Remuneration to corporate management and the Board of Directors

The Board has drawn up special guidelines for the stipulation of salary and other remuneration to executive management. The CEO's terms of employment are set by the Board. Each year, the Board of Directors undertakes a thorough review of salary and other remuneration to the CEO. The review is based on market polls of similar positions.

The structure of the incentive system for the other members of executivemanagement is determined by the Board, and presented to the AGM for an advisory vote. The terms are proposed by the CEO, and subject to the approval of the Chair of the Board.

Walter Qvam was hired by the Group on 1 Dec. 2007, and took over as CEO on 1 March 2008. The CEO's remuneration consists of a fixed annual salary of NOK 3 250 000 and a performance-based salary as described under "Bonuses for executive management". The CEO has six months' reciprocal notice of resignation/ termination. Beyond the notification period, the CEO may be entitled to full wages until he begins in a new position, limited to up to one year after severance. The CEO has a contract for retirement which includes severance pay from the age of 63 of NOK 1 300 000 per year (NOK 1 350 000 upon leaving at age 64; NOK 1 400 000 upon leaving at age 65). At age 67, the CEO is entitled to a pension which, including the National Insurance pension and the Group's ordinary pension plan, will result in benefits of NOK 1 200 000 from age 67 to 77, and NOK 1 000 000 from age 77 and for the rest of his life.

The Board's attitude to executive management's salaries is that they should be competitive, but not at the top end of the scale.

Members of executive management had remuneration consisting of a fixed salary and performance-based wages as described under the section on "Bonuses to executive management". Beyond the term of notice, executives may be entitled to full wages until they assume a new position, limited to up to 12 months after severance. Members of executive management are entitled to take early retirement from age 60. The benefits give them 90 per cent of their salary upon retirement at age 60, diminishing by 10 per cent per year to 60 per cent of their salary from age 63 to age 67.

In 2006, the Group introduced new rules for severance pay for newly hired managers. The rules entail freedom from the responsibility to work from age 62, that the accrual period has increased from 10 to 15 years and that the benefit has been reduced to 65 per cent.

 

Bonuses for executive management

In 2006, KONGSBERG's Board introduced a new bonus system for key management personnel that rewards good results. KONGSBERG's top executives and most important decision-makers have been given direct financial interests in KONGSBERG's progress, and have compensation arrangements that provide incentives for improvement. The long-term bonus schemes are stipulated by the Board, and expensed as personnel expenses.

The bonus system is linked to the trend in profits and capital consumption. The bonus is weighted between a manager's sphere of responsibility and higher levels. In addition, a certain bonus is awarded for the achievement of personal, non-financial goals.

The bonus system rests on three independent components, of which the changes in this year's EBITA are the most important. Thus the accrued bonus will be positive when performance improves and negative in the event of significant setbacks. The year's accrued bonus, positive or negative, is credited to the bonus bank, and then 1/3 of any positive balance in the bonus bank will be paid out once the accounts have received final approval from the Board of Directors. The bonus system distinguishes between accrued bonuses (credited to the bonus bank) and paid bonuses (disbursed from the bonus bank). Individual participants' annual accrual to the bonus bank can account for a maximum of 75 per cent of their regular salary, while the disbursement of funds from the bonus bank can account for a maximum of 50 per cent of their regular salary. The bonus scheme is designed so that managers who perform well over time will earn a bonus of 20–30 per cent of their regular salary. The scheme encompasses 94 managers. In the corporate accounts for 2007, the accrued bonus, including social security, totals MNOK 60 (MNOK 48 in 2006). Bonuses amounting to MNOK 18 (including social security contributions) were paid out to executive management in 2007.

Expensed salaries and other benefits specified for the members of executive management for 2007 and 2006

Amounts in NOK 1 000	Year	Salaries	Paid bonuses1)	Other benefits reported in the fiscal year2)	Total paid benefits	Option expense	Accured bonuses3)	Year's pension service cost	Total expensed benefits
Executive management
Jan Erik Korssjøen, CEO	2007	2 802	692	176	3 670	13	2 100	783	5 874
	2006	2 644	426	143	3 213	12	1 887	706	5 818
Arne Solberg, CFO	2007	1 554	387	162	2 103	13	1 168	284	3 181
	2006	1 466	207	142	1 815	12	1 056	207	3 090
Stig Trondvold, EVP, Business Development	2007	1 480	471	155	2 106	13	1 112	799	3 559
	2006	1 416	197	137	1 750	12	1 014	770	3 546
Even Aas, EVP, Corporate Communications	2007	1 178	393	177	1 748	10	885	528	2 778
	2006	1 099	175	173	1 447	6	800	440	2 693
Ellen Christine Orvin Raaholt, EVP, Human Resources	2007	1 299	318	164	1 781	13	968	848	3 292
	2006	1 227	197	135	1 559	12	866	843	3 280
Total salaries, bonuses and remuneration to executive managment, parent company	2007	8 313	2 261	834	11 408	62	6 233	3 242	18 684
Total salaries, bonuses and remuneration to executive managment, parent company	2006	7 852	1 202	730	9 784	54	5 623	2 966	18 427
Torfinn Kildal, president, Kongsberg Maritime	2007	2 128	516	175	2 819	13	1 547	442	4 305
	2006	1 958	294	159	2 411	12	1 409	1 038	4 870
Tom Birck Gerhardsen, president, Kongsberg Defence & Aerospace	2007	1 968	491	139	2 598	13	1 470	331	3 921
	2006	1 852	261	129	2 242	12	1 341	335	3 930
Total salaries, bonuses and remuneration to corporate executive managment	2007	12 409	3 268	1 148	16 825	88	9 250	4 015	26 910
Total salaries, bonuses and remuneration to corporate executive managment	2006	11 662	1 757	1 018	14 437	78	8 373	4 339	27 227

1)	The bonus paid for 2007 comprises 1/3 of the bonus earned for 2006, which was expensed in 2006. The bonus paid for 2006 was calculated on the basis of the profit from 2005, and expensed in 2006. As from 2006, bonuses have been expensed in the year of accrual. Recognised benefits for 2006 therefore include the bonus accrued in 2006 and the bonus paid out in 2006 based on accrual in 2005.
2)	Benefits other than cash refer to expensed discounts on shares in connection with the employee share programme, the taxable portion of accident and industrial injury insurance, the interest rate advantage on car loans, and the advantage of having a free car for those who do not have a car loan.
3)	Accrued bonuses are related to the bonus system. Of the accrued bonus amount will 1/3 be paid out in the following year, while the remaining 2/3 is transferred to an individual's bonus bank, and future disbursements will be conditional upon future goal achievement, cf. the description of bonuses for executive management.

	Year	Number of shares	Option granted	Options exercised	Strike price	Options out- standing	Terms for current share options	Car loands in NOK	Debt instru-ments from	Re- payments plans	Out- standing amount in NOK	Interest rate
Corporate management
Jan Erik Korssjøen, CEO	2007	6 930	0	198	106	125	see Note 10	547 000	31 Dec 04	10 years	382 876	1%
	2006	6 553	125	196	93	323	see Note 10	547 000	31 Dec 04	10 years	437 584	1%
Arne Solberg, CFO	2007	7 284	0	198	106	125	see Note 10	572 000	20 Jan 06	10 years	457 592	1%
	2006	6 907	125	196	93	323	see Note 10	572 000	20 Jan 06	10 years	514 796	1%
Stig Trondvold, EVP, Business Development	2007	3 109	0	198	106	125	see Note 10	539 000	20 April 04	10 years	323 384	1%
	2006	2 732	125	196	93	323	see Note 10	539 000	20 April 04	10 years	377 288	1%
Even Aas, EVP, Corporate Communications	2007	2 186	0	75	106	100	see Note 10
	2006	1 932	100	150	93	175	see Note 10
Ellen Christine Orvin Raaholt, EVP, Human Resources	2007	1 022	0	198	106	125	see Note 10	558 000	20 April 05	10 years	404 550	1%
	2006	645	125	0		323	see Note 10	558 000	20 April 05	10 years	460 350	1%
Torfinn Kildal, president, Kongsberg Maritime	2007	8 144	0	198	106	125	see Note 10
	2006	7 767	125	196	93	323	see Note 10
Tom Birck Gerhardsen, president, Kongsberg Defence & Aerospace	2007	6 592	0	198	106	125	see Note 10
	2006	6 215	125	196	93	323	see Note 10

Remuneration to the members of the Board of Directors

	Year	Number of shares		Board remuneration
Board of Directors
Finn Jebsen, Chair	2007	5 000	(through the company Fateburet AS)	313 333
	2006	5 000	(through the company Fateburet AS)	300 000
Benedicte Berg Schilbred, Deputy Chair	2007	17 500	(through the company Odd Berg AS)	166 667
	2006	17 500	(through the company Odd Berg AS)	160 000
Erik Must1), Director	2007	100 000	(through the company Must Invest AS)	146 667
	2006	100 000	(through the company Fondsavanse AS)	136 667
Erik Must1), Director	2007	31 150
	2006	31 150
Siri Beate Hatlen, Director	2007	-		146 667
	2006	-		136 667
Roar Marthiniussen, Director	2007	3 279		146 667
	2006	3 100		136 667
Jan Erik Hagen, Director	2007	506		46 667
	2006	477		136 667
Kai Johansen, Director from 8 May 2007	2007	-		100 000
Audun Solås, Director	2007	1		146 667
	2006	1		136 667
John Giverholt2), Director	2007	-		146 667
John Giverholt2), Director	2006	-		136 667
Total remuneration to the Board	2007			1 360 002
Total remuneration to the Board	2006			1 280 002

1) Erik Must is chair of the Board of Arendals Fossekompani ASA, which owns 2 388 199 shares in KONGSBERG.
2) John Giverholt is CFO at Ferd AS, which owns 500 000 shares in KONGSBERG.

Expensed benefits, executive management

Amounts in NOK 1 000	2007	2006	2005
Short-term benefits	16 640	17 228	12 268
Pension benefits	4 015	4 339	3 895
Other non-current benefits	6 167	5 582	-
Share-based payment	88	78	47
	26 910	27 227	16 210

Other non-current benefits are 2/3 of the accrued bonus.

Transactions between related parties

The Norwegian Government as the largest owner
The State as repr. by the Ministry of Trade and Industry is KONGSBERG's largest owner (50.001 per cent of the shares in Kongsberg Gruppen ASA). The State as repr. by the Ministry of Defence is an important customer for the Group. Sales to the Armed Forces are regulated by the EEA agreement and the Procurement Regulations for the Armed Forces, which guarantee equal treatment for all vendors. At 31 Dec. 2007, KONGSBERG has a balance outstanding from State-owned customers of MNOK 60.