NOTE 1

GENERAL INFORMATION AND ACOUNTING PRINCIPLES

General information

Ferd AS is a privately owned Norwegian investment company located in Strandveien 50,Lysaker. The Company is involved in long-term and active ownerships of companies with international potential,and financial activities through investments in a wide range of financial assets.

Ferd is owned by Johan H. Andresen and his family. Andresen is the Chair of the Board.

The Company's financial statements for 2012 were approved by the Board of Directors on 8 April 2013.

Basis for the preparation of the financial statements

Ferd AS’ financial statements are prepared in accordance with the Norwegian Accounting Act section 3-9 and regulation on simplified application of international accounting standards.

Summary of the most significant accounting principles

The most significant accounting principles applied in the preparation of the financial statements are described below. The accounting principles are consistent for similar transactions in the reporting periods presented,if not otherwise stated.

Ferd has changed the principle for measuring investments in subsidiaries from using acquisition cost to fair value in accordance with IAS 39. Note 19 has details.

Investments in subsidiaries

Subsidiaries are companies where the parent company Ferd AS has a controlling influence. Such influence normally exists when Ferd AS has a stake exceeding 50 % of the voting capital.

Subsidiaries are classified as tangible assets in the balance sheet and measured at fair value. Value changes on subsidiaries,current returns like dividend and gain or loss on the realisation of subsidiaries are recognised as net operating income in the income statement.

Investments in associates and joint ventures

Associates are entities over which Ferd has significant,but not controlling,influence. Significant influence implies that Ferd is involved in strategic decisions concerning the company’s finances and operations without controlling these decisions. Significant influence normally exists for investments where Ferd holds between 20 % and 50 % of the voting capital.

A joint venture is a contractual arrangement requiring unanimous agreement between the owners about strategic,financial and operational decisions.

Investments in associates and joint ventures are classified as non-current assets in the balance sheet and are recognised at fair value. Value changes on the investments,current returns like dividend and gain or loss on the realisation of investments are recognised as net operating income in the income statement.

Revenue recognition

Revenue is recognised when earned. The Company's revenue mainly includes rendering services to other group companies and other related parties. Income from the sale of services is recognised according to the service's level of completion,provided the progress of the service and its income and costs can be reliably measured. Revenue is presented as Other income in the income statement.

Foreign currency translation

The financial statements are presented in Norwegian kroner (NOK),which is the functional currency of Ferd AS. Transactions in foreign currency are recognised and measured in NOK at the date of the transaction. Monetary items in foreign currency are translated to NOK on the basis of the exchange rate at the date of the balance sheet. Gain and loss due to currency changes is recognised in the income statement.

Classification of financial instruments

Financial instruments constitute a substantial part of Ferd’s balance sheet and are of considerable significance for the Company's financial position and result. Financial assets and liabilities are recognised when the Company becomes a party to the contractual obligations and rights of the instrument. All financial instruments are classified in the following categories,pursuant to IAS 39,at their initial recognition:

 

1. Financial instruments at fair value and with changes in value recognised through profit and loss

2. Loans and receivables

3. Financial liabilities

Financial instruments are classified as held for trading and included in category 1 if acquired primarily for benefiting from short-term price fluctuations. Derivatives are classified as held for trading and as current assets.

Pursuant to the “fair value option” in IAS 39,financial instruments can also be classified at fair value,with changes in value recognised in the income statement. The instrument must initially be recognised at fair value with value changes through profit and loss and also meet certain criteria. The key assumption for applying the “fair value option” is that a group of financial assets and liabilities are managed on a fair value basis and that management evaluates the earnings following the same principle.

Loans and receivables are non-derivative financial assets with fixed or determinable payments not quoted in an active market. They are classified as current assets,unless they are expected to be realised more than 12 months after the balance sheet date. Loans and receivables are presented as trade receivables,other receivables and bank deposits in the balance sheet.

Financial liabilities that are not included in the category held for trading and not measured at “fair value through profit and loss” are classified as other liabilities.

Recognition,measurement and presentation of financial instruments in the income statement and balance sheet

 

Financial instrument transactions are recognised on the date of the agreement,which is when the Company has made a commitment to buy or dispose of the financial instrument. Financial instruments are derecognised when the contractual rights to the cash flows from the asset expire or are transferred to another party. Correspondingly,the financial instruments are derecognised when the Company on the whole has transferred the risks and rewards connected with the ownership.

Financial instruments at “fair value through profit and loss” are initially measured at quoted prices at the balance sheet date or estimated on the basis of measurable market information available at the balance sheet date. Transaction costs are recognised in profit or loss. In subsequent periods,the financial instruments are presented at fair value based on market values or generally accepted calculation methods.

Borrowings,receivables and financial liabilities are initially measured at fair value with the addition of direct transaction costs. In subsequent periods,the assets and liabilities are measured at amortised cost by using the effective interest method. Losses on loans and receivables are recognised in profit and loss.

Gain and loss from the realisation of financial instruments,changes in fair values and interest income are recognised in the income statement in the period they arise. Dividend is recognised as income when the Company has established the right to receive payment. Net income related to financial instruments is presented as operating income in the income statement.

Financial derivatives and hedge accounting

The Company applies financial derivatives to reduce any potential loss from exposures to unfavourable changes in exchange rates or interest rates. The derivates are recognised as financial instruments at fair value,and the the value changes are recognised in the income statement. Ferd does not apply hedge accounting in the financial statements.

Income taxes

The income tax expense includes tax payable and changes in deferred tax. Income tax on items recognised in other comprehensive income (OCI) is also recognised in OCI,and tax effects on items recognised directly in equity is also recognised in equity.

The tax payable for the period is calculated according to the tax rates and regulations ruling at the end of the reporting period. Deferred tax is calculated on temporary differences between book and tax values of assets and liabilities in the financial statements and any tax effects of loses carried forward at the reporting date.

Deferred tax assets are only recognised in the balance sheet to the extent that it is probable that there will be sufficient taxable profits to utilise the benefits of the tax reducing temporary differences. Deferred tax liabilities and assets are calculated according to the tax rates and regulations ruling at the end of the reporting period and at nominal amounts. Deferred tax liabilities and assets are recognised net when the Company has a legal right to net assets and liabilities,and is able to and intend to settle the tax obligation net.

Property,plant and equipment

Property,plant and equipment are measured at cost less accumulated depreciation and impairment. The cost includes expenses directly attributable to the acquisition of the asset. Expenses incurred after the acquisition are recognised as assets when future economic benefits are expected to arise from the asset and can be reliably measured,whereas current maintenance is expensed.

Property,plant and equipment are depreciated on a straight-line basis over their expected useful lives. If indications of impairment exist,the asset is tested for impairment.

Impairment

Property,plant and equipment is considered for impairment when there are indications to the effect that future earnings cannot support the carrying amount.

The difference between the carrying value and recoverable amount is charged to the income statement as a write-down. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Fair value less costs to less is the amount that can be recovered at a sale of an asset in a transaction performed at arm’s length between well informed and voluntary parties,less costs to sell. The value in use is the present value of future cash flows expected to be generated by an asset or a cash-generating unit. Impairment losses are subsequently reversed when the impairment indicator no longer exists.

Leasing

Leases are classified either as operating or finance leases based on the actual content of the agreements. Leases under which the lessee assumes a substantial part of risk and return are classified as finance leases. All of the Company's present leases are classified as operating leases.

Leasing costs in operating leases are charged to the income statement when incurred and are classified as other operating expenses.

Trade and other receivables

Current receivables are initially recognised at fair value. In subsequent periods,provisions for actual and possible losses are considered. The Company reviews the receivables on a regular basis and prepares estimates for losses as a basis for the provisions in the balance sheet.

Cash and cash equivalents

Cash and cash equivalents include cash,bank deposits and other short-term and easily realisable investments that will fall due within 3 months,also including restricted funds. Bank overdraft is presented as short-term debt to finance institutions in the balance sheet. In the statement of cash flows,the overdraft facility is included in cash and cash equivalents.

Pension costs and pension funds/obligations

Defined benefit plans

A defined benefit plan is a pension scheme defining the pension payment an employee will receive at the time of retirement. The pension is normally determined as a part of the employee's salary. The Company's net obligation from defined benefit pension plans is calculated separately for each scheme. The obligation represents an estimate of future retirement benefits that the employees have earned at the balance sheet date as a concequence of their service in the present and former period. The benefits are discounted to present value reduced by the fair value of the pension funds.

The net pension cost of the period is included in payroll costs and comprises the total of the benefits earned during the year,the interest cost on the liability,the expected yield of the pension funds and the accrued social security tax. Estimate deviations are recognised as other income and expenses in the statement of comprehensive income.

Changes in defined benefit obligations due to changes in pension schemes are recognised over the estimated average remaining service period when the changes are not immediately recognised. Gain or loss on a curtailment or settlement of a plan is recognised in the income statement when the curtailment or settlement occurs. A curtailment occurs when the Company decides to reduce significantly the number of employees covered by a plan or amends the terms of a defined benefit plan to the effect that a significant part of the current employees’ future earnings no longer qualify for benefits or will qualify for reduced benefits only.

Provisions

A provision is recognised when the Company has an obligation as a result of a previous event,it is probable that a financial settlement will take place and the amount can be reliably measured. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period,discounted at present value if the discount effect is significant.

Current liabilities

Accounts payable and other current liabilities are initially recognised at fair value and subsequently measured at amortised cost. Accounts payable and liabilities are classified as current when they fall due within 12 months after the balance sheet date or are integrated in the Company’s ordinary operating activities.

Dividend

Dividend and the distribution of group contribution proposed by the Board is recognised as current liabilities pursuant to the exemption in the regulation to the Norwegian Accounting Act section 3-9.

Business areas

Ferd reports business areas in line with how the Company`s management makes,monitors and evaluates its decisions. The segments are identified based on whose results are regularly reviewed by management and used for allocation of capital and other resources,and assess performance.

Cash flow statement

The cash flow statement has been prepared using the indirect method,implying that the basis used is the Company’s profit before tax to present cash flows generated by operating activities,investing activities and financing activities respectively.

Related parties

Parties are considered to be related when one of the parties has the control,joint control or significant influence over another party. Parties are also related if they are subject to a third party’s control,or one party can be subject to significant influence and the other joint control. A person or member of a person’s family is related when he or she has control,joint control or significant influence over the business. Companies controlled by or being under joint control by key executives are also considered to be related parties. All related party transactions are completed in accordance with written agreements and established principles.

New accounting standards according to IFRS

The financial statements have been prepared in accordance with standards approved by the International Accounting Standards Board (IASB) and International Financial Reporting Standards - Interpretations Committee (IFRIC) effective for accounting years starting on 1 January 2012 or earlier.

New and amended standards applied by Ferd effective from the accounting year 2012:

The amendments include a requirement to group income and expenses in total comprehensive income on the basis of whether there is a potential for reclassifying them to the income statement or not. The amendment has had an impact on the presentation of comprehensive income and the statement of changes in equity.

The amendment concerns disclosure requirements in connection with transfers of financial assets where the Company still has an involvement. The amendment has no significant impact for Ferd AS.

Under the amendments the measurement of deferred tax liability is required to reflect the tax consequences of recovering the carrying amount of an investment property entirely through sale. The changes have had no impact for the financial statements of Ferd AS.

New and amended standards not yet implemented by Ferd:

In the changed IAS 19,the ”corridor method” is not allowed for the recognition of actuarial gains/losses. Actuarial gains/losses shalI in their entirety be recognised in other comprehensive income in the period they arise. Ferd does not apply the corridor method,hence this change has no impact for Ferd.

The pension earnings shall be presented in the income statement as salary expenses,whereas net interest can be included in the finance items. In addition,in benefit schemes net interest shall be calculated by applying the discount interest rate on the net obligation,i.e.,the pension obligation less earned funds. This implies that return shall no longer be calculated on the funds. The changes are effective for acounting years starting on 1 January 2013. Ferd expects to implement the amended standard from this date.

The amendment implies that enterprises must provide a number of quantitative information related to setting-off financial assets against financial liabilities. The amendment is effective for accounting years starting on 1 January 2013. The Company expects to implement the changed standard from this date,but the changes are expected to have no or very limited impact for Ferd AS.

IAS 32 has been amended to clarify the set-off requirements in the standard. The changes become effective for annual periods beginning on 1 January 2014. Ferd expects to implement the amended standard from this date,but the changes are expected to have no or very limited impact for Ferd AS.

IFRS 9 will replace the current IAS 39. The project is divided in several phases. The first phase concerns classification and measurement and has been finalised by IASB. The classification and measurement requirements for financial liabilities in IAS 39 are continued,with the exception of financial liabilities recognised at fair value with changes in value through profit and loss (the fair value option),where changes in value connected with the company’s own credit risk is separated and recognised in other income and expenses in total comprehensive income. Phase 2 concerns impairment of financial instruments and phase 3 hedge accounting,but neither has so far been completed by IASB. IFRS 9 is effective for accounting years starting on 1 January 2015,but the standard has not yet been approved by the EU. Ferd expects to implement IFRS 9 starting on 1 January 2015. Those parts of IFRS 9 that have been completed so far,have relatively limited consequences for Ferd AS.

IFRS 12 applies to enterprises with interests in companies that are consolidated,and companies not consolidated,but in which the enterprise nevertheless is engaged. IFRS 12 combines the disclosure requequirements for subsidiaries,joint arrangements,associates and non-consolidated entities into one standard. IFRS 12 becomes effective for annual periods beginning on or after 1 January 2014 (earlier adoption is allowed),and the standard has been approved by the EU. Ferd expects to implement IFRS 12 starting on 1 January 2014,and the implementation will have an impact on Ferd's notes to the financial statements as a consequence of increased information requirements.

The standard specifies principles and guidance for measuring fair value on assets and liabilities. The objective of the standard has been to establish a single source of guidance under IFRS for all fair value measurements,with a view to ensuring a common definition of fair value across all other standards and provide a uniform guidance to measuring fair value. IFRS 13 becomes effective for annual periods beginning on or after 1 January 2014 (earlier adoption is allowed),and the EU has approved the standard. Ferd expects to implement IFRS 13 starting on 1 January 2014,but it is not expected that the clarifications in IFRS 13 will have any significant consequences for Ferd.

As a consequence of the new IFRS 10 and IFRS 12,amendments were made to IAS 27 coordinating this standard with the new accounting standards. IFRS 10 replaced those parts of IAS 27 that concerned consolidated financial statements. IAS 27 is now limited to accounting for the financial statements of the parent company,and will therefore not apply for the group accounts when implemented. The changes become effective for annual periods beginning on or after 1 January 2014,and the standard has been approved by the EU. Ferd expects to implement the amended standard starting on 1 January 2014.

NOTE 2

ACCOUNTING ESTIMATES AND JUDGMENTAL CONSIDERATIONS

Management has used estimates and assumptions in the preparation of the financial statements. This applies for assets, liabilities, income, expenses and disclosures. The underlying estimates and assumptions for valuations are based on historical experience and other factors considered to be relevant for the estimate on the balance sheet date. Estimates can differ from actual results. Changes in accounting estimates are recognised in the period they arise. The main balances where estimates have a significant impact on disclosed values are mentioned below. The methods for estimating fair value on financial assets are also described below.

Determination of the fair value of financial assets

The balance sheet of the Ferd includes a large part of financial assets at fair value. The fair value assessment of financial assets will at varying degrees be influenced by estimates and assumptions related to factors like future cash flows, the required rate of return and interest rate level. The most significant uncertainty concerns the determination of fair value of the unlisted financial assets.

Listed shares

Fair value on financial assets with standard terms traded in active and liquid markets are determined at noted market prices on the balance sheet date (the official closing price of the market).

Unlisted shares and investments in other equity instruments

The class “Unlisted shares and bonds” comprises private shares and investments in private equity funds. Fair value is determined by applying well-known valuation models. The input to the valuation models is related to future estimates and assessments of a number of factors existing on the balance sheet date.

Ferd is of the opinion that estimates of fair value reflect estimates and assumptions that the parties in an independent transaction are expected to consider relevant, including the factors impacting expected cash flows and the degree of risk associated with them.

Hedge funds

The hedge funds are managed by external parties providing Ferd with monthly, quarterly or half-yearly estimates of the fair value. The estimates are verified by independent administrators. In addition, the total return from the funds is assessed for reasonableness against benchmark indices.

Investments in debt instruments

The fair value of interest-bearing investments is determined on the basis of quoted prices. If such prices are not available, the investment is valued in accordance with price models based on the current yield curve and external credit ratings.

Derivatives

The fair value of derivatives is based on quoted market prices. If such prices are not available, the investment is valued in accordance with price models based on the current yield curve and other relevant factors.

Determination of the fair value of subsidiaries with properties

Ferd has subsidiaries with significant properties recognised at fair value. The fair value is based on the discounted value of future cash flows, and the estimate will be impacted by estimated future cash flows and the required rate of return. The main principles for deciding the cash flows and required rates of return are described below.

Future cash flows are based on the following factors:

 

1) Existing contracts

2) Expected future rentals

3) Expected vacancies

The required rate of return is based on a risk-free interest with the addition of a risk premium for the property.

The risk premium is based on:

1) Location

2) Standard

3) Expected market development

4) Rent level compared to the rest of the market

5) The tenant`s financial strength

6) Property specific knowledge

In the event that transactions concerning comparable properties close to the balance sheet date have taken place, these values are applied as a cross-reference for the valuation.

Determination of fair value of other subsidiaries

Ferd has subsidiaries with investments of the same character as Ferd AS. The fair value of these subsidiaries are set to the carrying value of equity, adjusted for non-recognised unrealised gain on the underlying investments. The underlying investments are value according to the same principles and methods as Ferd AS' direct investments.

Pension funds and obligations

The calculation of pension obligations implies the use of judgements and estimates on a number of financial and demographical assumptions. Note 15 has details on the assumptions used. Changes in assumptions can result in significant changes in pension obligations and funds in the balance sheet.

NOTE 3

BUSINESS AREAS

Ferd's segment reporting complies with IFRS 8. Ferd is an investment company, and the Company's management makes decisions and monitors and evaluates these decisions based on the fair value of the Company's investments and their changes in value. The operating segments are identified on the basis of capital and resource allocation. Ferd is divided into the following five business areas:

Ferd Capital is an active and long-term investor in privately owned and listed companies. Ferd has a general approach to investments in the area going from late-venture to "buy-out". Ferd Capital prioritises investments in companies where we have the relevant expertise. The team comprises highly qualified staff with operational experience from manufacturing, business development, finance and strategic consultancy. Ferd Capital manages the Group's long-term active equity investments, the largest investments being:

- Elopak (97 percent stake) is one of the world's leading manufacturers of packing systems for fluid food articles. With an organisation and cooperating partners in more than 40 countries, the company's products are sold and marketed in more than 100 countries on all continents.

- TeleComputing (97 percent stake) is a leading supplier of IT services to small and medium-sized enterprises in Norway and Sweden. The company supplies a broad range of netbased applications and customised operating and outsourcing services in addition to system development, customer assistance and other consultancy services.

- Swix Sport (100 percent stake) is developing, manufacturing and marketing ski wax, ski poles, accessories and textiles for sporting and active leasure time use under the brands Swix, Ulvang and Bavac, Toko, Original and Lundhags. The company has extensive operations in Norway as well as abroad through subsidiaries in, i.a., Sweden, USA, Japan and Germany.

- Mestergruppen (94,5 percent stake) is a prominent participant in the Norwegian building materials market concentrating on the professional part of the market. The company's operations include developing land and projects, housing and cottages and the sale of building materials.

- Aibel (49 percent stake) is a leading supplier to the international upstream and gas industry with the emphasis on the Norwegian shelf. The company is engaged in operating, maintaining and modifying offshore and land based plants, and is also supplying complete production and processing installations.

- Interwell (34 percent stakel) is a preeminent Norwegian supplier of high-tech well tools to the international oil and gas industry. The company's most important market is the Norwegian shelf, but it has in recent years also gained access to several significant markets both in Europe and the Middle-East. The company supplies innovative plugs and packs highly in demand with the customers. The products and services are primarily utilised in the manufacturing phase and play a important role in the oil companies' efforts to secure wells or increase the exploitation rate on existing oil and gas fields.

Ferd Special Investments (SI) has a wide mandate to make investments, but so far only hedge fund in the second-hand market have been purchased. SI makes investments where Ferd assumes there are opportunities within this niche.

Ferd Hedgefond invests in types of hedge funds with varying mandates, managed by asset managers based abroad. In addition to giving a satisfactory risk-adjusted return, the business area shall ensure a risk diversification for Ferd in total.

Ferd Eiendom is an active property investor responsible for Ferd's investments in property. Operations include developing, leasing and managing office, warehouse and logistic properties and developing housing property for sale, mainly in the Oslo area. The projects are partly carried out internally, partly together with selected external cooperating partners. Ferd Eiendom also invests in foreign property funds.

Other mainly comprises investments in externally managed private equity funds that do no require much daily follow-up and are monitored by management rather than allocated to a separate business area. Hence, these securities are part of Other. Other also comprises some financial instruments management may acquire to adjust Ferd's total risk exposure. Additionally, opreating expenses related to Ferd's management and internal bank are included in Other.

NOK 1 000

Ferd AS

Ferd Capital

Ferd Invest

Ferd Special

Investments

Ferd Hedgefond

Ferd Eiendom

Other

Income statement 2012

Operating income

Operating expenses

Operating profit

Balance sheet 31 December 2012

Investments in subsidiaries

Investments classified as current assets

Other assets*

Total assets

*) The business area's net bank overdraft are included here and deducted from the other assets.

NOK 1 000

Ferd AS

Ferd Capital

Ferd Invest

Ferd Special

Investments

Ferd Hedgefond

Ferd Eiendom

Other

Income statement 2011

Operating income

Operating expenses

Operating profit

Balance sheet 31 December 2011

Investments in subsidiaries

Investments classified as current assets

Other assets*

Total assets

*) The business area's net bank overdraft are included here and deducted from the other assets.

NOTE 4

INCOME FROM FINANCIAL INVESTMENTS

NOK 1 000

Dividend and group

contributions from

financial investments *)

Unrealised value

change on

financial investments

Net gains on

sales of

financial investments

Total

Investments in subsidiaries

Shares and stakes in other companies

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Investments in debt instruments

Total 2012

NOK 1 000

Dividend and group

contributions from

financial investments *)

Unrealised value

change on

financial investments

Net gains on

sales of

financial investments

Total

Investments in subsidiaries

Shares and stakes in other companies

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Investments in debt instruments

Total 2011

*) Cash distributions from private equity are mainly offset against the carrying value of the funds and are not recognised in the income statement.

NOTE 5

SALARIES AND REMUNERATIONS

NOK 1 000

Salaries

Social security tax

Pension costs (note 15)

Other benefits

Total

Average number of man-labour years

Salary and remuneration to Group CEO

NOK 1 000

Salary

Bonus

Benefits in kind

Pension

John Giverholt

The Group CEO's bonus agreement is limited to an annual salary. Bonus is based on achieved results in the Group.

The Group CEO participates in Ferd's collective pension schemes and is thereby entitled to a defined benefit pension. He also has an additional arrangement for a penson basis higher than 12 G and and an early retirement pension scheme giving him the opportunity to retire at the age 65.

The Group CEO is entitled to 9 months pay after termination of employment is he has to resign from his position.

Ferd AS has a receivable on the CEO of NOK 600 000, which is subject to interest on market based terms. The loan has no defined instalment plan.

Fees to the Board

No specific fees have been paid for board positions in Ferd AS.

NOTE 6

OTHER OPERATING EXPENSES

NOK 1 000

Lease of buildings etc.

Fees to auditors, lawyers, consultants

Travel expenses

Other expenses

Total

NOTE 7

AUDIT FEES

Specification of fees to the Company's auditors, Ernst & Young:

NOK 1 000

Audit fees

Other attestation services

Tax assistance

Other non-audit services

Total

Other non-audit services mainly comprise due diligence servicies and assistance in the facilitation and quality assurance of data in connection with Ferd's implementation of a new consolidation tool. All amounts are exclusive of VAT.

NOTE 8

INCOME TAXES

NOK 1 000

The tax expense comprises:

Income tax payable

Change in deferred tax

Tax concerning prior periods

Tax effect of net rendered group conribution

Tax expense

Reconciliation of nominal and effective tax rate

NOK 1 000

Result before tax

Expected tax expense according to nominal tax rate (28 %)

Non-taxable gains/losses and return on securities

Changes in value, securities

Adjustment of tax from prior periods

Tax effect of other permanent differences

Tax expense

Effective tax rate

Deferred tax assets and liabilites

NOK 1 000

Receivables

Shares and bonds

Tangible assets

Provisions

Net pensions

Balance sheet value 31 December, deferred tax asset (-)/liability (+)

Change in net deferred tax recognised in balance sheet

NOK 1 000

Balance sheet value 1 January

Charged in period

Tax set-off against other comprehensive income (actuarial gains/losses - pensions)

Balance sheet value 31 December

NOTE 9

TANGIBLE ASSETS

NOK 1 000

Buildings

and land

Fixtures

and equipment

Total

Cost at 1 January

Additions

Disposals

Cost at 31 December

Accumulated depreciation and impairment at 1 January

Depreciation of the year

Accumulated depreciation and impairment at 31 December

Carrying amount at 31 Decmeber

Estimated economic life of depreciable assets

-

4-10 years

Depreciation method

Straight-line

NOK 1 000

Buildings

and land

Fixtures

and equipment

Total

Cost at 1 January

21 060

Additions

3 784

Disposals

Cost at 31 December

22 615

Accumulated depreciation and impairment at 1 January

12 996

Depreciation of the year

1 448

Disposal of depreciation

Accumulated depreciation and impairment at 31 December

13 262

Carrying amount at 31 Decmeber

Estimated economic life of depreciable assets

-

4-10 years

Depreciation method

Straight-line

NOTE 10

SHARES AND STAKES EXCEEDING 10 % OWNERSHIP IN OTHER COMPANIES

 

Business office

Stake

Subsidiaries

Det Oversøiske Compagnie AS

Bærum

Elopak AS

Røyken

FC Well Invest AS

Bærum

FC-Invest AS

Bærum

Ferd Aibel Holding AS

Bærum

Ferd Capital Partners AS

Bærum

Ferd Eiendom AS

Bærum

Ferd Malta Holdings ltd

Malta

Ferd MG Holding AS

Bærum

Ferd Sosiale Entreprenører AS

Bærum

Kapole II AS

Bærum

Norse Crown Company Ltd. AS

Bærum

Swix Sport AS

Oslo

Non-current ownership > 10 %

Herkules Capital I AS

NMI AS

Current ownership > 10 %

ARKeX Ltd

CF Engine AS

Energy Ventures AS

Energy Ventures IS

Energy Ventures II AS

Energy Ventures II KS

Energy Ventures III AS

Energy Ventures III GP LP

Energy Ventures III LP

Eniram Ltd

Help Forsikring AS

Herkules Private Equity Fund I (LP-I) Limited

Herkules Private Equity Fund II (LP-I) Limited

Herkules Private Equity Fund III (LP-I) Limited

Intera Fund I

Marical Inc

Napatech AS

NRP Fleetfinance IV D.I.S

SPV Herkules II LP

Streaming Media AS

The Cloud Ltd

Vensafe ASA

NOTE 11

FINANCIAL INSTRUMENTS

The table below is an overview of carrying and fair value of the Company's financial instruments and their classification in the financial statements. It is the starting point for additional information on the Company's financial risk and refers to notes to follow.

Financial instruments measured at fair value over profit and loss

Financial instruments measured at amortised cost

NOK 1 000

Lending and receivables

Financial obligation

TOTAL

Fair value

Non-current assets

Investments in subsidiaries

Loans to group companies

Non-current shares and ownership in other companies

Other non-current receivables

Total 2012

Total 2011

Current assets

Short-term receivable on group companies

Other short-term receivables

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Investments in debt instruments

Bank deposits

Total 2012

Total 2011

Long-term debt

Long-term interest-bearing debt

Total 2012

Total 2011

Short-term debt

Trade accounts payable

Public duties etc.

Debt to group companies

Other short-term debt

Total 2012

Total 2011

Fair value hierachy - Financial assets and liabilities

Ferd classifies instruments measured at fair value in the balance sheet by a fair value hierachy. The hierarchy has the following levels:

The table shows at what level in the valuation hierarchy the different measurement methods for the Group's financial instruments at fair value is considered to be:

NOK 1 000

Level 1

Level 2

Level 3

Total 2012

Investments in subsidiaries

Non-current shares and ownership in other companies

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Investment in debt instruments

Total 2012

NOK 1 000

Level 1

Level 2

Level 3

Total 2011

Investments in subsidiaries

Non-current shares and ownership in other companies

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Investments in debt instruments

Total 2011

Reconciliation of movements in assets on level 3

NOK 1 000

Opening bal. 1 Jan. 2012

Purchases

Sales

Transfers from level 3

Recognised in P/L 2012

Closing bal. 31 Dec. 2012

Investments in subsidiaries

Non-current shares and ownership in other companies

Unlisted shares and investments in other equity instruments

Hedge funds

Total

NOK 1 000

Opening bal. 1 Jan. 2012

Purchases

Sales

Transfers from level 3

Recognised in P/L 2012

Closing bal. 31 Dec. 2012

Investments in subsidiaries

Non-current shares and ownership in other companies

Listed shares

Unlisted shares and investments in other equity instruments

Hedge funds

Total

Investments in unlisted shares managed in-house are valued on the basis of an earnings multiple, adjusted by a liquidity discount reduction and the addition of a control premium. The corrections are made directly on the multiple. Finally, the equity value is calculated by deducting net interest-bearing debt.

Some subsidiaries are valued in the same manner as unlisted shares, cf. above. The valuation of other subsidairies is based on the companies' recorded equity and adjusted for value changes not recognised. Underlying investments are valued according to the same principles as in Ferd AS, whereas investment properties are valued by discounting future expected cash flows.

A significant part of venture investments constitutes companies with no positive cash flows. This implies a greater degree of uncertainty in the valuations of the companies. Valuations are based on international guidelines (EVCA guidelines), i.e., the lower of cost and fair value unless a transaction at a higher value has taken place.

The valuation of investments in externally managed private equity and hedge funds is based on value reports received from the funds. The hedge funds in the SI portfolio are adjusted for estimated discount on the funds based on estimates made by brokers.

 

NOTE 12

RISK MANAGEMENT - INVESTMENT ACTIVITIES

There have been no significant changes concerning the Company's risk management in the area during the period.

CAPITAL ALLOCATION AND IMPAIRMENT RISK

The capital allocation in Ferd is decided by the Board each year. The allocation of capital is one of the Board's most important responsibilities, as the return and risk to a high degree is determined by the classes of assets Ferd is investing in, and the allocation between these classes. A structured capital allocation secures a conscious relationship to the diversification and use of Ferd's capital base and ability to manage risk. Ferd's management is, on a regular basis, assessing Ferd's available risk capacity and whether the distribution of the funds at all times is in line with the assumptions and requirements that are the basis for the allocation.

Ferd's principal strategic allocation is seeking a balance between industrial and financial investments.

The allocation shall be in line with the owner's willingness and ability to take risk. One measure of this risk willingness is the size of the decline in value in kroner or per cent the owner accepts if any of the markets Ferd is exposed to should experience very heavy and quick downfalls. This has an impact on how much equity that can be invested in assets with a high risk of decline in value and is measured and followed up by stress tests.

The loss risk is assessed as a possible total reduction in value expressed in kroner and as a percentage of equity. Due to Ferd's long-term approach, the owner can accept significant fluctuations in value-adjusted equity.

CATEGORIES OF FINANCIAL RISK

Liquidity risk

Ferd strongly emphasises liquidity and assumes that the return from financial investments shall contribute to cover current interest costs. Hence, it is important that Ferd's balance sheet is liquid, and that the possibility to realise assets corresponds well when Ferd's debt is due. Ferd has determined that under normal market conditions, at least 4 billion kroner of the financial investments shall comprise assets that can be realised within a quarter of a year. This is primarily managed by investments in listed shares and hedge funds. Note 16 has an overview of due dates of the debt.

Currency risk

Ferd has defined intervals for exposure in Norwegian kroner, euro, USD and Swedish kroner. As long as the exposure is within these intervals, Ferd is not making any currency adjustments. If Ferd's exposure exceeds these intervals, steps are taken to adjust the exposure to the established currency curve.

SENSITIVITY ANALYSIS, IMPAIRMENT RISK IN INVESTMENT ACTIVITIES

The stress test is based on a classification of Ferd's equity in different asset classes, exposed for impairment as follows:

 

- The Norwegian stock market declines by 30 percent

- International stock market decline by 20 percent

- The market value of property declines by 10 percent

- The interest rate curve shifts by 1 percentage point

- The Norwegian krone appreciates by 10 percent

In order to refine the calculations, it is considered whether Ferd's investments will decline more or less than the market. As an example, it is assumed that private investments in a stress test scenario have an impairment loss of 1.5 - 2 times the market (30-60 per cent in Norway and 20-40 per cent abroad).

The impairment risk is presented as an impairment expressed in NOK and as a percentage of equity. The table below shows the estimated impairment risk for the last two years.

NOK 1 000

2012

2011

Price risk: Norwegian shares decline by 30 percent

Price risk: International shares decline by 20 percent

Price risk: The market value of property declines by 10 percent

Interest rate risk: The interest rate curve increases by 1 percentage point

Currency risk: The Norwegian krone appreciates 10 percent

Total impairment in value-adjusted equity

Impairment as a % of net asset value

In the sensitivity analyses, Ferd's exposure in Aibel in 2012 is reduced to 49 % compared to 2011, when it amounted to appr. 80 %, as a consequence of the transaction with Ratos made in December 2012. Ferd's exposure in Pronova will not be reduced until 2013, as the sale of shares transaction takes place in the new year.

NOTE 13

BANK DEPOSITS

The following restricted funds are included in the bank deposits in the balance sheet:

NOK 1 000

Employees' withheld tax

NOTE 14

SHARE CAPITAL AND SHAREHOLDER INFORMATION

The share capital of the Company consists of 183.267.630 shares at a nominal value of NOK 1.-.

Owner structure

Shareholders as at 31 December 2012:

Number of shares

Stake

Ferd Holding AS

Dref Lojal AS

Dref Lojal II AS

Dref Lojal III AS

Dref Lojal IV AS

Total number of shares

Ferd AS is a subsidiary of Ferd Holding AS, being a subsidiary of Ferd JHA AS. Ferd shares offices with its parent companies in Lysaker, Bærum. The consolidated financial statements of the parent company are available upon request.

Shares indirectly owned by the CEO and board members of Ferd AS:

Position

Stake

Johan H. Andresen

Chair of the Board

John Giverholt

CEO/Board member

Erik Rosness

Board member

Gry Skorpen

Board member

The children of Johan H. Andresen own appr. 85 % of Ferd AS indirectly by ownership of shares in Ferd Holding AS.

NOTE 15

PENSION COSTS AND LIABILITIES

FERD'S PENSION PLANS

Ferd has established pension schemes in accordance with Norwegian legislation. The employees participate in defined benefit plans complying with the requirements of mandatory occupational pension.

Defined benefit plans

Defined benefit pension plans give the employees the right to determined future pension benefits. Ferd's net obligation reagarding these pension schemes is calculated separately for each scheme. The obligation is an estimate of future benefits earned by the employees, based on the number of service years and the salary level at the age of retirement. The benefits are disounted to present value, and the recognised obligation is reduced by the fair value of the pension funds for funds based pension schemes. Changes in assumptions, total number of members and deviations between estimated and actual salary increases and return on funds result in actuarial gains and losses. Such gains and losses are recognised in total comprehensive income.

The defined benefit plans comprise collective schemes and some additional arrangements including early retirement pension for Group mnagement. Until 2012, Ferd has also had a benefit plan for employees with a pension pension exceeding 12 G, but this scheme was replaced by a contribution plan at the end of 2012. The plan change has been recognised in the income statement.

Financial assumptions at 31 December

Discount rate

Expected return from pension assets

Expected wage growth

Future expected pension regulation

Expected regulation of base amount (G)

DEFINED BENEFIT PLANS

Specification of the recognised liability

NOK 1 000

Present value of unfunded pension liabilities

 

Present value of wholly or partly funded obligations

Total present value of defined benefit obligations

 

Fair value of pension assets

Total defined benefit obligation recognised in the balance sheet

Movement in the liability for defined benefit pension plans

NOK 1 000

Liability for defined benefit pension plans at 1 January

Present value of the pension earnings of the year

Interest expense on the pension liability

Actuarial gains/losses on the pension liability

Plan changes

Benefits paid

Liability for defined benefit pension plans at 31 December

Movement in fair value of pension assets for defined benefit pension plans

NOK 1 000

Fair value of pension assets at 1 January

Expected return from pension assets

Actuarial gains/losses on pension funds

Contribution from employer

Administration expenses

Benefits paid

Fair value of pension assets at 31 December

Pension assets include the following

NOK 1 000

Managed by insurance companies

Total pension assets

Pension costs recognised in the income statement

NOK 1 000

Present value of this year's pension earnings

Interest expense on the pension liability

Plan changes

Administration expenses

Expected return from pension assets

Total pension costs recognised in the income statement

NOTE 16

LONG-TERM DEBT

Long-term interest-bearing debt by currency

NOK 1 000

Amount in

currency 2012

Amount in

NOK 2012

Amount in

NOK 2011

NOK

USD

EUR

Balance sheet value at 31 December

Ferd has a total lending facility of NOK 5 billion, and the above debt is included therein.

All the long-term debt is due in 2015.

NOTE 17

TRANSACTIONS AND BALANCES WITH GROUP COMPANIES

Ferd AS has the following loans and balances with group companies:

NOK 1 000

Receivables

Long-term loans to group companies

Short-term receivables on group companies

Total receivables

Debt

Short-term debt to group companies

Sum gjeld

Alle group balances bear an interest of 6 months NIBOR + 2 % points.

Long-term loans bear interest at assumed market terms.

NOK 1 000

Services billed to group companies

Management fees

Property management

Total income

Interest income on intercompany loans

Interest income

Total interest income

NOTE 18

CONTINGENT AND OBLIGATIONS NOT RECOGNISED IN BALANCE SHEET

Guarantees and obligations not recognised in balance sheet

NOK 1 000

Unpaid, committed capital to private equity funds

Total

Contingent obligations and litigation

Ferd AS has been sued by Amorin in connection with Ferd's former engagement in TiMar (Portugal). In 2013, Ferd agreed to a settlement involving an insignificant amount.

NOTE 19

CHANGE OF PRINCIPLE

Ferd AS is an investment company, where measurement at fair value is key. Hence, Ferd presents financial statements with all investments at fair value. Ferd applies fair value in the daily management of the Company, in allocation of the Company's capital and when monitoring the Company's results. Pursuant to IAS 27.38, Ferd has decided to change the measurement of the subsidiaries to fair value in the statement of financial position.

The change of principle implies that the subsidiaries are converted to fair value at 1 January 2011, i.e., by the beginning of the first comparable period. In numbers, the consequences for 2011 of the change of principle are as follows (NOK000):

Shares in subsidiaries and equity increase by NOK 4 283 651 at 1 January 2011

Operating income and result for 2011 are reduced by NOK 243 023

Shares in subsidiaries and equity have increased by NOK 4 040 628 at 31 December 2011

NOTE 20

MERGER

On 27 November 2012, Ferd AS has merged with the wholly owned Kapole AS. The merger was carried out in accordance with the rules on simplified merger in the Companies Act, and no compensation was paid. As Kapole AS was fully owned by the acquiring party, the merger has been accounted for using the continuity method.