		Annual Report 2006

Corporate Governance

The VPS Group’s Principles of Corporate Governance are largely based on the Norwegian Code of Practice for Corporate Governance published by the Norwegian Corporate Governance Board (NUES). The Group’s principles clarify the respective roles of shareholders, board of directors and executive officers in the Group, and the principles and methods by which its business is managed and controlled. Good corporate governance ensures that the company promotes the best interests of its owners and other stakeholders. The VPS Group has a policy of transparency in regard to processes between its elected bodies, in regard to recruitment to the Board of Directors, Election Committee and Control Committee, the composition of these bodies and the guidelines established for each of them.

The Board of the VPS Group’s parent company, Verdipapirsentralen Holding ASA (VPSH) is identical to the Boards of, respectively, Verdipapirsentralen ASA (VPS) and VPS Clearing ASA (VPSC). The Board of Manamind AS (Manamind) consists of persons employed in the VPS Administration.

The Board of VPSH performs an annual evaluation of the companies’ compliance with the VPS Group’s Principles of Corporate Governance. The respective Boards undertake a self-evaluation which is forwarded to the Election Committee at VPSH.

The VPS Group’s area of business
The principal business of the VPS Group is registration of financial instruments, clearing and settlement of trades in financial instruments and clearing of financial derivatives. The Group also engages in other business naturally related to its main business areas. The business of VPS and VPSC requires a licence. The Securities Register Act and the Securities Trading Act set limits to the business VPS and VPSC can engage in. Manamind AS mediates financial information. The companies’ missions are set forth in their Articles of Association which are available at www.vps.no, www.vpsclearing.no and www.manamind.com. The objectives and main strategy of each company are described in the VPHS Annual Report. VPSH’s business consists in managing its owner interest in its subsidiaries. The company’s legal structure is shown below:

Company capital and dividends, takeover, equal treatment of shareholders and transactions with close associates
As of 31 December 2005 the Group’s equity capital amounted to NOK 453.4 million, or 17.85 per cent of its total capital. The Board considers the company’s equity capital to be adequate in relation to the business engaged in.

Under the terms of its securities registration licence, VPS is required to keep Kredittilsynet (Norway’s Financial Supervisory Authority) continuously informed of the company’s capital base. VPSC is also subject to specific capital requirements set out in the Securities Trading Act.

VPS’s dividend policy is to distribute at least of the Group’s annual net profit as dividends. No authorisation has been granted to the Board of Directors to increase the company’s capital or to buy the company’s own shares.

VPSH has one class of shares. The company’s shares are freely negotiable subject to the limitations set out in the Securities Register Act. This Act prohibits anyone from owning shares representing more than 10 per cent of the share capital or votes in a company operating a securities register under statutory licence. This does not however apply to a company holding 100 per cent of a securities depository where such company’s business consists in managing owner interests in subsidiaries whose business is confined to securities registration or business naturally related thereto. If this criterion is not met, the above-mentioned ownership restriction also applies to the holding company. Hence no party may own more than 10 per cent of the share or votes in VPHS.

Under a dispensation granted by the Ministry of Finance, DnB NOR ASA is authorised to hold 16.58 per cent of the shares of VPSH. The rules restricting voting rights have not been waived. The dispensation applies for three years as from 2 July 2004. The Board does not consider that the dispensation implies differential treatment of shareholders in as much as it was granted by the Ministry of Finance. The company is not itself entitled to grant dispensation from the ownership restriction rules.

No significant transactions took place in 2006 between VPSH and its shareholders, Board members, senior employees or close associates. The same applies between individual companies in the VPS Group and VPSH’s shareholders, Board members, senior employees or close associates. The VPS Group has established strict guidelines for elected officers’ and employees’ trade in financial instruments.

Several Board members represent and are employed by shareholders with stakes in VPSH approaching the Securities Register Act’s upper limit of 10 per cent. Moreover, several major shareholders are substantial customers of VPS. The chairman of the Board is employed by the Group’s largest shareholder, DnB NOR ASA, which is also the VPS Group’s largest customer. The Board is aware that shareholder and customer relationships create particular challenges in terms of consistent and reliable case-handling, and is of the opinion that the Board has dealt with its business in keeping with adopted rules and guidelines, and in a manner that neither provides a basis for criticism of case-handling procedures nor is likely to impair confidence in the Board or VPSH.

Transactions involving disposal of significant business have not been contemplated. Any question of disposing of a significant portion of the licensable business of VPS would have to be submitted to the General Meeting of VPSH for decision under the Securities Trading Act by the same majority as that required to amend the Articles of Association.

Election Committee
The Articles of Association require the company to have an Election Committee comprising at least three members. Neither the CEO nor any other employee of the company may be a member of the Election Committee. The committee writes to all shareholders inviting input in regard to upcoming elections. The names of current Election Committee members are available on the company’s home page at www.vps.no. VPSH’s Election Committee is identical to the Election Committee of VPS and VPSC.

Annual General Meeting
An Ordinary General Meeting is called each year by the end of June, normally in April. Notice is circulated to the shareholders no later than two weeks prior to the meeting. VPSH’s Articles of Association set no deadlines for notifying attendance at the Meeting. Shareholders may sign up and notify proxies electronically.

The Annual General Meeting elects shareholder-nominated representatives to the Board of VPSH. Elections to be undertaken by the General Meeting are prepared by the Election Committee which circulates its reasoned recommendation to the shareholders together with the notice of the General Meeting. In keeping with the Articles of Association, Board members are elected for a two-year term. The chairman of the Board is elected separately, for a one-year term. In line with established practice, the General Meeting also elects the Board’s deputy chairman for a one-year term. Two Board members are elected by and from among the employees.

The General Meeting is attended by the Board members, Election Committee, Supervisory Committee and the auditor. The meeting is opened by the chairman of the Board who asks those present to nominate a chairperson. The minutes of the Annual General Meeting are published on www.vps.no as soon as they have been signed.

Board of Directors – composition and independence
According to the VPSH’s Articles of Association, the Board shall have not less than five and not more than ten members, as decided by the General Meeting.

The Securities Register Act lays down requirements in terms of the number of Board members, who may sit on the Board and the qualifications required. The Act states that the CEO cannot be a member of the Board. The incumbent Board has nine members, two of whom are elected by and from among the employees. As mentioned above, it is standard practice for members of the Board of VPSH to be appointed Board members of VPS and VPSC.

The Election Committee and the incumbent Board consider that the Board is composed in such a way that it has the desired competence, capacity, representativity and diversity, and that its composition ensures that the company is operated in the best manner independently of any particular wishes on the part of any owner grouping. The Board members’ competence etc is described in the Annual Report on page 13 and 14.

As long as all shareholder-elected Board members represent substantial shareholders in the company, the Board does not consider it is imperative to actively encourage Board members to personally own VPSH shares. Nor has the General Meeting encouraged VPS Board members to personally acquire shares in VPSH. None of the Board’s members privately owns shares in VPSH. The number of shares controlled by Board members’ employers at 31 December 2006 is shown below:

The work of the Board
The Board bases all administrative procedures on the principal on equal treatment of, and accountability towards, all shareholders. The Board establishes an annual plan for its work. Each year the Board carries out a comprehensive evaluation of the business, establishes a business plan for the two years ahead and sets goals and main activities for the coming year. Based on the adopted business plan, the Board establishes a budget for the coming year. The Board of VPS has not considered it appropriate to set up board committees. The Board operates under instructions drawn up in conformity with section 6-23 of the Public Limited Companies Act. The Board’s instructions are reviewed annually. The instructions contain the following main points: Purpose, overarching principles for the work of the Board, the Board’s tasks, and administrative procedures.

In addition to the separate guidelines drawn up in regard to competency, the instructions to the Board establish that Board members shall assess their own competency in matters under consideration by the Board, and must alert the Board members at the earliest possible stage of circumstances which render or may render the person in question incompetent. Board members are also subject to a duty of confidentiality under section 8-1 of the Securities Register Act. The company’s Administration is urged to come forward should a Board member be thought to be in a situation where he/she should not be involved in handling a particular item of business.

The Board appoints the President/CEO and has adopted instruction for that position. The instructions to the President/CEO establish that this person is responsible for the day-to-day leadership and shall ensure that the business is run in accordance with public regulations, the Articles of Association and guidelines and orders issued by the General Meeting and the Board. The instructions also describe the President/CEO’s disclosure obligation vis-à-vis the Board in regard to the company’s development and other factors which may affect the company’s future. Each month a report is submitted to the Board by the CEO. The instructions are reviewed annually.

The Board has established ethical guidelines for the VPS Group which describe the employees’ duty to report irregularities and significant deviations from the ethical guidelines. The guidelines also make it clear that any attempt to suppress reporting of censurable circumstances, or to seek to retaliate against an employee who has in a loyal manner drawn attention to censurable circumstances, will be severely dealt with. Employees who wish to report censurable circumstances can do so to the chairman of the Supervisory Committee.

Risk management and internal control
The securities registration and clearing business operated by, respectively, VPS and VPSC must, according to law, have a supervisory committee of at least three members who are elected by the General Meeting. The Supervisory Committee oversees the company’s compliance with law, regulations and licence terms, as well as with Articles of Association and resolutions adopted by the bodies of the company, and assesses security aspects of the business. Instructions for the Supervisory Committee have been established by the General Meetings of, respectively, VPS and VPSC and approved by Kredittilsynet. The Supervisory Committee reports on its work to the General Meeting and Kredittilsynet. The Supervisory Committees of VPS and VPSC consist of the same members.

VPS and VPSC have an internal audit function which is independent of the company’s Administration. The instructions to the internal auditor are established by the Boards of VPS and VPSC. The outcome of the audit is reported on a regular basis to the Boards with a copy going to the CEO, and the internal auditor attends both Board meetings and meetings of the Supervisory Committee. The internal auditor meets the external auditors on a regular basis.

VPS and VPSC are subject to statutory internal control rules. The Boards of VPS and VPSC have each established principles for internal control applicable to the two companies. Kredittilsynet and the Supervisory Committee of VPS and VPSC oversee the companies’ compliance with the internal control regulations. The main features of the organisation of the internal control function are set forth in the Annual Report on page 40 and 41.

Remuneration to the Board of Directors and senior employees
The Annual General Meeting fixes the Board’s remuneration each year based on a recommendation from the Election Committee. The remuneration is not performance-related, consisting only of the fee decided for Board members. The chairman of the Board receives higher remuneration than the members of the Board. Overall remuneration to the Board is specified on page 26, Note 3 of the Annual Report. Board members’ fees are specified in the minutes of the Ordinary General Meeting, which are available at www.vps.no.

The Board of VPSH has adopted guidelines for fixed and variable remuneration to senior employees, and each year stipulates the CEO’s fixed and variable remuneration at a meeting. Guidelines for remuneration are presented at the General Meeting. Guidelines for remuneration to senior employees are to be found in the Annual Report on page 26, Note 3. Salary and remuneration to senior employees are set forth in Note 3 to the Group annual accounts.

The question of options schemes and allotment of shares to employees in the Group has not arisen. The Group operates a performance incentive scheme whereby employees can qualify for a bonus depending on the degree to which the companies’ targets are met. Arrangements have also been established enabling some employees to achieve personal performance-related bonuses.

Information and communication
Each year the Group publishes a financial calendar along with information on the Annual General Meeting etc at www.vps.no. The time and date of the Ordinary General Meeting are posted on the website as soon as they are decided, no later than at the turn of each year. Information sent to the shareholders is simultaneously posted on VPSH’s website.

Guidelines have been established for reporting financial information to ensure that market actors receive correct, clear, relevant and simul-taneous information, and that VPSH continuously publishes information enabling shareholders and other investors to make well-informed decisions regarding the purchase or sale of shares based on identical information. The guidelines state who is to make statements on behalf of the company in a variety of matters. The guidelines take a basis in the principles of transparency, simultaneity and equal treatment.

External auditor
The external auditor attends Board meetings that deal with the annual accounts, and gives the Board an account of his work and of particular risks attending the business. The auditor also reviews the company’s internal financial control with the Board, attends the General Meeting and each year presents to the Board the main features of the plan for implementation of the audit process.

The auditor’s remuneration, distributed on audit and nonaudit services, is shown on page 26, Note 4 of the Annual Report. Documentation to the General Meeting contains the Board’s detailed account of the Administration’s use of the external auditor for services other than ordinary audit.

Guidelines have been drawn up for the executive management’s right to utilise the external auditor for non-audit services, in accordance with the advisory services instructions, cf. the Auditors Act. The external auditor’s additional tasks are reviewed and agreed upon with the Supervisory Committee.