Headquartered in Cyprus, Prosafe Production is subject to Cypriot company and accounting legislation. Prosafe Production is listed on the Oslo Stock Exchange and observes the Norwegian code of practice for corporate governance of 4 December 2007.

In describing its corporate governance according to the Norwegian code of practice, Prosafe Production wants to clarify the division of roles between its shareholders, board of directors and executive management.

The company will observe good corporate governance in order to strengthen confidence in it among shareholders, the capital market and other interested parties, and to ensure the greatest value creation over time in the best interests of shareholders, employees and other stakeholders.

Prosafe Production's articles of association and its vision, goals and strategies provide the information necessary to help ensure that shareholders can anticipate the scope of its activities.

Prosafe Production has a sound financial position which supports its expressed strategy and policy for return on capital. The company's long-term aim is to provide shareholders with a competitive return on their shares through a combination of price appreciation and/or direct return in the form of dividend. The level of dividend will reflect the underlying financial development of the company, while taking into account opportunities for further value creation through profitable investment.

Prosafe Production has one class of shares. The articles of association place no restrictions on voting rights. All shares have equal rights. The board's mandate to acquire the company's own shares is conditional on such purchases being made in the market.

Except for the transactions that took place between Prosafe Production and Prosafe SE prior to the split, no transactions took place in 2008 between the company and its shareholders, directors and senior executives, or the close associates of any of these.

Prosafe Production has rules which 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.

All Prosafe Production's shares are freely negotiable. Its articles of association place no restrictions on negotiability.

The general meeting secures the participation of shareholders in the company's highest decision-making body. The company's articles of association are adopted by the general meeting. All shareholders are entitled to submit matters for inclusion on the agenda of a general meeting, as well as to attend, speak at and vote at the meeting.

The annual general meeting (AGM) must be held by 30 June every year. An AGM and a meeting called to pass a special resolution must be notified no less than 21 days in advance in writing, and a meeting of the company other than an AGM or a meeting to pass a special resolution must be notified no less than 14 days in advance in writing.

Emphasis is given to include all requisite information in the supporting documents related to items on the agenda, so that shareholders can take a position on all matters to be discussed.

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 to set the deadline for notification of attendance as close as possible to the meeting date. Shareholders who are unable to attend in person are encouraged to appoint a proxy.

The agenda is determined by the board. The meeting is opened by the chair of the board, and a chair for the meeting is then elected. The minutes of the general meeting will be published as a stock exchange announcement and posted on the company's website.

The company has appointed a nomination committee comprising two members and one alternate.

The board of Prosafe Production comprises six shareholder-elected non-executive directors. Directors are elected by the shareholders in a general meeting. Pursuant to the articles of association, the board will have six members. However, the number of directors may be increased or reduced by an ordinary resolution (simple majority of the votes present) of the shareholders.

All six directors are independent of the company's management, its main business associates and the principal shareholders.

Prosafe Production does not have a corporate assembly.

The board of Prosafe Production has overall responsibility for management of the company. The company's operations and strategic direction are regularly reviewed with the help of periodic board meetings and annual strategy and budgetary processes, supplemented by on-going strategic discussions and monthly reporting of all significant management parameters and other factors. In parallel, a constructive on-going dialogue is pursued between the board and the management. The board is also responsible for reaching decisions which form the basis for improving and executing investments and structural measures.

Scheduled board meetings will be held at least eight to 12 times a year, but the work schedule is flexible and adaptable to take into consideration operational and strategic circumstances.

The board has drawn up separate instructions for the management. A job description specifies the duties, authority and responsibilities of the chief executive in relation to the rules governing the business. The chief executive has a particular responsibility for ensuring that the board receives precise, relevant and timely information which is sufficient for it to be able to discharge its duties.

Prosafe Production does not have a separate internal audit function. Internal control of the accounts is handled through various forms of segregation of duties, guidelines and approval routines. The company's internal financial transactions are subject to special control systems and routines. Financial risk is managed by the group's central finance function. Monthly financial reports are received by the board.

The chair has a particular responsibility for ensuring that the board's work is well organised and efficiently conducted. The chair of Prosafe Production encourages open and constructive debate by the board.

The board has assessed the use of board committees. A compensation committee comprising three of the board members has been established. Its duties are to develop and maintain proper and effective compensation policies for the company, with a particular emphasis on management remuneration. The board has not otherwise found it appropriate to appoint committees. This is primarily because all the directors are regarded as independent, and the chief executive is not a director. The board is accordingly unaffected by the problems relating to independence which are often used as an argument for appointing board committees.

The board undertakes a yearly self-evaluation of its working methods, composition and the way 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.

Prosafe Production's conduct and development of its business are subject to several categories of risk. These risks and the associated internal control measures are described in more detail in our annual report.

Prosafe Production has established a corporate ethics committee which will maintain and further develop the company's code of conduct. Concerns about possible breaches of the code can be reported to the committee by ordinary mail or e-mail (conduct@prosafeproduction.com) on a confidential basis. The committee will ensure that alleged breaches are investigated thoroughly and fairly and reported to the board of directors.

Board of Directors
The remuneration of the members of the board will be determined on an annual basis by the AGM. Remuneration of the board reflects its responsibilities, expertise, commitment of time, and the complexity of Prosafe Production's activities. The directors may also be reimbursed for such outlays as travel, hotel and other expenses incurred when attending meetings of the board or in connection with the business of the company. Directors' fees are not related to the company's performance and no options are given to directors. Remuneration of directors totalled EUR 236 000 in 2008.

Executive Management and Senior Officers
The terms of employment of the president and CEO are determined by the board of directors on the basis of a detailed annual assessment of salary and other remuneration.

Prosafe Production aims to provide a competitive total package for senior 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 Production pursues its operations. The total remuneration package for the corporate management team and other senior officers comprises three principal elements - basic pay, variable pay and other benefits. In addition, corporate management and senior officers of Prosafe Production are awarded share appreciation rights.

The company introduced a bonus scheme in 2008 which embraces corporate management and senior officers. The size of these bonuses depends on achieving defined results for earnings, health, safety and the environment, and on meeting strategic targets. Bonus payments earned on the basis of targets met in 2008 totalled USD 2.5 million.

Prosafe Production has prepared guidelines which define the main principles for determining the salary and other remuneration of management. For further details of these guidelines and for a specification of remuneration paid to corporate management, please refer to our annual report.

Prosafe Production presented its preliminary annual accounts in early February. Complete accounts, the directors' report and the annual report are sent to shareholders and other stakeholders in April. Beyond this, Prosafe Production presents its interim accounts on a quarterly basis.

Open investor presentations are held in connection with the reporting of annual and interim results. These presentations are also broadcast as webcasts and can be followed on the internet. The chief executive and the chief financial officers use these occasions to review the results and comment on operations, markets and prospects.

An on-going dialogue is otherwise maintained with, and presentations made to, analysts and investors. In order to ensure equal treatment of its shareholders, one of Prosafe Production's aims is to make sure that the stock market is at all times in possession of correct, clear and timely information about the company's operations and condition.

Prosafe Production has no defence mechanisms against take-over bids in its articles of association, and has not implemented other measures which limit the opportunity to acquire shares in the company.

If an offer is made for the company's shares, Prosafe Production's board of directors will issue a statement evaluating the offer and make a recommendation as to whether shareholders should or should not accept the offer.

The company's independent auditor is Ernst & Young, Cyprus. Ernst & Young has been the company's auditor since 2008.The auditor will attend all board meetings where the annual accounts are considered.