Invalda INVL — Governance Information 2010

Jan 8, 2010

REGULATIONS OF THE FORMATION AND ACTIVITY OF THE AUDIT COMMITTEE OF INVALDA AB

Invalda

GENERAL

1. The present Regulations of the Formation and Activity of the Audit Committee of Invalda AB (hereinafter referred to as the Regulations) define the rights and duties, size, period of membership of the Audit Committee, requirements for education, professional experience of the members of the Audit Committee, principles of independence applied to the independent member of the Audit Committee, and other issues related to formation of the Audit Committee and work organization thereof.

2. The legal basis for the present Regulations is Article 52 of the Law on the Audit of the Republic of Lithuania also the Resolution of the Securities Commission of the Republic of Lithuania "On the Requirements for the Audit Committees". The Regulations also apply to Invalda AB subsidiaries which financial statement are consolidated and which according to Paragraph 6 Article 52 of the Law on the Audit of the Republic of Lithuania wave the requirement to form the audit committee if the parent company is registered in Republic of Lithuania or in any Member State and forms the audit committee (hereinafter referred to as the Subsidiaries).

3. The Regulations should be approved and / or amended by the resolution of the Board of Invalda AB (hereinafter referred to as the Company) and then should be proposed for the approval for the next General Shareholders Meeting.

PROCEDURE OF THE FORMATION OF THE AUDIT COMMITTEE

1. The Audit Committee should consist of 2 members, one of which is independent.

2. The members of the Audit Committee should be elected by the General Shareholders Meeting at the proposal of the Board of the Company.

3. The term of office of the Audit Committee should coincide with the term of office of the Board of the Company.

4. Any member of the Audit Committee should have the right to resign upon submitting a 14 (fourteen) days written notice to the Board of the Company. The new member of the Audit Committee replacing the resigned member should be appointed by the Board of the Company within 20 (twenty) days from the day of receipt of the notice of resignation of the member of the Audit Committee. The new member should be appointed till the day of the next General Shareholders Meeting of the Company, and should start his activities in the Audit Committee on the day specified in the resolution of the Board of the Company. The next General Shareholders Meeting should elect a new member at the proposal of the Board of the Company till the end of term of office of the operating Audit Committee.

REQUIREMENTS FOR THE MEMBERS OF THE AUDIT COMMITTEE

1. The members of the Audit Committee should be appointed (elected) in pursuance that the Audit Committee should, collectively, have a recent knowledge and relevant experience in the fields of audit and accounting, for it is required for the appropriate activity of the Company, considering its shares are admitted to trading in the Main List of the Vilnius Stock Exchange.

2. Independent persons with appropriate qualification should be persons with university degree in economics. Other Audit Committee members with appropriate qualification should be persons with university degree in economics or law.

3. Persons, who are not considered independent, with appropriate work experience should be persons with at least 5 (five) years of work experience in the field of finances, accounting or law. Independent person with appropriate experience should be persons with at least 5 (five) years of work experience in the field of accounting or audit.

4. Information and data confirming the qualification and experience of the person proposed as a member of the Audit Committee should be provided to the General Shareholders Meeting by the body or shareholder proposing to elect the person. The qualification and work experience of the members of the Audit Committee should be assessed by the Board of the Company. If the qualification or work experience of the member of the Audit Committee by the judgment of the Board is not sufficient, the Board should propose for the General Shareholders Meeting to revoke this member and to elect a new member until the end of term of office of the operating Audit Committee.

5. One member of the Audit Committee should be independent.

A member of the Audit Committee should be considered independent only if he is free of any business, family or other relationship with the Company, the controlling shareholder or management that creates a conflict of interest such as to impair his judgment and if he satisfies other criteria of independence specified hereunder should be considered an independent member of the Audit Committee. The person proposing the candidate of the independent member of the Audit Committee should submit a written confirmation of the candidate stating that he is independent. In case it becomes known that the independent member of the Audit Committee submitted false data about himself or they changed and due to that this person can no longer be considered independent, such a member of the Audit Committee should be revoked immediately by the resolution of the Board of the Company, and replaced by a new independent member of the Audit Committee under the procedure specified in paragraph 7 of the Regulations.

1. The key criteria for identifying whether a member of the Audit Committee can be considered to be independent are the following:

13.1. he is not a head of the Company and any associated company and has not been such during last 5 (five) years;

13.2. he is not an employee of the Company and any associated company and has not been such during last 3 (three) years;

13.3. he is not receiving and has been not receiving significant additional remuneration from the Company and associated company other than remuneration for the office in the Audit Committee;

13.4. he is not a controlling shareholder and is not a representative of such shareholder;

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REGULATIONS OF THE FORMATION AND ACTIVITY OF THE AUDIT COMMITTEE OF INVALDA AB

Invalda

13.5. he does not have and did not have any material business relations with the Company and associated company within the past year directly or as a partner, shareholder, head or employee of the administration of the subject having such relationships. A subject is considered to have business relations when it is a major supplier or service provider (inclusive of financial, legal, advisory and consulting services), major client or organisation receiving significant payments from the Company or its group, should be considered as a subject having business relations;
13.6. he is not and has not been during the last 3 (three) years partner or employee of the current or former audit company of the Company and associated company;
13.7. he has not been in the position of a member of the Audit Committee of the Company for over than 12 years;
13.8. he is not a close relative to the head of the Company or to any person specified in above paragraphs 13.1. to
13.6. The spouse (partner), children and parents are considered to be close relatives.
14. A company associated with the Company as specified in paragraph 13 should be one which:
14.1. directly or indirectly controls the Company or is controlled by it;
14.2. has a significant influence on the Company;
14.3. jointly controls the Company under a joint activity agreement;
14.4. is controlled by the same legal or natural person (their group) as the Company;
14.5. is an associated company;
14.6. is a company controlled under a joint activity agreement;
14.7. is a company accumulating and at the end of the service paying pensions and other benefits.

FUNCTIONS, RIGHTS AND DUTIES OF THE AUDIT COMMITTEE

1. The main functions of the Audit Committee should be the following:
   15.1. provide recommendations to the Board of the Company and the Subsidiaries with selection, appointment, reappointment and removal of an external audit company as well as the terms and conditions of engagement with the audit company;
   15.2. monitor the process of external audit of the Company and the Subsidiaries;
   15.3. monitor how the external auditor and audit company follow the principles of independence and objectivity;
   15.4. observe the process of preparation of financial reports of the Company and the Subsidiaries;
   15.5. monitor the efficiency of the internal control and risk management systems of the Company and the Subsidiaries. Once a year review the need of the internal audit function.
2. The Audit Committee should report on its activities to the General Meeting of the Company shareholders at least twice a year (present written reports):
   16.1. to the Ordinary General Meeting of the Company shareholders;
   16.2. to the General Meeting of the Company shareholders which shall take place no later than within 30 days after the Company's semi-annual financial statements are announced;
   16.3. the Company is not obliged to convene General Meeting of shareholders, indicated in paragraph 16.2, if its agenda has no other items. In this case the Audit Committee is obliged to present written report of its activities to the Board of the Company.
3. The members of the Audit Committee should:
   17.1. act in good faith with care and responsibility for the benefit and in the interests of the Company, the Subsidiaries and shareholders with due regard to the interests of employees and public welfare;
   17.2. follow the legal acts and the internal documents of the Company and the Subsidiaries in performing their functions.
4. The independent member of the Audit Committee should:
   18.1. under all circumstances maintain the independence of his analysis, decision-making and actions;
   18.2. do not seek and accept any unjustified privileges, that might compromise his independency;
   18.3. express his objections should a member consider that the resolution of the body of the Company, the Subsidiaries is against Company's and/or Subsidiaries' interests. Should a body of the Company and/or the Subsidiaries have passed the resolutions independent member has serious doubts about, the member should report his findings to the next General Meeting of Shareholders.
5. Upon fulfilling their duties the members of the Audit Committee should have the following rights:
   19.1. select the course of activities and procedures using professional knowledge and skills;
   19.2. receive from the Company the necessary documents and/or their copies and information and use it;
   19.3. demand the Company and the Subsidiaries to provide explanations, perform other necessary actions necessary for performing the functions of the Audit Committee;
   19.4. demand the employees of the Company and the Subsidiaries to provide explanations in writing;
   19.5. other rights specified in the present Regulations and valid legal acts.

PROCEDURE OF WORK OF THE AUDIT COMMITTEE

1. The Audit Committee is a collegial body, taking decisions during meetings. The Audit Committee may take decisions and its meeting should be considered valid, when both members of the Committee participate in it. The decision should be passed when both members of the Audit Committee vote for it. The member of the Audit Committee may express his will – for or against the decision in question, with the draft of which he is familiar with – by voting in advance in writing. Voting in writing should be considered equal to voting by telecommunication end devices, provided text protection is ensured and it is possible to identify the signature.
2. The right of initiative of convoking the meetings of the Audit Committee is held by both members of the Audit Committee. The other member of the Audit Committee should be informed about the convoked meeting, questions

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REGULATIONS OF THE FORMATION AND ACTIVITY OF THE AUDIT COMMITTEE OF INVALDA AB

Invalda

that will be discussed there and the suggested drafts of decisions not later than 3 (three) business days in advance in writing (by e-mail or fax).

1. The meetings of the Audit Committee should not be recorded, and the taken decisions should be signed by both members of the committee. When both Audit Committee members vote in writing, the decision should be written down and signed by the secretary of the Audit Committee who should be appointed by the Board of the Company. The decision should be written down and signed within 7 (seven) days from the day of the meeting of the Audit Committee.

2. The Board of the Company should ensure:

23.1. the members of the Audit Committee should be properly introduced to the activities of the Company, should be provided in particular with complete information relating to the Company's specific accounting, financial and other operational features;

23.2. the Audit Committee should be informed of the methods used to account for significant and unusual transactions where the accounting treatment may be open to different approaches. The Audit Committee should be furnished with complete information on particulars of accounting, financial and other operations of the Company;

23.3. the Audit Committee should be provided with the premises for its operation, appointed secretary and granted other required expedients.

23.4. the Audit Committee should be informed of the work programme of internal auditors, and should receive internal audit report or a periodic summary, when the internal auditing function is started in the Company;

23.5. the Audit Committee should be informed of the work programme of external auditors, and should obtain a report by the external auditor, describing all relationships between the independent auditor and the Company and its group. The Audit Committee should obtain timely information about any issues arising from the audit;

23.6. the Audit Committee should be free to obtain advice and assistance from outside legal, accounting or other advisors as it deems necessary to carry out its duties, and should receive appropriate funding from the Company to this effect.

1. The Audit Committee should have the right to invite the head of the Company, member(s) of the Board, the chief financier, employees responsible for finance, accounting and treasury issues as well as external auditors to its meetings.

2. Members of the Audit Committee may receive remuneration for their work in the committee at the rate approved by the Management Board.

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