NOTE 15
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

OVERALL The Group has low exposure to financial risks. The main financial risks in the Group are foreign currency risk and credit risk. It is the Group’s policy that no trading in financial instruments shall be undertaken, with the exception of investment in short-term cash deposits. Short-term cash deposits are defined as financial instruments under IFRS and are measured at fair value. The market value of Short-term deposits was USDM 151.2 and USDM 201.0 as of 31 December 2005 and 2004, respectively. Under IFRS, receivables and liabilities are also defined as financial instruments and book value is assumed to be the same as market value.

INTEREST RATE RISK TANDBERG has no interest bearing debt. Surplus liquid funds are kept in USD and invested in short-term cash deposits or at floating interest rates with banks. The Group’s interest rate exposure is minimal, since the portfolio of liquid funds has a duration below two months.

FOREIGN CURRENCY RISK The structural currency exposure (translation exposure) is limited. Approximately 90% of total assets minus liabilities are denominated in the functional currency USD. The other main currencies for the Group, NOK, GBP, EUR and CAD, have separately less than +/- 10% of total assets minus liabilities.

The Group has transactional currency exposure. Such exposure arises from sales or purchases in currencies other than the reporting currency USD. TANDBERG attempts to create natural hedges in the flow of currencies other than USD. Although this reduces the transactional currency exposure, a change in the NOK/USD rate of +/- 1.00, will impact the operating revenue with about -/+ USD 2 million and the operating profit with about +/- USD 12-14 million.

COMMODITY PRICE RISK The Group’s exposure to price risk is minimal.

CREDIT RISK The Group trades only with recognized, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is limited. Customers that are not credit-worthy can only trade with the Group when prepayment, Letters of Credit or other security are received. There are no significant concentrations of credit risk within the Group.

LIQUIDITY RISK The Group has no funding need or liquidity risk.