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CORPORATE GOVERNANCE AT CYTA

At CYTA we strongly believe that good Corporate Governance is crucial to the smooth operation, long-term survival and, more generally, the creation of value for our Organisation. Furthermore, it is important for the building of trust with all our stakeholders - owners, customers, personnel, society. Although we are not obliged to comply with the Principles of Corporate Governance, we make every possible effort to adopt them, wherever they do not contravene the laws governing CYTA’s operations.

THE BOARD
Our Board is made up of nine non-executive members who, by law, are appointed by the Council of Ministers. The Board approves all decisions regarding corporate policy and strategy on financial, technological and social issues. In addition, it guides and monitors their implementation, through the various committees that it has set up, one of which is the Audit Committee. The Board comes together in its entirety about once a week, whereas the various committees meet as and when required.

For the execution of its duties, the Board may use independent advisory services, including Legal Advisor, and it has unrestricted access to information. At every meeting, Members of the Board have at their disposal all the relevant information, so as to be in a position to form a proper, informed opinion on issues on the agenda.

The Board Members’ remuneration is determined by the Council of Ministers, while relations between the Board and the shareholders (Government) are determined by the relevant provisions of the law.

AUDIT COMMITTEE
The Audit Committee, formed in 2004, operates in accordance with the Code of Corporate Governance and comprises exclusively Members of CYTA’s Board.

During 2006, the Committee held six meetings. In accordance with its mandate, the Committee reviewed, inter alia, CYTA’s Financial Statements for 2005 together with the underlying accounting principles, as well as the findings of the external auditors. The Committee also reviewed the Management Accounts and Budgetary Control for 2005. In the course of the year, the interim financial statements, management accounts and rolling budgets were also reviewed.

The Committee reviewed and approved the Annual Audit Programme for 2006, prepared on the basis of the results of the risk assessment carried out for CYTA. It also assessed the audit work undertaken during the year by the Internal Audit Department (IAD) and oversaw the implementation of the recommendations made. In the context of its responsibility to review the effectiveness of internal audit systems, the Committee also reviewed the results of assessments carried out for these purposes at the corporate level.

RISK ASSESSMENT AND RISK MANAGEMENT
During the year under review, our IAD again undertook the coordination of special workshops for the assessment of risks in all Business Units (BUs), important trans-departmental processes and projects of major significance. In these workshops the goals of the BUs were reassessed and the risks threatening their achievement were identified, taking into account the controls that were already in place to mitigate them. All risks were assessed for their likely impact on the Organisation and their probability of occurring. The results were reported, with the corporate risks prioritised. On this basis, the Annual Audit Programme of the IAD for 2007 was prepared and subsequently approved by Senior Management and the Board of Directors.

ASSESSMENT OF INTERNAL CONTROLS
The basic goal of our audits is to assess adequacy and effectiveness of our internal controls, which are embedded in the various procedures for implementing activities and projects. In this way, we safeguard our shareholders’ investment and the Organisation’s assets, and we improve our ability to achieve our goals. The conclusions and suggestions that come out of our audits are agreed with the auditees and are submitted to the Chief Executive Officer for the necessary approvals. Summaries of all audit work are submitted to the Board regularly for information.

On the corporate level, the assessment of internal controls is based on the COSO methodology, which is the most widely accepted best practice internationally.

INTERNAL AUDIT DEPARTMENT
Our IAD is now recognised within CYTA as a Unit that adds value. It provides the Board and Senior Management with high level consultancy services regarding opportunities for improvement, as well as assurances about the adequacy and effectiveness of the internal audits, risk management and Corporate Governance.

The majority of our internal auditors are certified by the International Institute of Internal Auditors. They are recognised for their expertise in matters of assessment of internal controls, risk management and Corporate Governance, as well as for their abilities to implement best practices and for having an all-round understanding of our Organisation’s activities.

The IAD regularly assesses its own level of compliance with international standards, audit coverage, the efficiency and effectiveness of its internal auditors, as well as customer satisfaction.

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