CORPORATE GOVERNANCE

Telenor’s principles of corporate governance shall secure shareholder values, a positive and robust corporate culture and a good reputation. Telenor has clearly set out its value base through the vision “Telenor – ideas that simplify”, in combination with the core values dynamic, innovative and responsible. In accordance with these core values, Telenor has devised new Codes of Conduct.

Telenor’s principles of corporate governance are primarily based on the various public regulations and guidelines that Telenor is subject to. As a Norwegian and international group, Telenor is subject to Norwegian law and the legislation of the countries in which operations are carried out. Furthermore, as Telenor is listed on the Oslo Stock Exchange it is also subject to regulations relating to the stock exchange. Being listed on Nasdaq entails an obligation to uphold legislation relating to stocks and shares in the US, including the Sarbanes-Oxley Act and Nasdaq’s own regulations.

The complete body of public regulations also contains more general requirements for operations, as well as a number of rules relating to good corporate governance. Special references are made to company, accounting and stock exchange regulations and guidelines that include requirements for the organisation of the operations, management principles, financial reporting, company law responsibilities and information to the market etc.

Telenor’s principles of corporate governance are further inspired by the national Norwegian recommendation for good corporate governance of 11 December 2003.

Additionally, Telenor has drawn up internal regulations for corporate governance and created functions to ensure that Telenor’s values and objectives are upheld in line with these principles. The internal regulations are not intended to provide exhaustive regulation of Telenor’s requirements and principles of corporate governance, but to supplement the prevailing legal framework. The external and internal regulations and guidelines combined provide Telenor with a solid foundation for the proper management of the company and for developing a positive and robust corporate culture.

EQUALITY AND TRANSFERRAL RIGHTS
All shareholders of Telenor have the same status whereby the company only has one class of share. Telenor strictly adheres to the principle of equal treatment of all shareholders. This is also reflected in Telenor’s acquisitions of own shares which are carried out via the stock exchange. Telenor shares are freely transferable without any sales restrictions in the form of consent from the Board, owner restrictions or similar.

COMPANY CAPITAL AND DIVIDENDS
Telenor’s objective is to create value for its owners. The company maintains a continuous focus on ensuring that the equity is adapted to the objectives, strategy and risk profile of the activities. A recent equity increase and improved cash flow have enabled Telenor to return value to the owners in the form of increased dividends and the repurchase of shares. In 2003, the Annual General Meeting (AGM) granted limited authorisation for the repurchase of shares and a share issue authorisation for a period up to the next AGM in May 2004.

ANNUAL GENERAL MEETING
The shareholders exert the highest authority in the company through the AGM. Norwegian law dictates that certain issues must be dealt with and decided by the AGM, including approval of the financial statements, annual report, distribution of dividends, choice of auditor and the auditor’s remuneration.

Telenor encourages as many shareholders as possible to take part at the AGM. The shareholders receive agenda papers for the AGM at least two weeks before the meeting is held. The deadline for registration for attendig the AGM is three days before the AGM. Shareholders who are unable to attend can vote by proxy.

The Corporate Assembly and Board of Directors, composition and independence
Pursuant to Norwegian law, Telenor has a Corporate Assembly, which is a distinctly Norwegian body, and a Board of Directors.

The Corporate Assembly is mainly a supervisory body which supervises the Board’s management of company business. The Corporate Assembly also has decision-making powers in limited, but important areas.

Further stipulations concerning the composition of the Corporate Assembly and of the Board are laid down by the AGM and included in the company’s Articles of Association.

The Corporate Assembly has a total of 15 members who are appointed for a period of two years. The shareholders elect ten of these members, with alternates, and five are selected from and by the employees.

The Board of Directors has a total of ten members who are elected for a period of two years. Seven of these members are elected by the shareholders and three are elected from and by the employees. Telenor’s CEO is not a member of the Board.

The Corporate Assembly and the Board shall be made up to ensure a broad representation of Telenor’s shareholders. When appointing Telenor’s Corporate Assembly and Board, emphasis is also placed on meeting Telenor’s needs for expertise, capacity and balanced decisions. Six of the fifteen members of the Corporate Assembly and four of the ten Board members are women.

The shareholder-elected members of the Corporate Assembly and of the Board are independent of the company’s management. Furthermore, the shareholder-elected members a) do not receive extra remuneration from the company beyond the fees for Corporate Assembly members and Board members or fees for participation in sub-committees, b) have not been employed by the company in recent years and c) do not receive fees that are linked to profit performance or share options in the company.

When electing shareholder-elected members, emphasis is placed on the relevant candidate not having cross-relations with other members or the CEO, close family ties to the CEO or having or representing substantial business relations with the company. Furthermore, it is also the intention when selecting shareholder-elected members that these members must, for all material respects, be independent of the company’s main shareholder.

Should vested interests or associated interest situations arise, the company’s provisions for vested interests and conflict of interests shall be applied.

The company does not provide loans to Board members or Group Management.

The Nomination Committee
It is not a requirement of Norwegian law for the company to have a nomination committee, but a nomination committee is set up in accordance with resolutions determined by the AGM. Further stipulations regarding the Nomination Committee are included in the Articles of Association.

The Nomination Committee consists of four members who are shareholders or who represent the shareholders. The Chairman of the Corporate Assembly is a member and chairs the Nomination Committee. Two members are elected by the AGM and one member is elected by and from the Corporate Assembly’s shareholder-elected members and alternates. Members are elected for a two-year period.

When appointing the Nomination Committee, consideration is given to broad shareholder interests being represented and to the need for independence in relation to the company management and those that are elected.

The Nomination Committee works in accordance with instructions that are laid down by the Corporate Assembly’s shareholder-elected members, in line with proposals from the Board’s shareholder-elected members. The Nomination Committee is responsible for submitting to the AGM recommendations on the choice of shareholder-elected members and alternates to the Corporate Assembly, and recommends to the Corporate Assembly the choice of shareholder-elected Board members. The Nomination Committee forwards these proposals to the Chairman of the Board.

The Board’s evaluation report for 2003 is dealt with separately by the Nomination Committee.

The Board of Directors
Pursuant to Norwegian law, the Board is responsible for the management of the company and the proper organisation of the operation, including a responsibility to supervise the company management. In addition to statutory requirements, the Board works in accordance with special regulations for the Board, as well as guidelines and procedures for Telenor ASA.

The guidelines and procedures that apply to the Board include regulations for the preparation of agendas, privacy and confidentiality, competence, responsibility to establish a management system that ensures that activities are run in accordance with the company’s core values, ethical guidelines and generally accepted principles of corporate governance, information on the use of steering committees and evaluation of the Board’s activity and competence.

In accordance with the said guidelines and procedures, the Board is responsible, to the degree necessary, for determining strategies, business plans and budgets for the company. The Board is also responsible for ensuring that the company has a competent management with clear internal apportionment of responsibility and work.

The Board can choose to prepare issues in subcommittees which have been set up in order to process specific issues. Two such subcommittees have been set up.

Telenor’s Remuneration Committee consists of three shareholder-elected Board members. The Chairman of the Board is also the Chairman of the Committee. The Vice Chairman of the Board is also a Committee member. The Committee’s third member shall be elected by the Board’s shareholder-elected members for a period of two years. The Committee shall meet as required, normally twice annually. On behalf of the Board, the Committee evaluates the total remuneration to the CEO and the policy for remuneration to managers.

Telenor established its Audit Committee in 2003. The Committee consists of two members from the Board, one of which having been approved by the Board to meet the requirements of being a Financial Expert in accordance with US standards. The Audit Committee shall meet at least three times per year, for the purpose of identifying, understanding and evaluating operational and financial risks. This shall include a thorough evaluation of the company’s financial reporting, auditing, and established procedures for advance approval of the auditor’s remuneration, and also the handling of complaints from the employees in respect of accounts, control and audits.

These committees do not have any independent decision-making powers other than those assigned to them by the Board.

The CEO
The CEO is in charge of the day-to-day management of operations in Telenor ASA and the Telenor Group. The CEO is responsible for ensuring that the company and Group are organised, run and developed in accordance with current legislation, regulations and resolutions passed by the Board, the Corporate Assembly and the AGM.

The Board has devised guidelines and procedures for the CEO, covering the management of the Telenor Group, the management of ownership interests, the powers of the CEO, the CEO’s submission of issues to be determined by the Board and the CEO’s obligation to report to the Board.

Guidelines on the exercise of authority in the Telenor Group have been drawn up pursuant to the guidelines and procedures for the CEO.

As a part of the day-to-day management and running of the company, the CEO will be an owner representative in subsidiaries, provided that the issues in question do not require that they are handled by the Board, Corporate Assembly or the AGM.

At the election to the boards of Telenor’s subsidiaries, such election of the board, and its functions, shall be made in accordance with Telenor’s principles of corporate governance. Standard guidelines and procedures for the Board were approved in 2003 for Norwegian subsidiaries in the Telenor Group. The management and culture development in international subsidiaries is implemented according to principles that are set down under the common term “The Mobile Way”.

The Group Management
The Group Management consists of the heads of the key business areas and functions at Telenor. Issues of an important strategic, financial or fundamental matter to the company are dealt with in the Group Management’s weekly meetings, including the preparation of items for the Board, the Corporate Assembly and AGM, and also including strategy, ongoing follow-up of activities and coordination between the company’s senior managers etc.

Management model
Telenor has established a management model whereby goals are set, and results followed up in a systematic way. This applies to a number of vital financial matters, such as operational results, capital return and cash flow, and is also applicable to a number of non-financial matters relating to Telenor’s position in the market, including its capacity for innovation, internal routines and responsibilities as an employer. These financial management matters are followed up in the financial management Business Review, at Board meetings and through the company’s incentive system.

accounting and financial reporting
In accordance with Norwegian law, strict accounting and financial reporting requirements must be met. Telenor is also subject to further accounting and financial reporting requirements according to US regulations.

The compilation of quarterly reports, annual reports and 20-F shall be in accordance with Norwegian and US principles and regulations for accounting. Routines have been established to ensure that such information is accurate and complete. In addition, a Business Review and Financial Review are also conducted.

Business Review is the Group’s quarterly results follow-up, additional to the follow-up of the boards in the business units. The purpose is the strategic control and follow-up of results based on the prevailing strategic objectives and value drivers.

As a supplement to Business Review, a Financial Review is held in each of the Group’s business areas. The purpose is to analyse the economic and financial situations in such a way as to form the basis for external reporting and analyst presentations.

Risk management and internal controls
Risk management and internal controls is one of several topics that are included in the company’s 20-F reporting to the Securities Exchange Commission (SEC) under US legislation.

In connection with the annual reporting to the SEC (20-F), Telenor’s CEO and CFO must personally certify that the information given in 20-F is a correct and accurate reflection of the company’s activity, and that effective control routines are adhered to throughout the year.

The Disclosure Committee supports the company’s efforts to meet requirements for financial reporting. The Committee issues guidelines for reporting, provides follow-up and helps to ensure that requirements are met. The Committee is chaired by the CFO, and consists of members who have relevant expertise.

The Compliance Officer shall give quality assurance that the company acts in accordance with applicable law, regulations and legally binding directions issued by public authorities, and furthermore, that internal conduct in the organisation does not conflict with Telenor’s own regulations and guidelines. The Compliance Officer reports to the CEO.

The Investment Committee shall give quality assurance of the company’s investments, including acquisitions and sales of activities. Investments of a certain size are dealt with by the Investment Committee, the evaluation of such investments shall subsequently be returned to the Investment Committee for a final analysis. The Committee, which functions in an advisory capacity to the CEO and Group Management, is chaired by the CFO and consists of members who have relevant expertise. The company has devised a policy for the investment criteria to be used in the processing of such issues.

In order to ensure overall financial steering and control, the company has established a central finance function, Telenor Finance. Telenor Finance works in accordance with the guidelines of Telenor’s Finance Policy, which determines rules for capital structure, debt structure, profit liquidity and counter risks, as well as the capital structure and financing of subsidiaries and financial investments.

The Group Auditor helps to ensure good risk management and provides follow-up of general steering and control functions through random testing, hereunder ensuring compliance with internal steering directions. The Group Internal Auditor reports to the CEO and in some cases to the Audit Committee and the Board.

Based on Telenor’s values and its Codes of Conduct, the Ethical Council helps to ensure a high level of ethical awareness at Telenor. The Council is an independent forum where issues related to ethics and the reputation of the company can be discussed. The Council has no decision-making powers, but makes recommendations to the management of Telenor. The Council is chaired by the CEO and is made up to enable attitudes from various parts of the operation to be reflected.

Remuneration to the Corporate Assembly, Board and nomination committee
Remuneration to the Corporate Assembly is fixed by the AGM. Remuneration to Board members that are elected by the Corporate Assembly is fixed by the Corporate Assembly. Remuneration to the Nomination Committee is fixed by the shareholder-elected members of the Corporate Assembly. In all such cases, remuneration is based on the Corporate Assembly’s, the Nomination Committee’s and the Board’s responsibilities, expertise, time spent and the complexity of the activity.

Auditor
In accordance with Norwegian and US regulations, Telenor is subject to strict requirements for auditing, including restrictions on the type of work the auditor can undertake and prior approval from the Audit Committee of all services carried out by the auditor. Partner rotation is a further requirement, and the auditor cannot be employed by the company for a period of one year after having carried out auditing work for the company.

The auditor provides the Board with an annual written confirmation that he meets a number of requirements, including independence and objectivity requirements.

The company’s auditor presented the main features in a plan for the execution of the auditing work to the Audit Committee in 2003. The auditor attends meetings of the Audit Committee and Board meetings that deal with the Financial Statements. In addition to this, the auditor attends Board meetings at least once a year to review the report on the auditor’s view of the company’s accounting principles, risk areas, internal control routines etc.

At the AGM, the Board gives an account of the auditor’s remuneration divided into statutory auditing work and remuneration linked to other defined work.