Annual Report 2024 KLP Group and KLPKLP Group and KLP

KLP's annual report covers key parts of the company's corporate governance. This appendix supplements this with an overall account of all NUES recommendations.

1. Reporting on corporate governance

No deviation from the code of practice.

In most areas, KLP follows the Code of Practice for Corporate Governance as described in the principles set out by the Norwegian Corporate Governance board (NUES). Differences from NUES generally arise where individual provisions do not fit KLP’s mutual status.

2. Business

No deviation from the code of practice.

Refer to the annual report for a more detailed account.

3. Share capital and dividends

Deviation from the code of practice.

The board of KLP evaluates the company’s capital requirements on a regular basis, in light of the company’s objectives, strategy and risk profile. The board determines an annual appropriation of profits which is designed to ensure that the company has sufficient financial strength.

KLP’s principal objective is to contribute to prudent management of its members’ pension assets at the lowest possible cost. KLP is a mutual company owned by its customers, and does not aim to build up a surplus through payments from customers which is then paid out in dividends. Dividends are therefore not relevant. The articles of association state that the members undertake to pay equity contributions in so far as this is necessary to provide KLP with satisfactory financial strength. KLP’s financial strength, capital position and solvency are discussed in more detail in section 4 of the annual report.

The provision in the Companies Act on mandates to the board of directors is not relevant to KLP. In KLP, it is the board which sets and announces the rates for equity contributions which are “necessary to provide KLP with satisfactory financial strength”. For the Nurses’ Pension Scheme, it is the board of the pension scheme which decides on the equity contributions and the Ministry of Labour and Social Affairs which approves them.

4. Equal treatment of shareholders

Deviation from the code of practice.

Individual elements of the code are not directly transferable to KLP as a mutual company, but we follow the general intent of the Code. The difference is mainly due to the fact that the company has no negotiable equity instruments.

5. Shares and negotiability

Deviation from the code of practice.

This point is not relevant as KLP has no negotiable equity instruments.

6. General meeting

Deviation from the code of practice.

KLP has chosen a solution where the general meeting consists of elected delegates and deputies. The company is divided into constituencies. The county authorities together with the municipalities in those counties each make up one constituency, apart from the City of Oslo which is part of the Akershus constituency. The four regional health trusts and their subsidiaries each make up a constituency. The other members of the company (corporate members) make up a constituency. The number of delegates elected from the individual constituencies is related to the premium volume paid in from each constituency. The recommendation in the code to arrange for voting by proxy is therefore irrelevant to KLP.

The notice calling the meeting and the support information on the resolutions to be considered, including the recommendations of the nomination committee, are sent to the elected delegates no later than 14 days before the meeting is to be held. The deadline is longer than the minimum required by the Limited Companies Act, which is one week.

The chair of the board of directors, the group CEO, the chair of the corporate assembly, the nomination committee and the auditors are entitled and required to attend the ordinary general meeting.

KLP’s general meeting is opened and chaired by the chair of the corporate assembly.

7. Nomination committee

Deviation from the code of practice.

The rules for the nomination committee are set out in the company’s articles of association. The corporate assembly elects the members of the nomination committee, including the chair, adopts instructions to the nomination committee and determines the fees to be paid to the members of the committee. This differs from the code, which recommends that the general meeting should elect a nomination committee.

The composition of the nomination committee is in line with the Code. All the members are independent of the board of directors and executive personnel. The different groups of owners are represented on the committee. Appointments to all of the company’s corporate bodies should be calculated to achieve a reasonable balance between the sexes.

Details of the nomination committee, its composition and tasks are given on the company’s website.

The nomination committee proposes candidates to the members of the corporate assembly, who are elected by the general meeting, as well as the chair and deputy chair of the corporate assembly. It also proposes the members of the board of directors to be chosen in the corporate assembly by the members elected by the general meeting, and candidates for the nomination committee. The nomination committee is also required to make recommendations on the remuneration of the members of the corporate assembly, the board of directors and the nomination committee. In this process, the nomination committee actively consults with the company’s various owner groupings.

The members of the nomination committee are elected for a term of two years. They may be re-elected twice.

The nomination committee provides written justifications for its recommendations The chair of the nomination committee also reports orally on these justifications to the bodies for which elections are being held.

8. Board, composition and independence

No deviation from the code of practice.

For further details of the activities and composition of the board of directors, see section 1 and note 1 to the annual report.

The recommendation on broad representation from company members in the corporate assembly is enshrined in the articles of association. In the articles of association, the members of the corporate assembly elected by the general meeting should be reflect the company’s interest groups, customer structure and social function.

Five board members and two deputies are chosen by the members at the corporate assembly which is elected by the general meeting. The composition of the board of directors is such that the board as a whole can address the interests of the members and the company, including the company’s need for expertise, capacity and diversity. KLP believes that the articles of association adequately address the provisions in the Code on independence of executive personnel, material business contacts and members of the company with equivalent influence to principal shareholders. Please refer to more detailed discussion in section 9 below.

The chair and vice-chair of the board of directors are elected by the corporate assembly.

The members of the board of directors are appointed for two years. There is no provision stating how long a board member may remain in office, but in recent years, the nomination committee has suggested that board members should not normally stay longer than eight years.

The board is considered to be independent. The external members of the board of directors are independent of executive personnel. No board members have any relationship to members of KLP who represent more than 10 per cent of the votes at the general meeting. All board members are independent of significant business contacts.

9. The work of the board of directors

No deviation from the code of practice.

For more details about the work of the board, refer to the annual report.

The board has issued instructions for the board itself and the CEO. The instructions to the board and CEO were last revised in December 2024.

The board of directors has three sub-committees: The remuneration committee, the risk committee and the audit committee. Each year, the board appoints at least three members and possibly a deputy to the sub-committees from among the members of the board, and appoints the chairs of the committees.

The board of directors evaluates its own work at least once a year. In this connection, the board is required to evaluate its own work and competence related to the company’s risk management and internal control. The results of this evaluation are presented to the nomination committee, which uses them in its work.

Each year, the board is required to evaluate the work of the working committees as part of its self-assessment. The sub-committees also conduct an annual self-assessment.

The instructions to the board specify how the board and general management should deal with agreements with associated companies, including an independent valuation in the case of significant agreements. Agreements with associates are generally handled by the board, with the exception of agreements concluded as part of KLP's normal activities and which are based on normal business terms and principles. In the annual report, the board reports on any agreements that are not covered by the exception mentioned above. The aim is to ensure that the company is aware of possible conflicts of interest and has a process to handle such agreements, with the aim of preventing assets from being transferred from the company to affiliates.

10. Risk management and internal control

No deviation from the code of practice.

KLP has a well-established system of risk management and internal control adapted to the scope and nature of the company’s activities. For further details, see section 2 of the annual report.

11. Remuneration of the board of directors

No deviation from the code of practice.

The remuneration of the board of directors reflects the board’s responsibilities, expertise and time spent, and the complexity of the company’s activities.

12. Salary and other remuneration to senior executives

No deviation from the code of practice.

KLP is not covered by the rules on the remuneration of executive personnel in exchange-listed companies. KLP has no exchange-listed equity instruments either, and does not grant share options or bonuses to its staff.

As a finance company, the board of KLP adopts guidelines for the remuneration of all employees in the company, including special rules on salaries payable to executive personnel. The company’s guidelines on the remuneration of executive personnel are put to the general meeting.

For further details, see consolidated accounts.

13. Information and communication

No deviation from the code of practice.

The board of directors has established guidelines for the company’s reporting of financial and other information, and the company’s contact with member-owners other than through general meetings.

All reporting is based on openness and consideration of the requirement for equal treatment of the players in the securities market and the rules on good exchange practice. The published documentation is accessible from the company’s web pages.

KLP has contact with members outside the general meeting, including electoral meetings, owners’ meetings, resource group meetings etc.

14. Take-overs

Deviation from the code of practice.

We differ here because this is not relevant to KLP as a mutual company.

15. Auditor

No deviation from the code of practice.

The auditor is elected by the general meeting and conducts financial audits. KLP has chosen Ernst & Young (EY) as its auditor.

The auditor provides an audit report in relation to the financial statements, and signs off the sustainability report.

The auditor attends meetings of the audit committee, as well as the board meeting at which the annual accounts are discussed. The audit committee assesses the independence of the auditor each year.

The board of directors of KLP has established guidelines for the purchase of additional services etc. from auditors. The guidelines help to ensure that the auditor’s independence is safeguarded.

The auditor attends the meeting of the corporate assembly and the general meeting where the annual accounts are discussed, and other meetings where necessary.

In 2024, the board of directors had one meeting with the auditor without the administration present. The board’s audit committee held three meetings with the auditor without the administration present.

The remuneration of the auditor is determined by the corporate assembly.

Under the Disclosure Regulation (SFDR), financial institutions have to report on their principal adverse impact (PAI) indicators for the investment portfolio. In the KLP group, only KLP Kapitalforvaltning is covered by the Regulation, but we have chosen to report the mandatory PAI indicators for KLP on a voluntary basis.

The calculations are done for KLP’s total capital under management minus investments in government bonds and property. Due to a lack of data coverage, the calculations are mainly based on equities and bonds. We use data from MSCI and Nordic Trustee for the calculations. The formulae for calculating the PAI indicators are taken from the Annex to the SFDR. The method of calculating greenhouse gas emissions, carbon intensity and carbon footprint are the same as for KLP’s financed emissions.

You can read more about how KLP deals with sustainability risk in its investments in KLP Kapitalforvaltning’s PAI report from 2023, which was prepared for its management.