Corporate Governance

Tamro Corporation's governing bodies and management practices comply with the Finnish Companies Act, the Articles of Association and other applicable laws and regulations. The auditors' statement on Tamro's corporate governance is included in the Auditors' Report.

Tamro Corporation is a wholly owned subsidiary of PHOENIX Group. Administrative routines are aligned with those of the parent company.

Board of Directors and President/CEO

Tamro Corporation's Board of Directors comprises a minimum of three and a maximum of ten members elected at the Annual General Meeting. The term of a Board member expires at the close of the following year's Annual Meeting. The Annual General Meeting elects the Chairman.

The Articles of Association of Tamro Corporation specify no other tasks for the Board of Directors than those prescribed under the Finnish Companies Act.

In addition to the provisions of the Finnish Companies Act, it is the duty of the President and CEO to

• direct the company's business activities according to the guidelines and regulations issued by the Board of Directors,
• monitor economic trends in the countries of operation and adjust corporate activities as required by the changing business environment,
• manage the company's strategic planning and monitor the development of the Group's operational organisation and efficiency,
• supervise the M&A activities, and
• propose the meeting agenda to the Board of Directors.

No Group employee is nominated to the parent company's Board of Directors. No director of the corporate Board serves as non-executive Director on any of the Boards of Group subsidiaries.

The President and CEO is nominated by the Board of Directors, which also approves the terms and conditions of his post as stipulated in a written executive employment contract. All other employees of the Corporation are appointed with the terms and conditions of their contracts approved by the superior of the appointing person.

Tamro has elected to use a double signature policy throughout the whole Group. The name of the company, whether Tamro Corporation or its subsidiary, is signed by the members of the Board and the Managing Director, two together or by the procuration holder(s) authorized by the Board to do so together with another person entitled to sign. Where the subsidiary has no Board of Directors, the subsidiary is signed for by the procuration holder(s) authorized by the shareholder to do so either together with another procuration holder or with the Managing Director.

Organisation of business activities and areas of responsibility

The Group's core business - pharmaceutical distribution - is organised under eight country-specific business units. In all the countries where it is legally possible, Tamro Group is actively involved also in pharmaceutical retail trade.

All business units are headed by a Managing Director reporting to the President and CEO of Tamro Corporation.

The Group management comprises the President and CEO, the Group's Chief Financial Officer, the Group's Logistics Director and the Managing Director of Tamro Finland.

The responsibilities of the Group's Chief Financial Officer are to manage the corporate business controlling, treasury and Group administrative functions. He also establishes adequate financial standards and routines to be properly adopted and applied by all Group companies, and he guides the companies in their use of the said tools. He is responsible for the Group budgeting, financial reporting to the Board of Directors - including making pertinent comments and highlighting substantial deviations from plan - and making valid forecasts. The CFO also takes care of corporate tax planning and business development.

The Group's Logistic Director is responsible for driving the operational efficiency and quality of our operational processes, including the use of information technology. He is responsible for operational benchmarking processes in the Group, based on the key logistic parameters used to identify best practices that can be adopted by the local business units, as well as for driving and leveraging the efficiency and quality improvement work of the distribution units, in order to ensure competitive operations.

The responsibilities of the Group's Chief Financial Officer and Logistics Director have been defined by the President and CEO and approved by the Board.

A separate routine and rules for investments and expenses as well as a chart of authority have been established at Tamro Corporation for application throughout the Group.

Auditing

The external auditors are elected annually by the General Meeting. In addition to the tasks specified in the audit regulations and the audit scope, the auditors report their audit findings to the Board of Directors when necessary and take part in the meetings of Tamro's Board of Directors.

Risk management

For Tamro Group, a contributor to the national health care systems, it is essential that special attention is given to the risks inherent in the business. The main operational risks are property damage, business interruption and liability risks. The objective of the operational risk management of the Group is to identify and minimise risks associated with operations, assets, environment and personnel. The responsibility to manage and reduce the operational risks and to have appropriate contingency plans in place lies with the local business units.

The remaining risks are covered with insurances to the extent defined by the Tamro Group management and the Board of Directors. The Group level master insurance policies are administered centrally by Tamro whereas the business units are responsible for the appropriate local insurance coverage.

Financial risks are handled in accordance with the financial policy approved by the Board of Directors. The Tamro treasury function is responsible for monitoring and managing the Group level financial risks, and for advising the business units in their financial risk management. The business units are responsible for providing the Tamro treasury function with the necessary information regarding their financial risks, and for complying with the guidelines and policies given by the Tamro treasury function.

Tamro has an internal audit team. The function of the team is, among others, to report on the adequacy of internal controls and the level of compliance with Tamro Group regulations. The team also provides recommendations about the activities reviewed. The internal audit team reports to the President and CEO, while the Group management acts as its Audit Committee.

Subsidiaries

In a subsidiary where Tamro Corporation is the sole shareholder, the General Meetings are convened either by the Board of the local company or by Tamro Corporation. The Chairman of the General Meeting is either Tamro Corporation's President and CEO or a designated Tamro Corporation executive. The Chairman of the Board is either Tamro Corporation's President and CEO or another designated Tamro Corporation executive.

If a Board of Directors is not needed, the tasks laid down for the Board of Directors may be assigned to the General Meeting as specified in the articles of association of the relevant subsidiary.

The Managing Director of the subsidiary is appointed by Tamro Corporation's President and CEO, with the terms and conditions of their contracts approved by the Chairman of Tamro Corporation's Board of Directors as the superior of the appointing person.