Corporate Governance Report Prosafe SE Corporate Governance Report 2016

Transcription

1 Prosafe SE Corporate Governance Report 2016 Page 1 of 13

2 Corporate governance in Prosafe Prosafe s system of corporate governance forms the foundation for its vision and strategy. The group s business is organised on the basis of a transparent and efficient business model, with a clear segregation of responsibilities within the organisation. The directors have been appointed so as to ensure that a broad base of appropriate skills, expertise and diversity is reflected on the board. Working constructively together with its committees and the company s administration, the board oversees the strategic direction, targets, the precise reporting, efficient management and equal treatment of all shareholders so as to achieve the strategic and profitable development of the company. Norwegian Code of Practice Prosafe is a European public company (Societas Europaea), listed on the Oslo Stock Exchange. There are no significant deviations between the Norwegian Code of Practice for Corporate Governance of 30 October 2014 (the Code) and its implementation in Prosafe. Headquartered and registered in Cyprus, Prosafe is also subject to Cypriot legislation. Corporate governance The Code covers 15 topics which are designed to ensure that the division of roles between shareholders, the board and the company s administration are regulated in a way that strengthens confidence among shareholders, employees, the capital market and other interested parties to achieve maximum value creation over time. Prosafe s Code of Conduct sets out its corporate values which are reflected in its ethical guidelines and the corporate social responsibilities which it undertakes. Prosafe is committed to transparency, respect for employee and human rights and has a zero tolerance policy towards bribery and corruption. This is reflected in the various Prosafe policies, including Prosafe s Corporate Social Responsibility (CSR) Policy. Prosafe s Code of Conduct and CSR Policy can be accessed on Prosafe s website at and The Directors Report which is published annually, specifically refers to and is deemed to include the corporate governance report published on Prosafe s website at The business Prosafe s memorandum and articles of association and its vision, goals and strategies provide the necessary information which enables shareholders to understand and anticipate the scope of its activities. The objects for which Prosafe is established are set out in Article 3 of its memorandum of association which can be accessed on Prosafe s website. In order to give Prosafe sufficient legal basis under Cyprus law to carry out all aspects of its core business, the objects of the company are wide ranging. The memorandum and articles of association should therefore always be read in conjunction with other information made available by Prosafe to its shareholders in order to understand the business. Prosafe s vision and strategy are described in the section About Prosafe at Page 2 of 13

3 By complying with strict requirements for health, safety and the environment, Prosafe prioritises the safe and efficient operation of its vessels and the safety of its personnel. Equity and dividends Prosafe aims to have a sound financial position to support its published strategy and capital return policy. Prosafe s consolidated shareholder s equity as at 31 December 2016 amounted to USD million (2015: USD million), equivalent to 42 per cent (32.6 per cent) of the group s total assets. This change reflects mainly a net profit for the period of USD million, a share issue of USD million, convertible bond issues of 57 million, and revaluation of cash flow hedges. Prosafe's long-term dividend policy remains as described in the Q report. However, in light of the reduction in industry activity levels, in January 2016 the decision taken by the board in November 2015 to temporarily suspend dividend payments was reiterated. The board believes that this remains beneficial for the company, from a commercial, financial and strategic perspective, and that it will continue to improve the company's financial robustness and optionality. In addition, as part of the agreed amendments to its credit facilities, Prosafe has agreed that it will not issue any dividends, unless all deferred instalments have been prepaid or cancelled and a 12-month financial forecast has been provided which confirms compliance with the financial covenants. No dividends or equity buy-backs except as specified in this report have been declared or issued from 31 December The following events (with reference to the related announcements) in respect of the equity of the company occurred during 2016: July 2016 (stock exchange release): The board proposed a comprehensive refinancing involving key stakeholders, including secured bank lenders, major bondholders and shareholders, by way of inter alia (i) a private placement (ii) a subsequent equity offering (iii) a full redemption of senior unsecured bonds by way of part conversion to equity and part cash redemption, and (iv) amendments to the company's secured debt facilities (the Refinancing). August 2016 (Extraordinary General Meeting): As part of the Refinancing of the group the authorised share capital of the company was increased from EUR 68,981,037 to EUR 75,677,037 by the creation of 6,696,000,000 new undesignated shares, each with a nominal value of EUR 0.001, so that following the increase, the authorised share capital of the company of EUR 75,677,037 was divided into (i) 275,924,148 ordinary shares of nominal value Euro 0.25 each, and (ii) 6,696,000,000 undesignated shares of nominal value Euro each. The subsequent offering referred to in the stock exchange release dated 7 July 2016 aimed at facilitating the subscription by existing shareholders who were not able to participate in the private placement. Because the equity issuances would take place at a conversion/subscription price below the nominal value of the ordinary shares at the time, a reduction of the nominal value of the company's ordinary shares was necessary as a reduction of share capital without distribution. As a result, the general meeting approved (i) the reduction of the share capital of the company by cancelling paid up nominal capital (in lieu and without cancelling any shares per se) to the extent of Euro per share on each of the 259,570,359 ordinary shares that had been issued and were fully paid up thereby reducing the nominal value of all such ordinary shares from Euro 0.25 each to Euro each with the corresponding effect on the authorised share capital; and (ii) the entire amount of Page 3 of 13

4 Euro 64,633, corresponding to the amount cancelled from the company's paid up share capital (through the reduction of the nominal value of each ordinary share as aforesaid) was transferred and credited into the capital reduction reserve fund. The completion of the reduction of share capital was subject to approval of the District Court of Larnaca, Cyprus and registration with the Cyprus Registrar of Companies. Pending the completion of the share capital reduction, the new shares were to be issued as Class A Shares on an interim basis. Such shares had equal rights in all respects as the existing ordinary shares, including with respect to dividends and voting but would not be listed or traded on the Oslo stock exchange (Oslo Børs) prior to their conversion into ordinary shares. The Class A Shares were automatically convertible to ordinary shares on completion of the share capital reduction and approval and publication of a listing prospectus for the Class A Shares. In order to facilitate this issuance, the general meeting approved amendments to the company s articles of association so that the company could issue a new separate class of shares classified as Class A Shares. The general meeting also approved the disapplication of pre-emption rights for the issuance of the new convertible bonds and shares envisaged in the Refinancing. September 2016 Issuance of shares in private placement The company issued 4,376,600,000 new Class A Shares in connection with the private placement closed in July 2016 at a price of NOK 0.25 each. Update on timetable for refinancing completion As part of the Refinancing the company redeemed bonds against issuance of new convertible bonds in the aggregate nominal amount of NOK 81,790,013. Conversion of bonds and issuance of new Class A Shares The company issued 1,400,839,757 new Class A Shares as part of the conversion of senior unsecured bonds to shares. Pending completion of the capital reduction, the ordinary shares had a nominal value of EUR 0.25 each. The Class A Shares had a nominal value of EUR each. In addition to shares, the bondholders received USD 40.3 million in cash. Conversion of convertible bonds and issuance of new Class A shares Based on conversion notices received, convertible bonds of nominal value NOK 3,000,000 were converted into 12,000,000 Class A shares in the company, based on the conversion price of NOK 0.25 per share. Following the conversion, the remaining outstanding principal of the convertible bond loan was reduced to NOK 78,790,013. The number of outstanding shares in the company then increased to 6,049,010,116 shares, consisting of 259,570,359 ordinary shares and 5,789,439,757 Class A Shares. October 2016 (capital reduction completed, approved prospectus, launch of subsequent offering and conversion of Class A Shares and listing) Following completion of the capital reduction and the publication of the listing prospectus, the Class A Shares issued as part of the Refinancing, were converted to ordinary shares and all issued shares of the company had a nominal value of EUR The converted shares became listed and tradable on the Oslo Stock Exchange (Oslo Børs) as of Monday 17 October Page 4 of 13

5 November 2016 Completion of Subsequent Offering Settlement of the subsequent offering was completed and 504,000,000 new ordinary shares were issued at a subscription price of NOK 0.25 (approx. USD 15 million in total). Following the completion of the subsequent offering and conversion of Class A Shares, the company's total number of issued and outstanding shares consisted of 6,553,010,116 ordinary shares. Extraordinary General Meeting for reverse split The Extraordinary General Meeting approved the reverse share split in the ratio of 100:1. Every 100 ordinary shares of nominal value EUR each were consolidated into 1 ordinary share, each of nominal value EUR Additional resolutions were approved to facilitate the share consolidation and division exercise. Extraordinary General Meeting for Axis transaction A separate Extraordinary General Meeting held on 30 November 2016 approved a number of resolutions in support of the acquisition of Axis Nova and Axis Vega (further details included below). December 2016 Key information relating to the reverse share split On 2 December 2016 the company announced that prior to the reverse split, the share capital consisted of 6,553,010,116 shares at face value of EUR each. Subsequent to the reverse split, the share capital consisted of 65,530,102 shares at face value of EUR 0.10 each. Definitive agreement to acquire Axis Nova and Axis Vega executed The company announced completion of definitive agreements with respect to the acquisitions of all outstanding shares in the two single purpose companies Axis Nova Singapore Pte. Ltd. ( Axis Nova ) and Axis Vega Singapore Pte. Ltd. ( Axis Vega ) and 25% of the shares in Dan Swift (Singapore) Pte. Ltd ( Dan Swift ). The agreed consideration for the transaction of USD70 million was settled by the issuance of 5,868,900 ordinary shares priced at NOK 30 per share, and subordinated zero coupon convertible bonds of NOK 403,092,000 convertible into 13,436,400 shares at a conversion price of NOK 30 per share. Acquisition of Axis Nova/ Axis Vega and Dan Swift completed The acquisition of Axis Nova and Axis Vega was completed on 16 December 2016 and the transaction regarding the acquisition of Dan Swift was completed on 29 December 2016 following which the related issued share capital of the company was 71,399,002 ordinary shares of nominal value EUR 0.1 each. Pursuant to all changes made to the company s equity in 2016 as at 31 st December 2016, the authorised share capital of Prosafe is EUR 13,044, comprising (i) EUR 11,228, divided into 112,283,474 ordinary shares of EUR 0.10 and (ii) EUR 1,815, divided into 18,156,703 undesignated shares of EUR The issued share capital increased from 65,530,102 ordinary shares of EUR 0.10 each to 71,399,002 ordinary shares of EUR 0.10 each. Generally mandates for different purposes are considered separately at each annual general meeting ( AGM ) and are limited in time and valid to the date of the next AGM, except for those relating to convertible bonds which are valid for a longer period so as to ensure that they remain valid for the entire loan period to the extent permissible by law. However, no such mandate was proposed at the 2016 AGM. Page 5 of 13

6 Equal treatment of shareholders and transactions with close associates On 23 August 2016 the Extraordinary General Meeting resolved to amend the company s articles of association so that Prosafe may have more than one class of shares. During 2016 and as specified in the section headed Equity and Dividends, shares classified as Class A shares were issued. These Class A Shares constituted a separate class of shares and except as otherwise provided in the articles of association, ranked pari passu with the ordinary shares in all respects and for all purposes notwithstanding their nominal value. Pursuant to the completion of the share capital reduction in October 2016 the Class A Shares were converted into ordinary shares (as more specifically described in section headed Equity and Dividends ). The company treats all shareholders in a non-discriminatory manner ensuring that all relevant information is distributed to all shareholders. Except as referred to in this report, no transactions took place in 2016 between the company and its shareholders, directors, senior officers or the close associates of any of these. There are no group companies with minority shareholders. Prosafe implements rules and procedures to ensure that directors and senior officers report to the board if they have a significant interest, directly or indirectly, in any agreement concluded by the company. During the course of the year potential conflicts of interest were declared by e.g. Glen Ole Rødland (current chairman of the board) as partner in HitecVision AS, the owner of North Sea Strategic Investments AS (a key shareholder in the company), Christian Brinch (previously deputy chairman) as a director of HitecVision and Carine Smith Ihenacho (director) as Global Chief Compliance Officer in Statoil. Appropriate action was taken to protect against such potential conflicts which included e.g the individual not participating in the relevant part of the board meeting and/or abstaining from voting on the relevant matter. Freely negotiable shares Prosafe s articles of association place no restrictions on negotiability other than the right of the board to refuse to register certain transfers as described in articles 15 and 16 of the articles of association of the company, which can be accessed at Due to the diversified shareholder base, the right to refuse to register a share transfer pursuant to article 16 has not been exercised. General meetings The general meeting secures the participation of shareholders in the company s highest decisionmaking meeting. The company s articles of association are adopted by the general meeting. Shareholders holding at least 5 percent of the issued and voting shares are entitled to submit matters for inclusion on the agenda of an annual general meeting and all shareholders are entitled to attend, speak and vote at general meetings. The AGM must be held by 30th June every year. In 2017, it is scheduled to take place on 10 May. Written notice of an AGM and a meeting calling for adoption of a special resolution is sent out not later than twenty-one days before the scheduled meeting unless special notice is required by law. Written notice of a meeting, other than an AGM or a meeting calling for adoption of an ordinary resolution, must be sent out not later than fourteen clear days before the meeting. All requisite information is contained in the supporting documents. Both these and any recommendations of the election committee, enabling shareholders to take an informed position on all matters to be discussed are made available within the relevant timeframe on the company s website. Page 6 of 13

7 Shareholders wishing to attend the general meeting must notify the company of this intention before the deadline stipulated in the notice. As the board wishes to facilitate the attendance of as many shareholders as possible, it aims at setting the deadline for notification of attendance as close as possible to the meeting date. Shareholders who cannot attend the meeting in person are encouraged to appoint a proxy. Prosafe prepares proxy forms and conducts the voting arrangements at the meeting in a form and manner, to the extent possible, which allows the shareholder to vote separately on each matter to be considered by the meeting and for each of the candidates nominated for election to the Board. Prosafe also allows the possibility for shareholders who cannot attend the meeting in person to cast votes electronically by correspondence (without appointing a proxy). The relevant forms for this are included in the notice to the general meeting. Traditionally, the chairman (or in exceptional circumstances, another member of the board), auditor and at least the board representative to the election committee are present at annual general meetings. Of the members of the senior administration, usually the chief executive officer, the chief financial officer and general manager attend. Prosafe wishes to facilitate a dialogue with shareholders at the general meeting, and therefore encourages all board directors and senior officers to attend. The agenda is determined by the board. The chairman of the board (or his proxy) opens the meeting, following which a chairman for the meeting is elected. The minutes of the general meeting are published as a stock exchange announcement and are available to the public on the company s website within 48 hours of the meeting. Election committee 1 Pursuant to article 54 of its articles of association, Prosafe has an election committee comprising of two members. In addition the board appoints one of its members as a representative to the election committee. Such representative participates in the meetings and discussions but may not vote on any matter. The two members are elected by the general meeting for a period of two years unless otherwise agreed by the general meeting. At the 2016 AGM the members of the election committee were appointed for a period of one year. There are no additional guidelines specifically set by shareholders for the committee at any AGM. The election committee submits its recommendations for membership of the election committee and the board, to shareholders, together with the notice of general meeting and recommends the fees to be paid to directors and members of the election committee. The election committee appointed until the AGM of 25 May 2016 comprised: Thomas Raaschou chairman of the committee Erling Ueland member of the committee Erling Ueland did not participate in the committee works between 14 April 2016 and the AGM of 25 May The election committee appointed by the AGM of 25 May 2016 comprises: Thomas Raaschou chairman of the committee Annette Malm Justad member of the committee During 2016, Harald Espedal was the board representative until 25 May 2016 and at the 25 May board meeting, the board agreed to defer the appointment of a replacement board representative. No further appointment was made in 2016 as the ongoing interactions with the election committee were undertaken by the chairman. 1 Otherwise the Nomination Committee Page 7 of 13

8 The shareholders at the AGM also elect the chairman of the election committee, approve the committee s remuneration and may decide to approve any applicable guidelines. Relevant deadlines for submitting proposals for candidates to be appointed to the board or the election committee are identified on the company s website. The election committee held 23 meetings during 2016 (12 meetings prior to, and 11 meetings after, the AGM of 25 May 2016). Meeting attendance was 100%. Composition and independence of the board and corporate assembly At the extraordinary general meeting held on 15 March 2016, the number of directors which could be appointed by shareholders in accordance with the articles of the company was increased to up to seven directors. The number of directors on the board during 2016 was as follows: January to March March to May May to November November to December directors 7 directors 5 directors 6 directors Historically, continuity on the board and appropriate renewal was achieved by staggering in each year the expiry date of the individual appointments of the board. At the 2016 AGM, appointment of five of the seven directors expired. Four directors were reappointed for a period of one year with the remaining directors due for reappointment in May At each general meeting at which resignations and appointments occur the election committee will provide its recommendations for board composition to shareholders. All newly elected directors are provided with a thorough briefing on the company s history, business, status and challenges. Except in the case of Glen Ole Rødland, a partner of HitecVision AS, which owns North Sea Strategic Investments AS a key shareholder of Prosafe the board members are independent of the company s executive personnel and shareholders. Carine Smith Ihenacho is Global Chief Compliance Officer at Statoil which is a customer of one of the Prosafe subsidiaries. Management is not represented on the board. Any Prosafe shares held by any board member are disclosed in the report and accounts. The board has implemented various policies and procedures to avoid conflicts of interest between directors, senior officers, their close associates and external third parties with whom the company collaborates. The board also seeks to ensure that directors possess broad based and in-depth expertise and skillsets relevant to the company s business and the different market segments served internationally. On 26 May 2016, Harald Espedal resigned as chairman of the board and Glen Ole Rødland was appointed as interim chairman until his formal appointment as Chairman of the board at the extraordinary general meeting held on 30 November The remaining current directors have been appointed for a term of one year, except for Svend Anton Maier, who was appointed as director at the extraordinary general meeting held on 30 November 2016 for a period expiring at the AGM to be held in Information as to each board director is available on Prosafe s website, including whether they hold other directorships, their age, skills and experience. Directors are encouraged to own shares in the company. Details of share ownership can be found on each director s profile on the Prosafe website. The section relating to the board which can be accessed at indicates which directors are being put forward for re-election at the AGM in May Page 8 of 13

9 Except as stated in this report, directors are independent of the company and its management. The requirement to establish a corporate assembly does not apply to the company as it is a European public company (Societas Europaea), whose home member state is Cyprus. Work of the board The board has ultimate responsibility for management of the company. The company s operations, strategic direction and planning processes are regularly reviewed by the board through periodic board meetings. These are supplemented by ongoing commercial, strategic discussions, monthly reporting and ad hoc reporting and updates of all significant matters related to operations, projects, contracts, financial status and other matters of significance. In parallel, a constructive ongoing dialogue is pursued between board and management. The board is also responsible for reaching decisions which form the basis for improving and executing investments and structural measures. Scheduled board meetings are normally held six to eight times a year, but the work schedule is flexible and otherwise adaptable so as to take into account relevant commercial, operational and strategic circumstances. In view of the market conditions during 2016 and the consequent refinancing carried out, additional board meetings were necessary which resulted in a total of 22 board meetings being held. Internal segregation of responsibilities and duties between the board and management is established in a number of various corporate documents including corporate policies and procedures, approval matrices and delegated authorities, board approvals for budgets and specific investments, and the grant of specific powers of attorney in respect of particular transactions. The board has drawn up separate instructions for management and a job description and annual targets for the general manager and the chief executive officer specifying their respective duties, authority and responsibilities in relation to the business. The general manager has a particular responsibility for ensuring that the board receives precise, relevant and timely information enabling it to discharge its duties. Reference to chief executive officer during 2016 included the acting chief executive officer, Stig H. Christiansen who was appointed in place of the previous chief executive officer, Karl Ronny Klungtvedt on 27 April Recurrent items on the board agenda include, health, safety and quality issues, corporate strategy issues, business planning and forecasting and contingencies, approval of annual and quarterly results, monthly performance reports, annual reporting, management compensation issues, leadership assessment and succession planning, people and organisational strategy, special project reviews, risk evaluation, review of the company s governing documentation and annual board evaluation and reviews relating to special topics. Conclusion of the annual review of governing documentation will take place during 2017 so as to appropriately reflect and support the major restructuring and reorganisation exercise carried out during 2016/17. The company has defined rules on in-house communication, and has clearly identified which persons are authorised to speak to the external market on its behalf. The chairman has a particular responsibility for ensuring that the board s work is well organised and efficiently conducted. The chairman of the board encourages an open and constructive debate within the board and with management. Historically, the board has elected a deputy chairman who will act when the chairman is unable to lead its work. During 2016 no deputy was appointed from May 2016 and the role was carried out as required by members of the board. The board held 22 board meetings in Meeting attendance was 94.17%. Individual attendance by directors during 2016 was as follows: Page 9 of 13

10 Director Attendance % Glen Ole Rødland* Roger Cornish Carine Smith Ihenacho Anastasis Ziziros Nancy Ch. Erotocritou 100 Svend Anton Maier** 100 Harald Espedal*** 100 Christian Brinch**** 100 * appointed March 2016 ** appointed November 2016 *** resigned May 2016 **** appointment expired May 2016 Audit Committee The board established an audit committee in Until October 2015 the committee comprised three members of the board and was chaired by the chairman of the board. The committee currently comprises two members and is chaired by Anastasis Ziziros. Its mandate is to review and assess operational and financial risk. The audit committee is tasked from time to time with the carrying out of special investigations designed to assess the overall risk management system within the group. Proper internal control is ensured through various forms of segregation of duties, guidelines and approval procedures. The company s internal financial transactions are subject to special control systems and routines. Financial risk is managed by the group s corporate finance function which during 2016 has provided regular financial and liquidity forecasts and a monthly financial update to the board as well as comprehensive forecasts and sensitivities at each board meeting. In addition, an internal audit function was established in The audit committee held 6 meetings in Meeting attendance was 100%. Compensation Committee Further, in 2006, a compensation committee was established to prepare proposals related to the remuneration of senior officers. The compensation committee is headed by Roger Cornish, a board director. The compensation committee held 4 meetings in Meeting attendance was 87.5%. The board has traditionally undertaken an annual self-evaluation of its working methods, composition and the manner in which the directors function, both individually and collectively, in relation to the goals set for their work. In this context, the board also assesses itself in relation to corporate governance. The assessment is made available to the election committee as a tool for continuous improvement. Risk management and internal control Prosafe s conduct and development of its business are subject to several categories of risk. The strategic, commercial, operational, financial, insurance and project related risks and sensitivities of the business, and the associated internal control measures, are described in more detail at In addition to the ongoing reviews by the senior officers, annual reviews and assessments are carried out which are approved by the board in respect of risk management and internal controls. The risk management methodology applied by management and the board are in accordance with industry and market practices generally and as implemented in Prosafe over several years. The risk register forms the basis for the action plan which further represents a main and continuous agenda item for both management and the board to ensure that all key risks and opportunities are appropriately discussed and followed up by management and the board in the form of strategies and mitigating actions. Page 10 of 13

11 Corporate Ethics Committee Prosafe has established an ethics committee which maintains and further develops Prosafe s Code of Conduct and policies, which include guidance on illegal and unethical issues. Concerns about possible breaches of the code or any policy can be reported to the committee by ordinary mail (addressed to the Ethics Committee, Prosafe AS, PO Box 39, N-4064 Stavanger, Norway) or (conduct@prosafe.com) on a confidential basis. The committee ensures that alleged breaches are investigated thoroughly and fairly and reported as appropriate to the board. The internal audit function in the company focuses on the reduction of risk in the organisation by analysing routines and prevailing procedures with its key objective being to propose improvements to operations and the reduction of risk. Internal audit report to the audit committee and relevant matters are then raised to the board both on a regular and on an ad hoc basis. The board provides an account of the main features of the company s internal control and risk management systems which can be accessed at Remuneration of the board The AGM determines directors fees. Remuneration of the board reflects its responsibilities, expertise, commitment of time, and the complexity of Prosafe s activities. Directors fees are not related to the company s performance and none of the current board directors have a pension scheme or agreement concerning pay after termination of their office nor have they received any share options. Information relating to the remuneration of the board for 2016 is set out in note 6 to the consolidated accounts. In addition a fee of EUR 1,500 is payable for each board meeting held away from each director s home country. The fees payable to board committee members are as follows: Election Committee: chairman EUR 6,500, member and board representative to the Election Committee EUR 5000 At the 2016 AGM, an additional remuneration of EUR 750 per meeting for each of the chairman and the member of the committee was approved. Compensation Committee chairman EUR 15,000 and member EUR 10,000 Audit Committee chairman EUR 20,000 and member EUR 10,000 No director, or company with which any director is associated (except as disclosed below) takes on specific assignments for the company in addition to their appointment as a director. Harneys Aristodemou Loizides Yiolitis LLC has acted for Prosafe in the provision of Cyprus law advice. Nancy Ch. Erotocritou is a partner at Harneys and director of Prosafe. Remuneration of executive personnel Prosafe is not required to comply with the Norwegian Public Companies Act. However, certain key information for determination of the remuneration of the chief executive officer and other executive personnel is presented in note 6 of the annual accounts. The terms of employment of the general manager and chief executive officer are determined by the board, based on a detailed annual assessment of their salary and other remuneration. Prosafe aims at providing a competitive total package for executive officers. The basis for comparison is the practice followed by other companies involved in the oil and gas sector in the geographic areas where Prosafe pursues its operations. The total remuneration package for the management comprises three principal elements base pay, variable pay and other benefits, including car allowance, pension and insurance schemes. Page 11 of 13

12 During 2016 and in view of the challenging market conditions, the Refinancing and the requirement for a major cost optimisation exercise, a sliding scale of up to 10% salary reduction was carried out across the company. Although a new approval for grant of synthetic options was given at the AGM of 13 May 2015, no synthetic share options have been granted since such date. For further details relating to remuneration paid to executive officers, see note 6 to the consolidated accounts. Performance-related remuneration is subject to an absolute limit. Information and communication Prosafe s calendar for financial and other major events including the AGM, can be accessed on the Prosafe s website at Prosafe presents preliminary annual accounts early in February. Complete accounts, the directors report and annual report are provided to shareholders and other stakeholders. In addition interim accounts are provided on a quarterly basis. Open investor presentations are held in connection with the reporting of annual and interim results. These presentations are also broadcasted as webcasts, and can be viewed on the internet. The chief executive officer and the chief financial officer use these occasions to review the results and comment on operations, markets, prospects and outlook. The presentation material is available on Prosafe s website. An ongoing dialogue is otherwise maintained with analysts and investors, who are also invited to attend presentations. In order to ensure equal treatment of shareholders, Prosafe aims to provide clear and timely financial and other information about the company s operations to the securities market. The company places the greatest emphasis on treating all shareholders and analysts equally. All information distributed to the company's shareholders is published on Prosafe's website at the same time as it is sent to the shareholders. Guidelines as to who is entitled to speak on behalf of the company in respect of certain matters, as well as a contingency plan for managing information so as to respond to certain events are contained in the various corporate procedures. Information available to shareholders is only available to shareholders in English (not Norwegian). As a Cyprus registered international company with a broad shareholder base English is regarded as the most applicable common language. Take-overs Except as set out in article 16 of the articles of association, Prosafe s articles of association do not contain any defence mechanisms against take-over bids, nor has the company implemented other measures limiting the opportunity to acquire shares in the company. Article 24 of the articles of association sets out certain provisions on mandatory bid requirements. If an offer is made for the company s shares, the board will issue a statement evaluating the offer and make a recommendation as to whether shareholders should or should not accept such offer. In such a situation Prosafe will act professionally and in accordance with the applicable principles for good corporate governance. Auditor KPMG are the auditors of the company since May The auditor always attends board meetings where the annual accounts are considered. In 2016, auditors fees for the group amounted to USD352,000 and consultancy fees paid to KPMG amounted to USD79,000. These fees relate to accounting and tax-related issues. The auditor participates in the audit committee meetings and presents a review of the company s internal control environment and assessment of the key judgements/accounting issues at least once a Page 12 of 13

13 year. In addition, a meeting is held between the auditor and the board at least once a year (which is not attended by the chief executive officer or any other member of management). Use of the auditor by executive management for services other than audit is limited and therefore guidelines have not been considered as necessary for such use. See Note 6 in the annual accounts. Compliance with Non-Financial Reporting European Union Directive 2014/95/EU As regards compliance with European Union Directive 2014/95/EU relating to Non-Financial Reporting please refer to the Communication on Progress report submitted on 6 September 2016 which is updated on an annual basis and which can be accessed on Prosafe s website at Larnaca, 22 March Glen Ole Rødland Roger Cornish Carine Smith Ihenacho Non-executive Chairman Non-executive Deputy Chairman Non-executive Director Anastasis Ziziros Nancy Ch. Erotocritou Svend Anton Maier Non-executive Director Non-executive Director Non-executive Director Page 13 of 13