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General meeting of DNO

At the DNO annual general meeting May 27th, 2020, Folketrygdfondet plans to vote against items 5(a), 6, 9, 10 12 and 14 for the following reasons:

Item 5(a): Election of Bijan Mossavar-Rahmani as chairman of the nomination committee
Folketrygdfondet takes the view that the nomination committee should be independent of individual board members. Nomination committee independence is important to ensure the shareholder community has the necessary trust in the nomination committee’s process and recommendation. It is fundamental to the work of the nomination committee that there is a clear division of roles and responsibilities between the board and the nomination committee.
 
Item 6. Determination of remuneration to the members of the Board of Directors, the Audit Committee, the HSE Committee and the Compensation Committee
The remuneration of the chairman of the board reflects that he functions in practice as a working chairman. This is a scheme that is not in line with Folketrygdfondet's expectations for the board's independence. It follows from section 8 of the Norwegian Code of Practice for Corporate Governance that senior executives should not be members of the Board. One of the Board's main tasks is to supervise company management. Folketrygdfondet considers that board members can only supervise company management adequately if they are not recruited from among management.
 
Item 9. Discussion of the non-binding part of the Board’s statement regarding the determination of salaries and other remuneration to the management pursuant to § 6-16a of the Norwegian Public Limited Liability Companies Act 
Folketrygdfondet is generally supportive of compensation schemes that are targeted and depend on results. Incentive schemes should be linked to personal targets, company targets, and targets to ensure sustainable value creation for shareholders over time. We cannot see that these prerequisites are fulfilled for DNO’s share-based incentive schemes or bonus programs.

Share-based incentive schemes can involve a significant transfer of value from shareholders to employees. As DNO’s program does not include a cap on share-based compensation, it is Folketrygdfondet's view that the scheme may have an unreasonably large scope and involve an excessive transfer of value from the shareholders to the company's employees.
 
Folketrygdfondet votes both against the advisory item of the executive pay declaration and the part that includes share-based compensation and is binding on the company.

Item 10. Approval of the binding part of the Board’s statement regarding the determination of salaries and other remuneration to the management pursuant to § 6-16a of the Norwegian Public Limited Liability Companies Act
See the rationale for item 9.
 
Item 12. Authorisation to the Board to increase the share capital
The authorisation size of 15% is too large. In addition, the total sum of all the issuance authorizations (cf. items 12 to 14) has too large an overall scope. Folketrygdfondet therefore votes against the proposal.

Item 14. Authorisation to the Board to issue convertible bonds
The authorisation size of 15% is too large. In addition, the total sum of all the issuance authorizations (cf. items 12 to 14) has too large an overall scope. Folketrygdfondet therefore votes against the proposal.

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