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Corporate governance

Pursuant to section 3-3(b) of the Norwegian Accounting Act and the Norwegian code of practice for corporate governance, last revised in the autumn of 2012, the board has reviewed and updated the company’s principles for cor-porate governance. These principles also apply to HAVFISK ASA’s subsidiaries to the extent they are relevant. The board’s combined report on corporate governance has been included in the annual report. The individual recommenda-tions in the code of practice from the Norwe-gian Corporate Governance Board (NCGB) are discussed below. These recommendations are available on the NCGB website at www.nues.no. To a large extent HAVFISK’s principles cor-respond to these recommendations. Possible deviations from the code are discussed under the relevant sections below, and any deviation is accounted for and alternative practice adopted by the company explained.

PurposeHAVFISK ASA’s corporate governance princi-ples are intended to ensure an appropriate allo-cation of responsibility between the company’s owners, its board of directors and its executive management, and to ensure that the company’s operations are subject to satisfactory supervi-sion. An appropriate allocation of responsibility and satisfactory supervision will contribute to the utilising sustainable value creation, to the benefit of the shareholders, the employees and other stakeholders.

Values and ethical guidelinesThe board has adopted the company’s corpo-rate values and ethical guidelines. HAVFISK ASA has revised its ethical guidelines during 2012 and 2013 and new values for the company have been prepared. The values are based on the vision of «Proud managers» and central to this are our values Safety, Sustainability, Profit-ability and Pride.

In 2012, the company established the Aker Sea-foods School, to increase the employees’ exper-tise and reinforce the company’s ability to get things done. This work has continued in 2013 through the HAVFISK School. Group meetings have been held with key personnel from the fleet, as well as the entire administration. Both the values and the ethical guidelines have been central topics for discussion at these meetings.

The ethical guidelines are made known to all employees and are also part of the documenta-tion that is presented to and reviewed with new employees. A whistle-blowing system has also been established for breaches of the guidelines on the company’s website.

Overall control of the Group’s ethical guidelines is performed by corporate management. How-ever the day-to-day follow-up has a decentral-ised structure of responsibility to skippers and leading personnel on the individual vessels.

BusinessThe company’s business purpose clause is included in the company’s articles of association:

«The business of the company is trade, produc-tion and marketing of fish and fish products, to invest in and own fishing vessels and pro-duction equipment in connection therewith, hereunder the operation of fishing and fish pro-duction vessels and equipment, and advisory services and other activities within this business area. The company may also participate in other economic activities, including owning and man-aging real property, securities, and other assets, as well as owning subsidiaries within similar or other businesses.»

The business purpose clause ensures the shareholders’ control of the business and the company’s risk profile, without limiting the

opportunities for the board and the execu-tive management to implement strategic and commercially appropriate decisions within the defined purpose. The group’s main strategies are presented in the annual report.

Equity and dividends EquityThe group’s book equity as of 31 December 2013 was NOK 714 million, corresponding to an equity ratio of 28.6 per cent. HAVFISK ASA must at all times have an equity that is prudent with regard to the activities pursued by the group, including the goals and strategies gov-erning its activities. The group’s objective is to maintain an equity ratio of at least 27 per cent.

In the event that additional equity is required, a possible share capital increase will be con-sidered by the board and the general meeting. Any board authorisation to increase the share capital will be limited to defined purposes and apply until the earlier of the annual general meeting of 2015 and 30 June 2015.

DividendsHAVFISK ASA’s goal is to give its shareholders the best possible return. Over time, the objec-tive is to pay a reasonable proportion of the company’s net profit as dividend. In the short term the company will give priority to complet-ing its fleet renewal so as to create the basis for increased earnings.

The board will apply the above mentioned con-siderations when making its proposal regarding dividends to the general meeting.

Board authorisationsThe board’s proposals for future authorisations shall be limited to defined conditions and apply until the next annual general meeting, although no later than 30 June the following year.

HAVFISK ASA’s objective is to create the greatest possible value for its shareholders over time. Strong corporate governance will contribute to reducing risk and ensure

sustainable value creation.

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Equal treatment of shareholders and transactions with related partiesThe company has one class of shares, and all shares carry the same rights in the company. Emphasis is given to equal treatment of all shareholders. The board must provide a justi-fication for any exemption of the pre-emptive rights of existing shareholders in connection with any share capital increases. Transactions in the company’s own shares are conducted through Oslo Stock Exchange.

In share capital increases, the group’s policy is to prevent any dilution of shareholders. Accord-ingly, strong emphasis is given to ensuring equal treatment of all shareholders in connection with any future share issues, whether private placements or rights issues. Private placements can be used in cases where this is considered advantageous for existing shareholders.

Information to the stock market will be charac-terised by transparency and equality, and will aim to ensure that shareholders receive correct, clear, relevant and timely information for con-ducting any share value assessments.

Provided that appropriate board authorisation has been resolved by the general meeting, the company can purchase own shares. Such shares are purchased at the market price at which they are traded on the Oslo Stock Exchange. Any board authorisation to purchase the compa-ny’s own shares will apply until the next annual general meeting.

All agreements of a material nature between related parties must be entered into on com-mercial terms and will be reviewed by the company’s audit committee. In cases where transactions of a material nature are conducted between the company and related parties, these must in every case be reviewed and approved by the board. External, independent valuation must be used as a basis for decision making.

HAVFISK ASA sells a substantial part of its fresh fish harvest to Norway Seafoods. Clear-ing of such is conducted by the Norwegian Fishermen’s Sales Organisation, which is also responsible for the settlement. The Norwegian Fishermen’s Sales Organisation has systems to ensure that all sales occur within the price mechanisms applicable in its district, including minimum pricing.

HAVFISK ASA has prepared guidelines to ensure that board members notify the board if they have any material direct or indirect interest in agreements entered into by the group.

Freely negotiable sharesThe acquisition of shares in the company is sub-ject to the consent of the board. Such consent can only be withheld if more than 40 per cent of the company’s capital would become owned by people who are not Norwegian citizens or treated on an equal footing with the latter pur-suant to the Act on Participation in Fisheries, or if the acquisition generates a mandatory requirement for a licence pursuant to this Act. No other transfer restrictions are included in the company’s articles of association.

General meetingsThe general meeting of HAVFISK ASA is the supreme governing body of the group. The general meeting elects the shareholder repre-sentatives on the board of directors of HAVFISK ASA. Other responsibilities of the general meet-ing, including adoption of the annual financial statements for the parent company and the group, are specified in the Norwegian Public Limited Liability Companies Act.

The company encourages shareholders to par-ticipate in the annual general meeting. Priority is given to holding the annual general meeting as soon as possible after the end of the fiscal year. Notices of general meetings with compre-hensive supporting documentation, including recommendations from the nomination com-mittee, are made available to shareholders on the company’s website within the applicable deadlines stated in the Norwegian Public Lim-ited Liability Companies Act. The deadline for registering attendance is set as close to the date of the meeting as possible. Shareholders unable to attend in person may vote by proxy. HAVFISK ASA will appoint a person to act as proxy for shareholders who wish to make use of this ser-vice. Procedures for registering and appointing a proxy are otherwise specified in the notice and in the registration form. The annual report and other documentation appended to the notice of the meeting will only be made avail-able on the company’s website and through the Oslo Stock Exchange’s publication system. Shareholders requiring such documentation sent by mail must contact the company.

Existing systems for managing electronic par-ticipation in general meetings are inadequate. HAVFISK will consider this for future general meetings, if systems that can handle this in a reliable way become available. The board has accordingly resolved that such participation will not be permitted in HAVFISK ASA’s gen-eral meetings.

The board has resolved that shareholders una-

ble to attend the general meeting in person may vote directly on each agenda item through electronic advance voting. Shareholders will be able to amend their vote and to register as par-ticipating in the meeting throughout the period from the issue of the notice and until the dead-line for registering participation. This may be done on the company’s website.

Further, voting by proxy will still be possible. The form of proxy has been prepared in such a manner that the shareholder may vote on the matters as they are presented in the general meeting (proxy with voting instructions). Infor-mation on the procedure for electronic advance voting and the appointment of a proxy with voting instructions are provided in the notice of the general meeting.

The company does not appoint an independent proxy to vote on behalf of shareholders. In the company’s opinion the shareholder interests are duly protected through participation with a personal proxy or by awarding a proxy with voting instructions to the chair of the meeting/chairman of the board or any person appointed by the shareholder.

Pursuant to the articles of association, the gen-eral meeting is chaired by the chairman of the board or a person appointed by him. Hence, HAVFISK ASA does not follow the recommen-dation in the NCGB code of practice, i.e. that the board should have practices to ensure an independent meeting chairman, since previous experience of the leadership and conduct of annual general meetings has been good.

It is envisaged that the chairman of the board, the chairman of the nomination committee and the company’s auditor attend the general meetings. The nomination committee gives emphasis to ensuring that the board functions as effectively as possible as a collective body, that statutory requirements regarding gender equality are met, and that the board members possess complementary experience and quali-fications. The general meeting is therefore nor-mally called on to vote for a complete board of directors. Advance voting on individual candi-dates is not possible.

The company facilitate the opportunity to pro-pose agenda items for the general meeting. Further, shareholders may ask questions and propose resolutions for adoption in the general meeting.

Minutes from the general meetings are pub-lished as soon as practicable via the Oslo Stock

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Exchange’s reporting system on www.newsweb.no (ticker: HFISK) and in the Investor Relations section on www.havfisk.no.

Nomination committeeThe company has a nomination committee, as specified in its articles of association. The com-mittee comprises a minimum of three members, normally elected for two-year terms. When composing the nomination committee consid-eration is given to the shareholders’ interest as well as to the members’ independence from the board of directors and the executive manage-ment. Members of the nomination committee are elected by the general meeting, which also determines the remuneration of the committee members.

Pursuant to the articles of association, the nom-ination committee recommends candidates for the board of directors and proposes their remuneration. The nomination committee must state the reasons for its recommendations. The nomination committee must give grounds for its recommendations.

Information about the members of the nomina-tion committee and any deadlines for propos-ing new board members is made available on HAVFISK ASA’s website.

The deadline for proposing board candidates for the forthcoming period is 31 October. Fol-lowing this date the nomination committee normally starts preparing for the forthcoming general meeting.

Specific instructions have been adopted for the work of the nomination committee. These are available on HAVFISK ASA’s website.

Corporate assembly and board of directors; composition and independence The articles of association of HAVFISK ASA state that the board must be comprised of seven to ten board members, of whom three are elected by and among the employees of the group. The chief executive officer (CEO) is not a member of the board, but attends board meetings. It has been agreed that HAVFISK ASA will not have a corporate assembly. The employ-ees’ rights of representation and participation in decision-making processes are secured through extended representation in the board of direc-tors.

The nomination committee’s recommendations normally include a proposal for who shall be chairman of the board and they are adopted

by the shareholders at the general meeting. If the general meeting has not elected a deputy chair, the board will elect its deputy chair. Board members are elected on two year terms.

The majority of shareholder-elected board members are independent from the compa-ny’s executive management and significant business associates. Furthermore, at least two of the shareholder-elected board members are independent from the company’s main share-holders, i.e. a shareholder controlling, directly or indirectly, at least ten per cent of the shares or votes in HAVFISK ASA. None of the compa-ny’s executive management is also a member of the board. Board members are obliged to disqualify them-selves and withdraw from any consideration of matters in which they or any related party have a special interest. To ensure independent consid-eration by the board, one of the board members will be elected to chair the discussion on matters where the chairman or the deputy chairman can-not or should not chair the discussion.

The present composition of the board is described on the company’s website (www.havfisk.no). There is also further information about the board members’ competence. In 2013 the board held 9 meetings. The participation in the meetings was 80 per cent. Collectively, the shareholder-elected board members represent diversified expertise, capacity and experience from the financial sector, politics, industry and interest organisations. Two of the sharehold-er-elected board members are independent of the main shareholders.

Board members are encouraged to own shares in the company. A summary of board members’ shareholdings in the company may be found in note 30 to the financial statements.

Two of the shareholder-elected board mem-bers/deputy members are up for election in 2013. The nomination committee’s recommen-dation of candidates, including the basis of the recommendation, will be appended to the notice for the annual general meeting, which will be published on the company’s website and on the Oslo Stock Exchange’s reporting site, www.newsweb.no.

The activity and operations of the board of directorsThe board has ultimate responsibility for the group. The board shall ensure an acceptable organisation of the business and is responsible for establishing systems for supervision and

for ensuring that the business is conducted in accordance with the group’s corporate values and ethical guidelines. The board approves strategic plans and adopts the group’s budget. Matters of material strategic and financial sig-nificance for the business will be considered by the board, which is also responsible for the interim financial statements.

The board conducts its activities and operations based on a set of established board instructions which emphasise the following:• Strategic activities• Organisational matters• Supervision• Self-regulation

The board of HAVFISK ASA normally conducts six to eight meetings per year in accordance with the annual plan for the board’s activities.

The board appoints the CEO of the company, and determines the instructions for the CEO and his authority and powers of attorney.

Further, the board determines the CEO’s remu-neration. To secure a more independent and objective consideration of matters of material significance in which the chairman of the board is or has been actively engaged, practices has been established in order for another board member to chair such discussions. The board conducts annual evaluations of its performance and expertise.

The board of HAVFISK ASA has elected an audit committee from and among the board members of the company. Two out of three committee members are not independent of the group’s business. The committee shall pre-pare the matters to be considered by the board and contributes to a thorough and independ-ent consideration of matters related to financial reporting and other matters which fall naturally within the scope of the committee.

The board has assessed the need for a com-pensation committee, and the company does not at present have such a committee, since it is considered more appropriate for the entire board to discuss this.

Risk management and internal control - management principlesThe board of HAVFISK ASA determines the overall principles for management and control of the company. Board instructions defining the board’s obligations and areas of responsibility, as well as the allocation of responsibility and obligations between the CEO and the board,

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has been prepared. The board annually con-ducts a review of the company’s risk areas and its internal control systems. Other governing documents, clarifying the responsibilities of the board and the allocation of responsibility between the board and the management, have been adopted by the board.

A system has been established by HAVFISK ASA on the company’s website for notifying serious misconduct, such as breaches of the company’s ethical guidelines and violations of applicable law.

HAVFISK ASA has a decentralised allocation of responsibility, whereby operational subsidiaries and associated companies establish their own systems for risk management and control. The systems are based on overall guidelines from HAVFISK ASA. The board members elected by HAVFISK ASA are the driving force working to ensure that activities in the various opera-tional subsidiaries comply with management principles.

Risk management and internal control The board ensures that the company has appro-priate internal control procedures and appro-priate risk management systems tailored to its business. HAVFISK ASA is exposed to interest rate and market risk, as well as credit risk and opera-tional risk. HAVFISK ASA is not directly exposed to foreign exchange risk, as the company does not have subsidiaries outside Norway and all revenues from sales are in Norwegian kroner. However, the company is indirectly exposed as the price of its products could over time be affected by exchange rate fluctuations.

Financial guidelines in HAVFISK ASA ensure the monitoring of financial risk. Management of exposure in financial markets, including bunkers, interest rate and counterparty risk, is emphasised in the company’s governing documents. Further details on these principles are provided in notes 1 and 26 to the group’s financial statements and note 10 to the parent company’s financial statements.

The company has developed an authority matrix which is included in its governing doc-uments. Separate approval practices for com-pany costs have also been established.

Managing operational risk primarily takes place within the operational subsidiaries, but with HAVFISK ASA as an active driving force through its positions in the boards of the subsidiaries.

Operational risk relates to loss of life and injury, damage to the environment and loss and dam-age of material. There is also operational risk relating to the observance of legislation, reg-ulations and licence terms that provide the basis for the company’s operations. Routines and guidelines have been established to ensure that operational risk is acceptable and priority is given to work on ensuring compliance with the company’s values and ethical guidelines by means of competence-raising measures and attitude creation.

The financial reporting processHAVFISK ASA prepares and publishes interim (quarterly) as well as annual financial state-ments. The consolidated financial statements are prepared in accordance with the EU-ap-proved provisions of the IFRS, while the parent company’s financial statements are prepared in accordance with the provisions of the Norwe-gian Accounting Act and Norwegian generally accepted accounting principles (NGAAP).

Several control measures have been estab-lished in connection with the preparation of the interim and annual financial statements. Processes related to the closing of financial statements focus on the control of reported financial statements and analyses of the under-lying figures. HAVFISK ASA utilises a report-ing and consolidation tool, whereby the group companies report their financial statements to HAVFISK ASA. Further, the operational subsid-iaries and associated companies have estab-lished control measures to be applied prior to reporting their respective financial statements to HAVFISK ASA.

In addition to interim and annual financial state-ments, HAVFISK ASA reports financial infor-mation monthly through the group’s collective reporting and consolidation tool. Consolidation and control of financial information is a central-ised responsibility and lies with the chief finan-cial officer (CFO). Financial results compared to budget are assessed and analysed by the CEO and CFO on a continuous basis, and are reported to the board of directors on a monthly basis.

Review by the Financial Supervisory AuthorityAs part of its supervision of listed companies, the Financial Supervisory Authority of Nor-way performed a review of HAVFISK’s annual report for 2012. In the annual report for 2013, Havfisk corrects comparable figures for 2012 for the consolidated accounts. The correction also includes the interim figures for all quarters

in 2013 with comparable figures for 2012 as presented in the annual report for 2013.

The figures previously reported were based on the board and management’s best under-standing of how accounting principles and facts should be perceived. The understanding was that these have the most correct presenta-tion of the group’s values in connection with the fishing licences. During the period August 2013 to March 2014, the Financial Supervisory Authority assessed the application of facts and accounting principles and arrived at a differ-ent conclusion. The board and management consider that the company’s previous practice better reflects the underlying reality, but accept that the Financial Supervisory Authority and Expert Committee have come to a different conclusion and will take their understanding of IFRS as a basis.

Management has taken the process with the Financial Supervisory Authority seriously, with the wish to comply with the recommendations of the authority. The process with the Financial Supervisory Authority has meant that man-agement has taken a number of quality-raising measures with regard to interim and annual reporting. During the course of 2013, Havfisk has initiated processes and measures encom-passing an improved model for impairment testing, updated descriptions of principles for revenue entry and leasing and more complete note information relating to intangible assets and testing for loss of value.

The board and management will continu-ously asses whether there is a need for further measures.

Consideration by the audit committee and the boardThe audit committee reviews the company’s internal reporting systems, internal control and risk management, maintains contact with the company’s auditor concerning the auditing of the company, and prepares the board’s review of the financial reporting. The audit commit-tee has also assessed the independence of the elected auditor.

Remuneration to the members of the boardThe remuneration to the members of the board reflects the board’s responsibilities, expertise, time spent and the complexity of the opera-tions. The company’s financial performance is not a relevant factor when approving the remu-neration, and no board member is included in any option programme. Remuneration to board

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members is approved by the general meeting on the basis of a recommendation from the nomination committee. Except for their position as member of the board, and with the exception of certain contractual assignments between Converto and HAVFISK ASA, the board mem-bers and their associated companies do not undertake any assignments for the company. Board members elected by and among the employees of the group and associated compa-nies receive board remuneration in addition to their ordinary salary from employers. Remuner-ation for the employee elected board members is divided between the employee elected board members and the collective fund for union col-laboration at corporate level in HAVFISK ASA. This is in line with the agreement between the unions and HAVFISK ASA.

Further details about the remuneration of each director in 2013 are presented in note 29 to the group’s consolidated financial statements.

Remuneration paid to executive managementThe board has adopted guidelines for remuner-ation to executive management in accordance with section 6-16a of the Norwegian Public Limited Liability Companies Act. These guide-lines will be presented for the annual general meeting’s consideration. The remuneration of the CEO is determined by the board of directors.

HAVFISK ASA has no option schemes or arrangements for awarding shares to employ-ees. The key purpose of the salary system for executive management is to stimulate a strong and lasting performance-related culture which contributes to an increase in share value. The overall remuneration of executive management comprises a market-based basic salary, a few standard additional benefits and a variable sal-ary. The variable salary is based on the achieve-ment of financial, operational and personal targets, as well as management in line with the company’s values. The scheme gives managers the potential to earn a variable additional salary of up to 50% of the basic salary. Variable salary earned is paid out the following year. The imple-mentation of special projects may trigger the allocation of additional bonuses / variable sala-ries. The company’s guidelines for remuneration to executive management are given in note 28 to the consolidated financial statements and are presented to the annual general meeting for information.

Certain members of the executive manage-ment of HAVFISK ASA attend to the company’s

ownership interests as board members of other HAVFISK companies. They do not receive board remuneration in this regard.

Information and communicationHAVFISK ASA’s information policy is based on transparency and equal treatment of all shareholders. This policy is to ensure that the company’s shareholders receive correct, clear, relevant and timely information. The purpose is to enhance knowledge of HAVFISK ASA in particular and the group’s operations in general, so that the pricing of the shares as far as practi-cably possible is based on the underlying value and potential earnings of the group.

The CEO or a person appointed by the CEO is responsible for information to and communica-tion with the market.

Important information that might influence the valuation of the shares in HAVFISK will be made publicly available via the Oslo Stock Exchange reporting system (www.newsweb.no) at the same time as it is published on HAVFISK ASA’s website. Media and other third parties will simultaneously receive the same informa-tion through press releases. All stock exchange notices and press releases are made available on the group’s website at www.havfisk.no, while stock exchange notices are also available at www.newsweb.no. All information sent to the shareholders is at the same time made available on the group’s website.

An annual information plan/financial calendar is prepared annually and made public through the Oslo Stock Exchange and HAVFISK ASA’s website.

The HAVFISK ASA website includes a section for investor information, where the group’s annual and interim reports, stock exchange notices and other presentations can be found.

TakeoversNo separate set of principles has been prepared in case of a possible takeover bid for HAVFISK ASA. On this matter the company deviates from the recommendation in the code of practice.

A total of 73.25 per cent of the shares in HAVFISK ASA are controlled by Kjell Inge Røkke through Aker ASA. Share transactions in HAVFISK ASA and its direct or indirect par-ent companies require approval by the Norwe-gian fisheries authorities pursuant to the Act on Participation in Fisheries (the Participation Act). Exemptions to this regulation have been given for share transactions in the listed com-

panies in the ownership chain (i.e. HAVFISK ASA and Aker ASA), so that approval is only required if Aker ASA no longer owns more than 50 per cent of the shares with voting rights in HAVFISK ASA or if Kjell Inge Røkke no longer directly or indirectly owns at least 67.8 per cent of the shares with voting rights in Aker ASA. It would moreover represent a breach of the Participation Act if more than 40 per cent of the shares with voting rights in HAVFISK ASA were to be owned by foreigners, and the board of HAVFISK can refuse to approve transactions that might result in a breach of the Act. Share transactions in a breach of said regulations may result in the company losing its Norwe-gian fishing licences. On this basis, the com-pany considers that a separate set of principles for takeover bids is not relevant. However, the company will continuously evaluate the need for such principles.

AuditorThe auditor annually presents a plan for the audit of the group to the company’s audit committee. The auditor has provided a writ-ten confirmation to the board stating that the requirement of independence is fulfilled.

The auditor attends the board meeting in which the annual financial statements are con-sidered, and has, along with the audit commit-tee reviewed and assessed possible material changes to the company’s accounting princi-ples and the assessment of material accounting estimates. The auditor attends all meetings of the audit committee. There have not been any differences in opinion between the auditor and the executive management regarding material issues. The auditor has also reviewed and con-sidered the company’s internal control with the audit committee. The results of this review have been presented to the board.

The board meets with the auditor without members of the executive management pres-ent. The board has determined guidelines for the executive management’s possibility of using the auditor for services other than auditing. The guidelines lay down that services that exceed NOK 100,000 require authorisation from the chair of the audit committee.

HAVFISK endeavours as far as practicable to employ the same audit company for its subsidiaries as for HAVFISK ASA.

The auditor’s fees allocated between audit work and other services are presented in note 5 to the annual financial statements, and are also presented in the annual general meeting.