a Finnish public company whose share is listed on the Helsinki stock exchange.Componenta's head office is located in Helsinki.

Administration and management of Componenta Corporation are based on Finnish legislation,the company's Articles ofAssociation and the rules and regulations ofthe Helsinki stock exchange and the Finnish Financial SupervisoryAuthority.Componenta complies with the Corporate Governance Code for Finnish listed companies, which is available on the Internet at www.cgfinland.fi.

2e Corporate Governance Statementfor 2013 referred to in recommendation 54 ofthe Finnish Corporate Governance Code for Finnish listed companies is given as separate

report on Componenta's website atthe address www.componenta.com and in this Annual Report.2e content ofthis Corporate Governance section fully corresponds to the separate statement.2e Corporate Governance Statement has been handled atthe meeting ofthe Audit Committee of Componenta Corporation's Board of Directors on 3 February 2014.

Governing bodies of Componenta

Supreme authority at Componenta is exercised by the shareholders atthe General Meeting of Shareholders.

2e company is managed by the Board of Directors and the President and CEO.2e Group's Corporate Executive Team assists and supports the President and CEOin carrying out his duties.

Operationalresponsibility atthe Group level lies with the President and CEO.2e Group's Corporate Executive Team assists the President and CEOin this task.Operational

responsibility atthe division level lies with the SeniorVice President of each division, assisted by a management team.

Reporting structure

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COMPONENTA GROUP
Foundry Division	Machine Shop Division	Aluminium Division	*)
Orhangazi (TR) Weert (NL) Heerlen (NL) Högfors (FI) Pori (FI) Pietarsaari (FI) Suomivalimo (FI)	Orhangazi (TR) Främmestad (SE) Pistons (FI)	Manisa (TR) Manisa Wheels (TR)	**)

Componenta reports on its financial performance and business developmentin accordance with the divisional structure presented above as of1January 2013.

General Meeting

Componenta's supreme decision-making body is the General Meeting.(e Annual General Meeting of Componenta must be held within six months ofthe end of the financial period.(e General Meeting decides on matters that come underits authority as defined in the Finnish Limited Liability Companies Act and the company's Articles ofAssociation, including approval of the financial statements, decisions concerning the use of the profit shown on the balance sheet and the election of the Board members and the auditor.

In 2013,the Annual General Meeting was held on 22 March 2013 in Helsinki.Atthe Annual General Meeting, 45.8% of the company's shares and votes were represented.An Extraordinary General Meeting was held on 16 August 2013.Atthe Extraordinary General Meeting, 42.1% ofthe company's shares and votes were represented.

Board of Directors

The Annual General Meeting elects each year Componenta's Board of Directors, which according to the company's Articles ofAssociation has three to seven members.,e term of office ofthe Board continues until the close ofthe following Annual General Meeting.,e Board elects from its members the Chairman and the Vice Chairman.

,e majority ofthe Board members must be independent ofthe company. In addition, atleasttwo ofthe members belonging to this majority must be independent of major shareholders in the company. Independence is evaluated in accordance with Recommendation 15 ofthe Corporate Governance Code for Finnish listed companies.

,e Board of Directors draws up written Rules of Procedure foritself.,e main tasks and duties ofthe Board of Directors are to:

• oversee the management and business operations of Componenta and make major decisions relating to the strategy, capital expenditure, organization, corporate restructuring and financing
• appointthe President and CEOand the members of the Group's Corporate Executive Team, and approve the organizational structure and the principles for incentive schemes
• ensure thatthe company's accounting, supervision of financial management and risk management have been arranged appropriately
• approve the key operating principles and values, and confirm the annual business plans and budgets
• make proposals to the General Meetings and convene the meetings.

,e Board meets when itis convened by the Chairman or, in his absence, by the Vice Chairman.,e Board forms a quorum when more than half ofthe members are present, and one ofthem must be the Chairman orVice Chairman. Componenta's General Counsel serves as secretary to the Board meetings.

,e Board of Directors evaluates its own performance annually underthe leadership ofthe Chairman.,e Board also reviews the corporate governance annually and amends it when required.

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In 2013,the Annual General Meeting selected the following six members to Componenta's Board of Directors:

• Heikki Lehtonen,President and CEOat Componenta Corporation
• Marjo Miettinen,Chief Executive Officer at EM Group Oy
• Riitta Palomäki,Chief Financial Officer at Uponor Corporation
• Matti Ruotsala, Executive Vice President,Power Division at Fortum Corporation
• Tommi Salunen, Managing Partner at Aava Advisors Ltd
• Harri Suutari, professional board member

Marjo Miettinen,Riitta Palomäki, Matti Ruotsala, Tommi Salunen and Harri Suutari are independent ofthe company and ofthe shareholders.Heikki Lehtonen is President and CEOof Componenta Corporation.He is also a major shareholderthrough companies that he controls.

,e Board of Directors is presented in more detail in the section ,e Board of Directors.

,e Board of Directors met19 times during 2013.,e average attendance rate at Board meetings was 97%. Componenta's General Counsel,Pauliina Rannikko, served as secretary to the Board meetings.

,e Board of Directors evaluated its own performance in December 2013 underthe leadership ofthe Chairman.,e Componenta Corporate Governance document was updated atthe Board meeting held on 21 March 2013.

Componenta's Board of Directors and Board meetings in 2013

Board member		Attendance at Board meetings	Attendance at Audit Committee meetings
Harri Suutari	Chairman ofthe Board of Directors	19/19	-
Lehtonen Heikki		19/19	-
Marjo Miettinen	Member ofthe Audit Committee *)	17/19	1/1
Riitta Palomäki	Chairman ofthe Audit Committee	19/19	5/5
Matti Ruotsala	Vice Chairman ofthe Board of Directors	18/19	-
Tommi Salunen **)	Member ofthe Audit Committee	13/14	4/4
Board member until 22 March 2013
Pii Kotilainen		5/5	-
Juhani Mäkinen		4/5	1/1
*) Member until 22 March 2013

**) New member as of 22 March 2013

Board Committees

Componenta has a BoardAudit Committee.Afterthe Annual General Meeting,the Board of Directors elects from among its members the Chairman and members forthe Committee,for one year at a time. In the election ofthe Audit Committee members,the relevant qualification requirements are taken into account.

In 2013,the Board of Directors elected Riitta Palomäki as the Chairman and Tommi Salunen as a member ofthe Audit Committee.Both members ofthe Audit Committee are independent ofthe company and its major shareholders.

1e Audit Committee has no independent decisionmaking power. Instead,the Board of Directors makes decisions based on the preparations ofthe Audit Committee.1e Chairman ofthe Audit Committee reports on the work ofthe Audit Committee atthe Board meetings following the Audit Committee meetings.1e invitation and materials ofthe Audit Committee meetings are sentto all Board members, who all have the rightto attend the meetings ofthe Audit Committee.

1e Board of Directors has confirmed a written agenda for the Audit Committee.1e main tasks and duties ofthe Audit Committee are to:

• monitor and supervise the reporting process of financial statements, ensure thatthe reporting process generates correctinformation, and approve important accounting principles
• review and oversee the quality and integrity ofthe annualreport and the annual financial statements as well as the interim reports
• monitorthe financial position ofthe company and the sufficiency of financing and prepare matters and proposals to the Board on a need-to-know basis
• monitorthe efficiency, plans and processes ofthe Group's internal control, internal audit and risk management systems
• review the company's Corporate Governance Statement

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• review the external audit plan and monitorthe statutory audit ofthe financial statements and consolidated financial statements, approve the budget ofthe external audit as well as new assignments above the limit set by the Audit Committee
• meet with the external auditor quarterly and review all materialreports from the auditor
• evaluate the independence ofthe statutory auditor or audit firm, particularly the provision ofrelated services to the company to be audited
• prepare the proposal for a resolution on the election ofthe auditor
• meet with the management ofthe company, particularly the CEOand the CFO, and risk management.

In 2013,the Audit Committee convened five times and the attendance rate was 100%.Componenta's CFO Mika Hassinen served as secretary to the Audit Committee.Also regularly participating atthe Committee's meetings were the President and CEO,the auditors and the General Counselresponsible forrisk management.

1e Committee regularly evaluates its performance and working practices and carries out a related self-evaluation once a year. In December 2013,the Audit Committee evaluated its own performance in 2013 under the leadership ofthe Chairman.

President and CEO

The Board of Directors appoints the President and CEOand decides on the President's remuneration and other benefits.&e President and CEOis responsible for managing and developing Componenta's business in accordance with the Finnish Limited Liability Companies Act and the instructions given by the Board of Directors.

&e President and CEOprepares and presents matters for consideration at Board meetings and implements the decisions ofthe Board of Directors.He reports to

the Board of Directors on matters including the company's financial situation, its business environment and other major matters.&e President and CEOis Chairman of Componenta's Corporate Executive Team and Extended Corporate Executive Team.

Heikki Lehtonen, b.1959, M.Sc.(Eng.), is President and CEO of Componenta.He has acted as Componenta's President and CEOsince 1993.

Corporate Executive Team

Componenta's Corporate Executive Team assists the President and CEOin managing and developing Componenta.%e Board of Directors decides on the appointment of members ofthe Corporate Executive Team and on the terms oftheir employment based on the proposal ofthe President and CEO, in accordance with the "one over one" principle in use atthe Group.

%e members of Componenta's Corporate Executive Team are those in charge ofthe Group's majorfunctions and directors in charge ofthe Group's Operations.%e Corporate Executive Team convenes regularly, atleast once a month. Its key tasks include promoting the achievement ofthe Group's long-term business goals,the creation of added value and the development of business operations, ensuring the efficiency of operations throughoutthe Group, developing management practices and promoting common operating models and principles.

Atthe beginning of 2013,the Corporate Executive Team comprised President and CEOHeikki Lehtonen, Senior Vice President of Machine Shop Division Juha Alhonoja, CFO Mika Hassinen, SeniorVice President of Foundry Division Olli Karhunen, SeniorVice President of Sales and Customer Services Antti Lehto (until 31 May 2013), Senior Vice President of Human Resources and Internal Communication Anu Mankki,General Counsel Pauliina Rannikko and SeniorVice President ofAluminium Division Sabri Özdoğan.

Furio Scolaro, SeniorVice President, Sales and Product Development, was appointed as a member ofthe Corporate Executive Team as of1June 2013 afterAntti Lehto had moved to another employer.

%e Corporate Executive Team is presented in more detail in the section Corporate Executive Team.

In 2013,the Corporate Executive Team focused on implementing the Group-wide efficiency programme and the related projects aimed atimproving productivity and cost-efficiency.%e Corporate Executive Team also updated the Group's strategy.

Extended Corporate Executive Team

Componenta's Extended Corporate Executive Team is responsible for monitoring the divisions' financial and operational development and planning and implementing the necessary measures.

In 2013,the Extended Corporate Executive Team comprised the members ofthe Corporate Executive Team as well as Seppo Erkkilä,Vice President, Foundries in Finland;Ömer Lütfi Erten,Vice President,Orhangazi Foundry in Turkey; and Patrick Steensels,Vice President,Heerlen Foundry in the Netherlands, who is also in charge of coordinating Componenta's operations in the Netherlands.

Remuneration Statement 2013

Remuneration of key management

Remuneration of the Board of Directors and the Audit Committee

e Annual General Meeting decides on the remuneration ofthe Board of Directors and the Audit Committee. In 2013, the Annual General Meeting decided thatthe Chairman of the Board of Directors be paid an annual fee of EUR 60,000, ordinaryBoard members EUR 30,000 and members of

committees subordinated to the Board EUR 5,000, and that travel expenses be paid in accordance with the company's travelregulations.

e total amount of annual fees paid to Board members in 2013 was EUR 220,000.Board members do not participate in Componenta's share-based incentive scheme or pension schemes.

Remuneration of the Board of Directors and the Audit Committee

Board of Directors in 2013		Salaries,fees and fringe benefits, EUR 1,000
Suutari Harri	Chairman	60
Ruotsala Matti	Vice Chairman	30
Lehtonen Heikki	member	30
Miettinen Marjo	member	30
Palomäki Riitta	member,Chairman ofthe Audit Committee	35
Salunen Tommi	member,member ofthe Audit Committee	35
Total		220

Remuneration of the President and CEO and other management

Componenta's Board of Directors decides on the remuneration and other benefits ofthe President and the deputy to the President, and on the terms of employment of members ofthe Corporate Executive Team, based on the proposal ofthe President and CEOand in accordance with the "one over one" principle used by the Group.

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Remuneration systems

Each year,the Board of Directors reviews the market competitiveness oftotalremuneration,the used instruments and their weighting and goals in the remuneration of differenttarget groups.

Short-term remuneration system

Short-term remuneration (one calendar year) is based on meeting measurable personal and business targets setfor the year.

Long-term share-based incentive scheme

e Board of Directors decides on long-term share-based incentive schemes as part oftotalremuneration and manages the implementation ofthe schemes.

A share-based incentive scheme has been approved for the Group's key personnel for 2013.e aim ofthe scheme is to unite the objectives of shareholders and key personnel in orderto increase the value ofthe company, commit key personnel to the company and offerthem a competitive reward scheme based on ownership of company shares.

e scheme contains one earning period, calendar year 2013, and the earning criteria forthe period is the result of Componenta Group after financial items.

Any bonuses forthe 2013 earning period will be paid partly in company shares and partly in cash.e aim is thatthe portion paid in cash covers taxes and tax-related costs arising from the bonus forthe key person.e shares may not be transferred during the restriction period of approximately two years. In the eventthat a key person's employmentis terminated during the restriction period,he or she mustreturn the shares provided as a bonus to the company without compensation.

Remuneration and benefits of other members of the Corporate Executive Team

e fixed cash salary ofthe members ofthe Corporate Executive Team includes compensation for any work on the boards of directors of Componenta Group companies and any associated companies.

e maximum bonus, linked to financial and personal targets,thatis paid under short-term remuneration systems is position-related and, on average, some 40 per cent of a person's annual earnings.

e potential bonus from the long-term share-based incentive scheme for one earning period corresponds to, on average, 30–40 per cent of a person's annual earnings.

Members ofthe Corporate Executive Team are entitled to additional healthcare insurance in addition to the statutory occupational healthcare.

Members ofthe Corporate Executive Team are also entitled to a company car as part oftheirtotalremuneration.

Pension agreements

e Finnish members ofthe Corporate Executive Team, working in Finland, including the President and CEO, are paid supplementary pension worth 6 per cent oftheir basic annual salary. Forthe CFOacting as deputy to the President,the company's annual payments for his supplementary pension correspond to his total gross salary for one month.

Remuneration of the President and CEO, deputy to the President and other members of the Corporate Executive Team

2013	Salaries, fees and fringe benefits EUR 1,000	Bonuses, EUR 1,000	Voluntary pension benefits, EUR 1,000	Benefits paid on termination of employment, EUR 1,000	Share-based payments, EUR 1,000	Total, EUR 1,000
President and CEO Heikki Lehtonen	319	-	64	-	-	383
Deputy to the President Mika Hassinen	226	-	15	-	-	241
Other members ofthe Corporate Executive Team	984	-	45	-	-	1,029
TOTAL	1,529	-	124	-	-	1,653

Terms of employment of President and CEO Heikki Lehtonen

Salary and fringe benefits	Total monthly salary EUR 25,000, which consists of cash salary and fringe benefits (unlimited company car benefit and telephone benefit).
Short-term remuneration system	e President and CEOdoes not participate in the short-term remuneration system, which has been taken into accountin his long-term remuneration.
Long-term incentive schemes	e President and CEOhas been entitled to the Group's long-term share-based incentive scheme.
Pension	e retirement age ofthe President and CEOis 63 years, and he has a supplementary pension agreement.e agreementincludes old age pension afterreaching the age of retirement, paid-up pension policy rights ifthe employment ofthe insured person is terminated before reaching the age entitling to old age pension as stated in the insurance policy, disability insurance, and life insurance forthe duration ofthe employment, ofthe paid-up pension policy and of pension.is benefit was accumulated by EUR 19,000 in 2013. In addition,the President and CEOhas a separate pension capitalisation agreement, under which the pension begins atthe age of 63 years and ends atthe age of 68 years or when the savings in the capitalisation agreement have been used up.e pension capitalisation agreement was made in 2013 and in 2013 EUR 45 000 was paid to the savings underthe capitalisation agreement.e Board of Directors confirms the amount ofthe payment each year.e actual pension is calculated annually by dividing the remaining amount ofthe savings by the remaining number of months for the pension.
Termination of employment	e President and CEO's contract of employment may be terminated by the company by giving twelve months'notice and by the President and CEOby giving six months' notice.e President and CEOis not entitled to any separate compensation after giving notice or being given notice otherthan the salary and benefits agreed in the terms of notice and the supplementary pension in accordance with the principles of the paid-up pension policy.

Risk management and internal control

Main features ofthe internal control and risk management systems in relation to the financialreporting process

The objective ofinternal control and risk management related to Componenta's financialreporting is to ensure thatthe reporting is reliable and that all applicable laws and regulations have been complied with.

Componenta compiles its financialreporting in accordance with the International Financial Reporting Standards (IFRS),the new Finnish Securities Markets Act, the Finnish Accounting Act and the guidelines and statements ofthe Finnish Accounting Board, while also complying with the rules and regulations ofthe Finnish Financial SupervisoryAuthority and the rules ofNASDAQ OMX Helsinki Ltd.

Control environment

6e purpose of Componenta's internal control is to ensure thatthe Group operates in line with its strategy profitably and effectively,thatrisk managementis arranged appropriately and adequately, and that financial and operationalreporting is reliable.Control is based on Componenta's values, operating principles, policies and guidelines (the Componenta Way to Operate,the Disclosure Policy and the Code of Conduct). Internal control is a part of management, governance and daily operations.

Financialreporting and supervision are based on budgets drafted and confirmed once a year and on monthly performance reporting.GroupAccounting is responsible forthe financialreporting process and for ensuring that the related instructions are consistent and updated regularly.Controllers atthe unit and division level as well as management are responsible for ensuring that reporting is carried outin accordance with instructions.

Open and adequate communications ensure an effective and functional control environment. Information on reporting tools as well as instructions and principles relating to financialreporting have been provided to all the parties involved in financialreporting, and they are also available on the Group's intranet. Matters such as upcoming changes to IFRSand accounting principles or new reporting requirements are communicated to the financial organization on a regular basis.6e Group's CFO reports to the Board's Audit Committee regularly on matters pertaining to internal control.

6e Audit Committee appointed by the Board of Directors supervises the Group's financialreporting process and monitors the effectiveness ofinternal control, internal audit and risk management systems, and reports its observations to the Board.

Monitoring

6e profitability and efficiency of Componenta's operations and the achievement of financial objectives are monitored regularly by means of Group-wide financialreporting.6e effectiveness of measures in internal controlrelated to financialreporting is monitored by the Board of Directors, the Audit Committee,the President and CEO,the Corporate Executive Team and operative managementteams.

Common,Group-wide ways of operating also cover reporting, and the related instructions are included in the Controller's Manual maintained by GroupAccounting. GroupAccounting has defined the control measures which coverthe reporting process and allocated responsibilities fortheirimplementation.

All operational business units have their own controllers who are responsible for financialreporting in cooperation with the management ofthe respective unit.6e managementteam for each business unit and division analyses its own financialreports, including volumes, profits, costs, profitability and working capital, every month before the reporting meeting ofthe Corporate Executive Team.

6e Board of Directors is responsible forthe final evaluation ofthe Group's result.

Internal audit

Componenta Group's internal auditis conducted in accordance with the operating principles approved by the Board of Directors, which are based on the Group's internal reporting and the annual audit plan approved by the Audit Committee.

Componenta Group's financial administration conducts an internal audit of Group companies in accordance with the annual plan together with the external auditors.

Financialreporting that covers the whole Group regularly monitors how well financial targets are being met.6e reports include actual figures, budgets and up-to-date estimates forthe current year.

Risk management

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Risk managementis part ofthe company's monitoring system and it aims to ensure thatthe risks to which the company's business is exposed are identified, evaluated and monitored. It aims to help forecastthe threats and opportunities for business operations and ensure the continuity of business.

6e Board of Directors confirms the principles and responsibilities forrisk management.6e Board's Audit Committee monitors the effectiveness ofrisk management systems.6e President and CEOsupervises the implementation ofthe risk management programme and ensures thatitfocuses on matters that are essential forlocal and operational activities.6e Corporate Executive Team participates in identifying and evaluating risks, in allocating responsibilities and in monitoring the risks.

6e General Counsel is responsible for general development of Componenta's risk management, and the CFOis responsible for development ofrisk management relating to financialrisks.

Management of business operations is responsible for identifying and managing risks in their own business areas as part oftheir operational activities.

All employees are responsible foridentifying and evaluating the risks that are related to their work orthat are otherwise undertheir control and forreporting on them to their supervisors.

6e financialrisks relating to Componenta Group's business operations are managed in accordance with the Treasury Policy approved by the Board of Directors.6e Group's treasury department manages financialrisks and ensures fortheir own partthe availability of equity and debt finance to the Group on competitive terms.6e Group's treasury departmentis also responsible for managing and hedging the cash position.

6e Corporate Executive Team conducts the Group-level Enterprise Risk Management(ERM) process annually and monitors the majorrisks ofthe operations regularly.6e SeniorVice Presidents of Operations organise operationlevel ERM processes annually and reportthe main results ofthe ERM process to the Corporate Executive Team. In the context ofthe ERM process,the main risks are identified and evaluated and corrective actions are decided on.

In 2013,the Group's Corporate Executive Team conducted the annual Enterprise Risk Management(ERM) process, in which risks were identified and evaluated and measures were decided on.

Audit

The Annual General Meeting appoints the auditor and decides on the remuneration ofthe auditor.\$e company has one auditorthat must be a firm of authorised public accountants approved by the Finland Chamber of Commerce. In addition to the duties prescribed in current accounting regulations,the auditorreports regularly to Componenta's Audit Committee and to the Board of Directors of Componenta when necessary.

\$e responsible auditor may function as an auditorfor a maximum of seven years in succession.

In 2013,Componenta's auditor was Authorised Public Accountants PricewaterhouseCoopers Oy.\$e responsible auditor was Jan Holmberg. In accordance with the decision ofthe Annual General Meeting on 22 March 2013,the fees paid to the auditor are based on invoicing.\$e fees paid to the auditors of Componenta Group's companies, based on the work performed,totalled EUR 577,000, comprising auditfees of EUR 497,000 and fees for other services EUR 80,000.

Communications

Information about Componenta and its governance is published on the Group's website.Allreleases and reports published by Componenta are available on the Group's website immediately afterthey have been published.

*e Componenta Corporate Governance documentin its entirety,the separate Corporate Governance Statement and the Remuneration Statement are available online at www.componenta.com.