Contents. Key figures A greeting from the Chief Executive Officer Introduction to the company and headline figures 08

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1 Contents Key figures A greeting from the Chief Executive Officer Introduction to the company and headline figures The year s activities and results Management and control of the company Future prospects The Board of Directors s annual report Annual report accounts and notes Annexes 57 Annual Report 2013

2 << CONTENTS << CONTENTS 45,023 KEY FIGURES /53 172,189 47,600 TOTAL OUTSTANDING LOAN AMOUNT IN MNOK NUMBER OF APPLICATIONS RECEVIED FOR FINANCING IN 53 COUNTRIES OUTSTANDING LOAN AMOUNT BY CURRENCY (MNOK) APPLICATION VOLUME IN MNOK PROBABILITY-ADJUSTED ORDER BOOK IN MNOK LOAN AMOUNT BY INTEREST RATE (PERCENTAGES) OUTSTANDING LOAN AMOUNT BY CURRENCY (MNOK) APPLICATION VOLUMES BY SECTOR (MNOK) NUMBER OF LOANS BY SECTOR 25, ,000 LOAN AMOUNT BY INDUSTRIAL SECTOR MNOK Equipment for the oil and gas industry Ship equipment Ships Renewable and environmental technology Other industries Total 14,118 1,233 29, ,023 90,000 20, % LOAN AMOUNT BY INTEREST RATE (CIRR AND MARKET RATE) ,000 15, ,000 50, % 10,000 40, ,000 MNOK CIRR loans1 Market loans Total outstanding loans 3 80,000 5,000 17,208 27,815 45,023 20,000 10,000 0 Discrepancies in totals of tables and figures may occur due to rounding. 0 CIRR loans1 USD: 23,183 Equipment for the oil and gas industry Equipment for the oil and gas industry Market loans NOK: 20,250 Ship equipment Ship equipment EUR: 1,103 Ships Ships GBP: 486 Renewable and environmental technology Renewable and environmental technology Other industries Other industries CIRR (Commercial Interest Reference Rate) loans are made in accordance with the OECD agreement on officially supported export credits. The interest rate is based on interest rates on government bonds in each currency in question and is set by the OECD every 15th of the month. CIRR loans may be made in all OECD currencies. Repayment periods vary between two and 12 years. Certain loans for particular purposes may have repayment periods of up to 18 years

3 We provide an offer for both small and large enterprises. Large companies have traditionally been major consumers of export financing, but we are now seeing increased demand from small and medium-sized businesses. We hope this trend continues. A greeting from the Chief Executive Officer Norwegian exporters have a demanding year behind them. Although there are many successes to celebrate, not everyone is succeeding equally well. Norwegian industry is facing ever tougher competition from international businesses. Many are expressing their concerns regarding Norway s cost-levels, as Asian companies, among others, are growing in strength and winning contracts. Norwegian companies competing internationally face high expectations. To be competitive, they are expected to deliver not only high-quality goods and services, but also to do so quickly and at the lowest possible price. This makes it crucial that Norwegian businesses focus on their competitiveness and adaptability in the years ahead. Three factors will be decisive if Norway is to maintain a competitive business-sector: knowledge, capital and innovation. Raising the profile of Export Credit Norway s export financing scheme is an important task. Many businesses lack the time to investigate all of their options themselves and, in 2013, we have made active efforts to reach out to companies that are not yet using our services. We provide an offer for both small and large enterprises. Large companies have traditionally been major consumers of export financing, but we are now seeing increased demand from small and medium-sized businesses. We hope this trend continues. At Export Credit Norway, we meet exporters every day. In 2013, we supported international export contracts by disbursing 80 loans, totalling NOK 23.2 billion. Export Credit Norway provides efficient access to competitive financing. Our 42 members of staff are pleased to share their extensive knowledge of different financing-solutions. Export Credit Norway works hard every day to strengthen the international position of Norwegian businesses, but one thing is certain: we cannot do it alone. We want to work with our clients, guarantors and partners to support a competitive Norwegian business sector. We are continually seeking to improve and simplify the financing process. Your feedback, whether positive or negative, is vital to these efforts. That is why I encourage you, in the year ahead, to talk to us and challenge us. We promise to continue our efforts. Jarle Roth CEO 06 07

4 APPLICATION VOLUME IN 2013 BY INDUSTRIAL SECTOR (MNOK) 100,000 90,000 80,000 70,000 60,000 Equipment for the oil and gas industry Ship equipment Ships Renewable and environmental technology Other industries 50,000 40,000 30,000 20,000 10, Introduction to the company and headline figures Export Credit Norway manages the export financing scheme on behalf of the Norwegian government, represented by the Ministry of Trade, Industry and Fisheries (NFD). The company s primary objective is to promote Norwegian exports by providing competitive, accessible and effective financing. Export Credit Norway provides loans for export financing in the form of Commercial Interest Reference Rate (CIRR) loans and CIRR-qualified market loans on commercial terms. CIRR-loans are fixed-interest loans made in accordance with the OECD-agreement Arrangement on Officially Supported Export Credits. The company s credit-guidelines state that all loans must be 100 per cent guaranteed by a state export guarantee The company advises clients on all aspects of the financing-process, including sales and marketing, application-processing, commitments, the implementation of loan-agreements and loan-documentation, and the disbursement and follow-up of loans. The company puts great emphasis on ensuring that no losses incur on loans due to deficient documentation, pricing, credit-assessment, loan follow-up or system for group-accounts, which is administered by the Central Bank of Norway. The annual accounts of the export credit scheme are presented as part of the national accounts in accordance with the government s cash-principle. The company s business is regulated by the Act relating to Eksportkreditt Norge (the Norwegian Export Credit Act) and the Regulations on the Export Credit 2.1 Headline figures Export Credit Norway s first full year of operations was characterised by high activity, both in terms of the number of applications received and the number of loans disbursed. At the end of the year, the company s lending balance totalled NOK 45 billion. During 2013, Export Credit Norway received 409 loan applications for a total of NOK The company received NOK 105 million in operating and investment grants from the government in 2013, of which NOK 99.2 million was recorded as income. The operating costs totalled NOK 85.2 million. The annual accounts for 2013 show a profit of NOK 12 million after tax. The company s equity amounts to NOK 38.7 million, and is not exposed to any significant financial risk. The statement of cash-flow shows a strong liquidity for the company. institution and/or by financial institu- compliance with applicable rules and Financing Scheme. Together with the billion, compared to 302 applications tions with solid credit ratings. All loans regulations. OECD agreement Arrangement on for a total of NOK 173 billion in Export are recorded in the government s Officially Supported Export Credits and Credit Norway calculates a probability- balance sheet. The Norwegian govern- Export Credit Norway administers the its subsidiary agreements, the Regula- adjusted order-book, which is the ment is liable for the obligations the export credit financing scheme in tions determine, for instance, which company s best estimate of future company incur in connection with its accordance with requirements laid down contracts may be financed and the loan-disbursements linked to the received lending activities, which do not relate to by the authorities through governing terms included in loan-agreements. loan-applications. the operation of the company. documents. The government requires the export financing scheme s cash-flow to The probability-adjusted order-book be kept separate from the operations of amounted to NOK 47.6 billion, as per Export Credit Norway. Cash flow from the December 31 st of The non-probabili- export credit scheme pass directly ty-adjusted order-book totalled NOK through the Norwegian government s billion, as per the same date

5 Else Bugge Fougner Øivind Rue Board member Board Chair Else Bugge Fougner is a Supreme Court attorney and partner at the law firm Hjort DA. She is a former Minister of Justice, and has considerable board-experience from various large Norwegian enterprises. Øivind Rue is an Executive Vice President at Statnett SF, with responsibility for grid-operations. He has previously been a Vice President at Saga Petroleum ASA and an Assistant Director General at the Ministry of Trade and Industry (NHD). 2.2 The board of directors Export Credit Norway s board of directors includes representatives with a wide range of backgrounds from business, politics and the public sector. The board comprises chairwoman Else Bugge Fougner, as well as Siri Beate Hatlen, Trude Husevåg, Øivind Rue, Finn Ivar Marum, Jørgen Hauge (employeeelected representative) and Kaare Haahjem (employeeelected deputy-representative and observer). Trude Husevåg Board member Trude Husevåg is the Director of User Services at Skatt Vest (the Norwegian Tax authorities). She was previously the CFO of insurance-company Frende Livsforsikring AS, and held positions with Argentum Fondsinvesteringer AS and Pricewaterhouse Coopers DA. Siri Hatlen Board member Siri Hatlen is a member of numerous boards, including those of the Nobel Peace Center, Norske Skog ASA, Sevan Marine ASA and Entra AS. She is also a member of the Norwegian Board of Technology and the joint board of the Norwegian University of Life Sciences (NMBU). Hatlen has previously been managing director of Oslo University Hospital, vice president at Statkraft AS, and held various positions within Statoil ASA. Jørgen Hauge Board member Jørgen Hauge (employee-elected representative) has a special responsibility for the oil and gas sector at Export Credit Norway. He has previously worked for Eksportfinans ASA and the Financial Supervisory Authority of Norway. Kaare Haahjem Observer Kaare Haahjem (deputy employeeelected representative and observer) is a project-manager in the Project and Loan Administration Department at Export Credit Norway. His previous employers include Eksportfinans ASA, Danske Bank Finn Ivar Marum Board member Finn Ivar Marum is a member of various boards, including those of Nortek and Hagel Offshore. His former positions include senior partner at the investment-company HitecVision AS and posts with Kistefos AS, Ernst & Young AS and Statoil ASA. and DNB

6 Jarle Roth Chief Executive Officer Jarle Roth is the company s CEO. He joined Export Credit Norway from the Umoe Group, where he was Deputy Chief Executive. He has also previously served as the CEO of Unitor ASA and the Umoe Schat-Harding Group. He chairs the board of Norske Skog ASA, is a member of Ekornes ASA s board of directors, and has also held various board-directorships at companies within the maritime-sector. Ivar Slengesol Director of Lending Ivar Slengesol is Export Credit Norway s EVP Director of Lending Industry and Renewable Energy. Slengesol previously held the post of Business Development Director at Eksportfinans ASA. He has experience from start-ups in the renewable energy sector, as well as from Shell and the World Bank. 2.3 Executive management and administration Export Credit Norway s senior executives have broad industry and export-financing experience. By the end of 2013, Export Credit Norway had a total number of 42 employees, most of whom with a professional background as legal experts or economists. Eli Skrøvset CFO Eli Skrøvset is Export Credit Norway s CFO. She has extensive energysector experience, and previously held the position as Finance Director and CFO at Statkraft. She also has experience from the Ministry of Petroleum and Energy (OED). Eli Skrøvset is also a board-member at E-CO Energi Holdning AS and Avinor AS. Tobias Hvinden Director Tobias Hvinden is Export Credit Norway s Legal Counsel Head of Legal. He previously worked for Eksportfinans ASA as in-house counsel and head of Lending and Compliance. He has also practised law at the law firms Kvale Advokatfirma DA and Advokatfirmaet Grette DA. Jostein Djupvik Director Jostein Djupvik is Head of Project and Loan Administration. He previously held several positions within Eksportfinans ASA, most recently Senior Vice President and Head of Project Department Lending. He also has experience from the Ministry of Trade and Industry (NHD, now NFD). Olav Einar Rygg Director of Lending Olav Einar Rygg is the company s EVP Director of Lending Shipping and Offshore, and acted as Export Credit Norway s CEO for its first 100 days of operation. He has previously held various executive positions at Eksportfinans ASA, most recently that of Director of Lending

7 TOTAL LOANS BY SEGMENT AS OF 31 DECEMBER 2013 Platform supply vessels (PSVs) Anchor handling tug supply vessels (AHTSs) Other offshore vessels Construction ships Other sectors Other types of ships Misc. equipment for the oil and gas industry Equipment for semi-submersible platforms Equipment for drilling vessels Equipment for other types of ships Equipment for ferries Equipment for jack-ups Wind energy Other sectors - IT Equipment for other offshore vessels Ferries Equipment for fishing vessels Equipment for construction ships FPSO equipment Equipment for the oil and gas industry Ship equipment Ships Renewable and environmental technology Other industries 3.0 The year s activities and results In the autumn of 2012, Export Credit Norway developed a business-strategy based on objectives set by the Ministry of Trade, Industry and Fisheries (NFD). The strategy was revised in the autumn of The strategy s framework for the period , is the same as the one used for the previous period. The strategy-model defines four particular focus-areas for the company s work in the years ahead: an attractive offering, efficient processes, fulfilment of the company s public role and social responsibility and employment of motivated and competent staff. A priority throughout 2013 was to normalise Export Credit Norway s operations. Several major projects, such as a the lending handbook and a customer and document management system, were implemented during In total, ten new members of staff were recruited, and the use of external consultants was phased out. As part of assessing its own performance, Export Credit Norway conducted customer surveys in Oxford Research, a company with extensive experience of conducting corresponding surveys for Innovation Norway, was engaged to design, conduct and analyse the surveys. Three surveys were developed to cover three various user-groups: 1. Customer-survey among borrowers and exporters in Exporter-survey among exporters and potential exporters that had not previously applied for financing from Export Credit Norway. 3. Stakeholder-survey among guarantors, financial institutions, authorities and industry-organisations, etc. This survey was supplemented by qualitative in-depth interviews. The surveys had a modular design, and covered the following three main topics relating to Export Credit Norway: a) Reputation, awareness and information. b) Service and strategy, experience of the company, staff and products on offer. c) Results and effects significance for sales (asked of exporters) and The surveys were conducted in February and March of Since this was the first time the surveys were conducted, they covered not only 2013, but also In the future, customer-surveys will cover only the preceding year. In total, 48 borrowers, 126 exporters, 33 stakeholders and 237 potential exporters were asked to participate in the surveys. The stakeholder group had the highest response-rate (30 per cent), followed by borrowers (29 per cent), exporters (21 per cent) and potential exporters (10 per cent). These responserates indicate that some caution must be exercised as regards to drawing definite conclusions, but Oxford Research emphasises that the consistency of results throughout the surveys is reassuring and provides indication of validity. The quality of the data generated The overall impression from the results of the customer-surveys is that the different target-groups are satisfied with Export Credit Norway. The company received to a great extent positive feedback regarding its reputation and awareness, service and product range, as well as results and effects for businesses. Oxford Research highlighted the following findings: The awareness and familiarity with Export Credit Norway s products and services is strong. Of the exporters who have used Export Credit Norway, 85 per cent stated that they were highly familiar with the company, while the corresponding figure for borrowers and stakeholders showed 83 per cent. Exporters and borrowers stated that Export Credit Norway s most important product and service features are the (88 per cent) and borrowers (92 per cent). All of the surveyed target groups were highly satisfied with the interestlevels, repayment-periods and service-levels. There is a potential with regards to simplify administrative procedures and cooperation with GIEK and banks. Export Credit Norway s products and services are generally regarded as competitive by exporters (86 per cent) and borrowers (92 per cent). Loans from Export Credit Norway are very important to exporters in terms of improving profitability (67 per cent) and competitiveness (100 per cent), as well as promoting the development of new knowledge/know-how (100 per cent) and new technology (100 per cent). Additionality is considered to be high. 1 Some 73 per cent of the respondents purchases (asked of customers). by Export Credit Norway s customer- fixed-interest product CIRR, long stated that their project would not surveys will be further strengthened, as repayment-periods and good custom- have been realised, or would have been additional surveys are being conducted. er-service and follow-up. realised on a smaller scale, if Export On an overall level, Export Credit Credit Norway had not provided Norway s products and services are financing. well adapted to the needs of exporters 1 Additionality measures the probability that a contract/sale would have been completed if Export Credit Norway had not granted a loan

8 OUTSTANDING LOANS BY SEGMENT (%) AS OF 31 DECEMBER 2013 PROBABILITY ADJUSTED ORDER BOOK BY SECTOR (MNOK) AS OF 31 DECEMBER 2013 Segment % Platform supply vessels (PSVs) % Anchor handling tug supply vessels (AHTSs) % Equipment for drilling vessels % Construction ships % Equipment for semi-submersible platforms 9.28 % Other offshore vessels 8.05 % Other types of ships 4.69 % Misc. equipment for the oil and gas industry 3.88 % Equipment for jack-ups 1.98 % Ferries 1.94 % Segment % FPSO equipment 1.46 % FPSO for other types of ships 1.39 % Wind energy 0.71 % Equipment for construction ships 0.49 % Equipment for ferries 0.41 % Equipment for other offshore vessels 0.30 % Equipment for other fishing vessels 0.14 % Other sectors 0.06 % Other sectors - IT 0.03 % Equipment for the oil and gas industry Ship equipment Ships Renewable and environmental technology Other industries 30,000 25,000 20,000 15,000 10,000 5,000 Equipment for the oil and gas industry Ship equipment Ships Renewable and environmental technology Other industries Competitive financing Export Credit Norway aims to provide competitive export-financing. In this context, competitive means that Norway s publicly supported export-credits must be offered on equal as those of its competitors, and in accordance with international agreements. Export Credit Norway is mandated to support the ongoing development of the international regulatory framework in cooperation with the Ministry of Trade, Industry and Fisheries (NFD), and function as a specialist advisory body to the Ministry on relevant export-policy issues Lending activity developments in 2013 Export Credit Norway experienced strong demand in 2013, receiving 409 financing-applications for projects in 53 countries, with a total application-volume of NOK billion. The probability-adjusted order-book totalled NOK 47.6 billion, as per December 31 st of The non-probability-adjusted order-book amounted to NOK billion, as per the same date. The 2014 probability-adjusted order-book totals NOK 25.9 billion. At the end of the year, the probability-adjusted order-book was divided between the following sectors: maritime sectors, i.e. ships and ship equipment: 40 per cent equipment for the oil and gas sector: 59 per cent renewable energy and other industries: 1 per cent. Disbursements totalled NOK 23.2 billion in 2013, including NOK 12 billion disbursed during the second half of the year. Interest-income totalled NOK million, while fee-income amounted to NOK 61.9 million. Repayments recorded at historical cost, i.e. with the same exchange-rate as when the loans were disbursed, equalled NOK 8,701 million. 3 At year-end, the lending balance totalled NOK 45 billion. 4 Export Credit Norway experienced a steady increase in the number of early loan redemptions during the year. In total, 14 loans with a total lending-balance of NOK 4.8 billion were redeemed before maturity in The primary reasons for these early redemptions were ship-sales and improved access to alternative financing. In terms of lending-volume, Export Credit Norway s two largest segments are ships delivered by Norwegian yards and equipment for the offshore oil and gas sector. The ship-related lendingbalance increased from NOK 13.6 billion at the end of 2012 to NOK 29.3 billion at the end of The lending-balance related to oil and gas-sector equipment declined slightly, from NOK 14.6 billion at the end of 2012 to NOK 14.1 billion at the end of This drop was primarily due to several early loan-redemptions and delays to new projects. The probability-adjusted order-book for ships fell from NOK 19.4 billion at the 2 Based on previous and new applications, Export Credit Norway calculates the probability-adjusted order-book the company s best estimate of future loan-disbursements in connection with received loan-applications. 3 The company does not hedge against exchange-rate fluctuations. The government incurred a net foreign exchange loss of NOK 97 million in connection with repayments in 2013, meaning that repayments corrected for foreign exchange losses totalled NOK 8,604 million. 4 The lending-balance of NOK 45 billion is based on exchange-rates on the last banking day in 2013, while the lending-balance reported in the national accounts is based on the exchange-rate on the date the loan was disbursed (the historical rate). Applying the historical rate, the lending-balance was NOK 44.4 billion at the end of end of 2012 to NOK 17 billion at the end of In the shipping-sector, there is an increasing trend towards constructing simpler vessels abroad, while Norwegian yards are focusing on advanced vessels such as anchor-handling vessels and construction ships. However, the probability-adjusted order-book for oil and gas-sector equipment increased from NOK 17.5 billion at the end of 2012 to NOK 28 billion at the end of The oil and gas order-book comprises a number of large projects, some of which are associated with considerable uncertainty. The realisation of these projects will depend on the ability and capacity of the yards in question, developments in the energymarket and the availability of different financing-sources. Traditionally, the main markets for oil and gas-sector equipment have revolved around rigs operating in the North Sea, off the coast of Brazil and in the Gulf of Mexico. In 2013, Export Credit Norway s order-book for this sector expanded to include operations in the Mexican Gulf and off the coast of the United Kingdom. Export Credit Norway s lending-balance shows that the company is currently financing a relatively small portion of the market for ship-equipment. Norwegian equipment normally accounts for a small share of each individual ship s fittings in the traditional shipping-sector, whilst the share is higher on offshore-related vessels. A future priority for the company will be to cover a larger share of the ship-equipment market. Export Credit Norway will focus on this objective by offering financing-models specifically adapted to exporters of ship-equipment. In numbers, 40 per cent of the loanapplications received in 2013 were related to exporters within mainland industries. Small and medium-sized businesses (SMBs) accounted for more than 80 per cent of the applications in these segments. With one exception, all loans disbursed in connection with mainland exports in 2013 involved contracts worth less than NOK 30 million. In cooperation with GIEK, Export Credit Norway has made it cheaper and quicker to take up smaller loans. The feedback from exporters and marketsurveys, conducted by bodies including the European Central Bank (ECB) and Norges Bank, indicate that the creditpolicies of European banks towards SMBs remained relatively strict in The repayment-period and lending-rate are the most important factors that determine whether affected parties regard Export Credit Norway s products as competitive. The company s pricingmodel for market-loans was notified to the EFTA Surveillance Authority (ESA) in 2012, and approved in the spring of ESA s approval of the pricing-model for market-loans was important both for creating a competitive range of export-financing products and for ensuring that Export Credit Norway s loans on market terms are not deemed to be unlawful state subsidies Contributions to the work of the OECD Export Credit Norway is mandated to function as an export-financing resourcecentre, and is working with GIEK to provide the Ministry of Trade, Industry and Fisheries (NFD) with a solid technical platform for its leadership of Norway s negotiation-delegation to the OECD. The international negotiations, conducted under the auspices of the OECD, on regulations for publicly supported export-financing demanded a significant effort from the company in 2013, and this work will continue in

9 NUMBER OF LOAN APPLICATIONS RECEIVED BY SECTOR IN 2013 NUMBER OF LOANS BY INDUSTRIAL SECTOR AS OF 31 DECEMBER 2013 Equipment for the oil and gas industry Equipment for the oil and gas industry Ship equipment Ship equipment Ships Renewable and environmental technology Ships Renewable and environmental technology Other industries 12 Other industries Export Credit Norway has also been Export Credit Norway offers loans that those of competing countries in terms of The customer surveys conducted by external Norwegian and international surveys are completed, it will be possible involved in the work of the International support the Norwegian industry s close qualification-conditions, terms and the Oxford Research revealed that improve- law-firms in connection with the to calculate additionality for projects Working Group on Export Credits. The cooperation with its partners in other processes involved. ments can be made to the cooperation implementation of the various loan- featuring different contract sizes. This working-group was established after an countries, as it is accepted that up to 70 per between Export Credit Norway, GIEK and transactions. will result in a better additionality-esti- initiative from the US and China, and is working towards a common set of rules for export-financing that encompasses cent of the content of financed deliveries come from abroad. These factors make Norway s financing-scheme competitive Cooperation with other stakeholders Export Credit Norway seeks close the banks. Although this was emphasised particularly by exporters, it was also a recurring finding in the qualitative The scheme s contribution to Norwegian exports mate. Moreover, the use of estimates from multiple surveys will provide a surer estimate of Export Credit Norway s new, important exporters such as China, compared to those of other OECD-coun- cooperation with Norwegian suppliers, interviews conducted with various Customer-surveys allow calculation of effect on exports. Brazil, India and Russia. The working- tries. Credit-competition from non-oecd GIEK and banks to create a competitive stakeholders. the scheme s contribution to Norwegian group comprises Australia, Brazil, countries constitutes a challenge for portfolio of financing-products for the exports. This is done using the term Oxford Research has calculated that Canada, China, the EU, India, Indonesia, Norwegian suppliers to a certain degree, Norwegian export-industry. Simplifica- Cooperation with banks is vital to the additionality. Additionality measures 38 øre out of every 1 krone of exports Israel, Japan, Korea, Malaysia, New particularly in the construction of simpler tions in how lending-transactions are export credit scheme. Banks become the probability that a contract/sale financed by Export Credit Norway would Zealand, Norway, Russia, South Africa, types of vessels. Potentially aggressive implemented will be an important factor involved in projects at an early stage, would have been completed if Export not have been realised without the Switzerland, Turkey and the US. China, pricing of guarantee-premiums by in keeping the scheme attractive. It will and often arrange financing on behalf of Credit Norway had not granted a loan. An company s financing. This means that the EU, the US and Brazil constitute the competing OECD-countries may also also be important to ensure that the the buyer. GIEK and the banks deal with average additionality-estimate is Export Credit Norway has a strong working-group s steering committee. present challenges with respect to the scheme tracks developments in the the security-requirements and final calculated based on the responses from trigger-effect on Norwegian exports. equality in the credit-competition. It is product-portfolios of important credit-assessment of a given project. both the exporters and the customers. These results should be considered in Export Credit Norway s competitiveness therefore important that all OECD-countries price their financing and guarantee- competitors. Export Credit Norway s role is to provide loan-financing and ensure that the Both groups are heavily involved in contract-negotiations and purchase- conjunction with any similar results reported by GIEK, since the lapse of an Norway s export credit scheme appears premiums according to market-rates, and Export Credit Norway collaborates loan-relationship is satisfactorily decisions, and are thus able to assess export-guarantee or export-financing flexible and predictable compared to the that strong agreements concerning the closely with GIEK, on both individual documented. additionality-reliably. Using both groups may cause the cancellation of the under- schemes of most other OECD-countries. terms for export-financing are concluded cases and in addressing general produces a more robust additionality- lying export-contract. Oxford Research The scheme provides potential buyers of with non-oecd countries. questions related to publicly supported In Nordic and European projects, Nordic estimate. The exporter and customer has tested whether there are significant Norwegian capital-goods and services with export-financing. This cooperation is banks dominate the list of guarantors, groups are weighted equally when statistical differences between different an offer that is predictable in terms of In collaboration with GIEK, Export Credit important. As per the end of 2013, GIEK whereas international banks dominate estimating additionality. industries in how they rate the addition- financing-availability and financing-costs. Norway will work to ensure that Norwegian had issued guarantees for some 75 per in projects involving large loan-syndi- ality. Its findings show that there are no Furthermore, it is considered a strength of industry has access to competitive cent of the outstanding loans in the cates and international customers. It appears that additionality varies with significant differences, i.e. an average the scheme that Norway provides loans on export-financing at all times. Export- portfolio. The remaining 25 per cent are Export Credit Norway participates in contract size. The data produced by this estimate may be applied for all indus- market-terms approved by ESA. financing is increasingly being used guaranteed by Norwegian (12 per cent) loan transactions involving borrowers in year s surveys only allowed Oxford tries. Greater validity will be achieved if internationally, and it is important that and international (13 per cent) banks. many different jurisdictions. The Research to calculate an average surveys are conducted over time and Norway s scheme is at least as good as company cooperates closely with additionality-figure. Once additional trends can be observed

10 OUTSTAND LOANS BY CURRENCY (MNOK) AS OF 31 DECEMBER ,000 20,000 15,000 10,000 5, Performance assessment (competitiveness) Export Credit Norway s primary objective is to promote Norwegian exports by offering competitive export-financing, and this competitiveness can be measured in several ways. Feedback from exporters, borrowers and cooperating financial-institutions provide lessons and feedback on relevant improvement-measures. Price, securityrequirements, documentation and processes are important variables in assessing competitiveness. The general impression is that Export Credit Norway is competitive in terms of price. The company is not permitted to offer a lower price than the corresponding market-rate. In 2013, the market was characterised by an absence of suppliers of long-term export-financing. The customer-surveys conducted by Oxford Research show that Export Credit Norway s products and services are considered to be competitive by exporters (86 per cent very competitive ), and borrowers (92 per cent very competitive ). The customer-surveys also evidence a strong performance by Export Credit Norway: USD: 23,183 NOK: 20,250 EUR: 1,103 GBP: 486 Export Credit Norway s product and services are highly adapted to the needs of exporters and borrowers. Exporters, borrowers and other stakeholders are highly satisfied with the company s interest rate levels, repayment-periods and service-levels. There is room to improve certain administrative processes and cooperation with GIEK and the banks. Export Credit Norway s products and services are widely regarded as competitive. Loans provided by the company are highly important to exporters in terms of improving their profitability and competitiveness, as well as promoting the development of new knowledge/know-how and new technology. Loans from Export Credit Norway have a strong trigger-effect. A large proportion of contracts would not have been realised, or would have been realised on a smaller scale, if Export Credit Norway had not contributed loan-financing. The absence of providers of long-term export-financing leaves Export Credit Norway a large share of the market. Experiences in the market in 2013 indicate that the banking-industry regards Export Credit Norway s products as supplements to its own loan-products. With regards to documentation-requirements and processes, feedback has varied. Some transactions require extensive documentation, and this may be both costly and time-consuming for the borrower. In large and complex transactions extensive documentation-requirements are a natural part of the deal, and borrowers are prepared to handle them. In smaller transactions, the attractiveness of the product may well suffer if there are extensive loan documentation-requirements and complicated processes. It is therefore important to simplify documentation and processes wherever possible, within the limits of responsible credit policy. Following the financial crisis, financial institutions have increased the use of standardised loan-documentation. This makes loan-products more liquid, which in turn is important for the pricing of loans. Export Credit Norway seeks to adapt terms, documentation-requirements and processes to market practice whenever possible. The number of loan-applications increased by 35 per cent in 2013, compared to This is largely due to the targeting of industries unrelated to the Applications involved. In 2013, the company received a maritime or oil and gas sectors. In terms of loan amounts, the application-volume remained stable from 2012 to In the company s experience, active efforts focusing on Norwegian supplier-industries result in applications and utilisation of the scheme in realising projects. The probability-adjusted order-book for future disbursements grew from NOK 39 billion at the end of 2012 to NOK 47.6 billion at the end of Despite some random variations resulting from large individual projects, the increase is largely attributable to the attractiveness of the company s loan-products. 3.2 Accessible export financing Export Credit Norway is mandated to provide accessible export financing. By In 2013, Export Credit Norway s largest sector in terms of application-volume (amounts) was equipment-purcahses for the oil and gas-sector. In total, financing of approximately NOK 85.7 billion was applied for, spread across 67 applications. The shipping-sector accounted for the largest number of applications (104), and generated a total application-volume of NOK 57.1 billion. The distribution between loan-applications and application-volumes in 2012 and 2013 is shown in the chart below. In 2013, Norwegian yards signed fewer ship-building contracts than in previous years, although the unit-costs were higher in the concluded contracts. A trend which is expected to continue. total of 34 loan-applications for projects classified as innovative or highly innovative. These had a total application-volume of NOK 3.6 billion. Export Credit Norway uses the innovation-guidelines of OECD to define the degree of innovation in financed projects. Innovative projects encompass product/service-innovation, processinnovation, organisational innovation and commercial innovation. Highly innovative and innovative projects are defined as follows: Highly innovative project: Includes projects that aim to develop and introduce new products to an international market. The definition also includes projects that result in new production-processes and organisational forms that are not accessible export-financing one refers New knowledge and technology internationally known. to a known product from a company with a strong reputation, domestically and abroad. The product must also be available to small and medium-sized Norwegian exporters and companies developing new knowledge and technology. Export Credit Norway makes targeted efforts to ensure that its products are perceived as accessible. The application-figures for 2013 evidence a large, steady stream of applications. Export Credit Norway seeks to provide accessible export-financing for projects in the renewable energy and environmental technology sectors. The company participated in the Norwegian government s advisory board for environmental technology (Programråd for Miljøteknologi) until the board concluded its work in August The board s mandate included coordinating public policy bodies to strengthen the industry in Norway. Since January 1 st of 2013, Export Credit Norway has evaluated submitted projects with respect to the degree of innovation Innovative project: Includes projects within new or existing businesses that aim to develop and introduce new products to the national market, and projects encompassing the development and use of new production-processes that have not previously been introduced at national level. The definition also includes the introduction of previously exported products and services to new foreign markets. Loan applications and application volume (All amounts in NOK million) number of Number of Application Application applications applications volume volume Ships ,120 57,106 Ship equipment ,152 14,263 Equipment for the oil and gas sector ,955 85,722 Renewable energy and environmental technology ,748 8,356 Other industries ,083 6,743 Total , ,

11 As per year-end 2013, eight of 142 loans Transaction-costs can be relatively high The company received 148 applications under Export Credit Norway s manage- when loan amounts are small. To reduce relating to small and medium-sized ment were classified as innovative or these costs, Export Credit Norway exporters in 2013, with a total applica- highly innovative. These loans had a based on an individual assessment of tion-volume of NOK 13.2 billion. The total lending-balance of NOK each case and in cooperation with GIEK majority of the projects relate to the million. This picture becomes somewhat offers the option of using simplified mainland economy. Export Credit more complicated when the customer- loan documentation for transactions Norway is also contributing indirectly to surveys are analysed. In the surveys, totalling less than NOK 30 million. This the development of the many SMBs that exporters and borrowers were asked to makes the documentation-process less deliver goods and services to yards and specify the degree to which the projects time-consuming and reduces borrowers larger equipment-suppliers in the oil financed by Export Credit Norway had legal costs. In 2013, Export Credit service sector. As per year-end, 20 of contributed to the development of new Norway disbursed six loans using Export Credit Norway s 142 loans technology or knowledge, on a scale simplified documentation. involved small and medium-sized from 1 to 5, where 5 was the highest exporters, and the lending-balance of possible degree of new technology or Export Credit Norway has also intensi- these loans amounted to NOK 1,600.5 knowledge development. 100 per cent of fied its marketing efforts aimed at small million. the exporters reported a value of 4 or 5, and medium-sized exporters to make Cases whilst 62 per cent of the borrowers did the same. This may indicate that, in many cases, the connection between the loans provided by Export Credit Norway and the development of new technology enterprises more aware of how the export-financing scheme can help them to win export contracts. In 2013, Export Credit Norway analysed 2,000 Norwegian businesses in the mainland Export Credit Norway s customer-surveys are intended to support assessment of the export credit scheme s contribution to exports by Norwegian SMBs, and some 58 per cent of existing SMB and new-knowledge: Satellite technology from Vestfold County SMB: Innovative solutions for video-transport via the future s medianetworks and knowledge is less direct. The high economy, focusing on the usefulness exporters reported being in this score is probably due to the fact that and potential use of export-financing. segment. A consistent finding from the The Vestfold-based company Jotron The Norwegian company Nevion has The loan of NOK 9.6 million provided by respondents base their assessments on Some 140 exporters without an existing surveys is that, for most indicators, there produces advanced satellite-technology been developing and producing innova- Export Credit Norway has been split into their own situations, rather than looking relationship with Export Credit Norway are no differences in the responses for use on vessels. By utilising a robust tive, future-oriented solutiions for two loan-tranches, both co-guaranteed at the new-technology-and-knowledge were selected for further follow-up. received from small, medium-sized and satellite antennae, broadband-connection video-transport since Nevion by GIEK and Barclays Bank PLC. situation in the market as a whole. During the course of the year, Export large businesses. However, SMBs have a is secured on ships operating as supply- a global group with wholly-owned Simplified documentation was used for Credit Norway contacted 110 of these greater need for follow-up and service, vessels or cruise-ships in waters exposed subsidiaries in the US, Poland, the United both loans Small and medium-sized businesses, primarily SMBs. Almost 70 and demand Export Credit Norway s to challenging weather conditions. The Kingdom and Singapore employs businesses per cent of the doubling in the number of expertise relating to relevant markets, technology has been tested in the North around 140 people and its customers Export Credit Norway is focused on applications from mainland exporters products and customers to a greater Sea, and is now set to be launched on the include leading broadcasters and providing financing adapted to the needs (excluding the renewable energy and extent than larger businesses. global market. telecoms companies all over the world. of small and medium-sized businesses fish-farming industries), from 2012 to (SMBs). In 2013, the company sought to 2013 can be traced back to this targeted The US company Globe Wireless LLC has Export Credit Norway has provided make the export credit scheme more marketing-effort. Making the export- signed a distribution-agreement with financing in connection with Nevion s accessible to SMBs by simplifying financing scheme known to exporters Jotron. Globe Wireless is a world-leader in export of technology for broadcast- processes and agreement-templates will remain a priority in integrated offshore IT and communications equipment. The customer, a well-known used in establishing loans. solutions. Export Credit Norway has loaned UK-based media group, plans to use the NOK 2.6 million to Globe Wireless, with a technology in connection with the repayment-period of five years. GIEK has transmission of TV-signals from events, guaranteed 90 per cent of the loan, and such as Premier League football matches DNB the remaining 10 per cent. to its studio

12 are taken when a case presents an increased industries. Low awareness of the company export-seminars and delegations, as well risk of corruption or money laundering, or if and its product-range could entail that as ordinary customer-meetings and these things are suspected. In such cases, customers fail to consider the opportunities outreach-activities. Being present in the type of customer, company and offered by the financing-scheme. arenas frequented by the company s ownership-structure, geographical location Awareness of Export Credit Norway s potential and existing customers is of and transaction-structure are investigated products and services is good. The great importance in active marketing. more thoroughly. All loans are granted customer-surveys conducted in 2013 subject to the proviso that no corruption is confirm this, and the results do not In 2013, Export Credit Norway profiled the suspected in connection with the transaction. indicate any differences in awareness- company s financing-scheme by partici- In accordance with the know your customer levels between companies of different pating in various national and interna- money laundering principle, Export Credit sizes and in different industries. Never- tional conferences. These events were Norway evaluates borrowers pursuant to the theless, some of the surveys feedback organised both in-house and by external rules in the Money Laundering Act. does suggest that more marketing parties. During the course of the year, the focused on SMBs is required, particularly company gave lectures, mini-seminars In 2013, Export Credit Norway implemented in the form of explanations of the and presentations at conferences in, new anti-corruption guidelines. The application-process. among other; Edinburgh, London, Miami, Social responsibility category B are deemed to carry a medium focused on threats to the environment, guidelines and related tools strengthen the Brussels, Barcelona, Houston, Lima, Export Credit Norway can help to improve risk, while cases in category C are people and society by including conditions company s ability to monitor corruption-risk, In general, the customer-surveys have Santiago, Perth, as well as in Brazil, India, environmental and social conditions, and considered to present a low risk of failure to in loan-documentation and, where relevant, document relevant situations and implement shown that the company has a strong Iceland, Turkey, Germany, and various combat corruption through the require- safeguard environmental and social independent reports. Borrowers obligations measures in specific loan-transactions. reputation among Norwegian exporters. In Norwegian cities. ments it imposes on borrowers. The conditions. are followed up throughout the loan-period. addition, its products and services are company participates in the financing of Ethical guidelines considered to be very well adapted to the Raising awareness of the export credit various large-scale projects, with a The OECD Common Approaches lay down The company did not disburse any High ethical standards are crucial in needs of exporters and borrowers, and the scheme is no solo achievement and, in potentially significant social and environ- guidelines for project-assessment, and category A loans in One category B Export Credit Norway s business. All respondents were highly satisfied with the many contexts, it is logical for Export mental impact. Export Credit Norway is includes references to policies such as the loan, which involved an offshore employees who represent the company interest-levels, repayment-periods and Credit Norway to cooperate with other highly aware of its social responsibility. World Bank Safeguard Policies and the wind-power project off the coast of have a duty and responsibility to comply service-levels. The feedback also indicated market participants to reach out to International Finance Corporation (IFC) Belgium, was partially disbursed. All with the company s ethical guidelines. that stakeholders regard the company s customers. GIEK and Export Credit Norway Environmental and social conditions Performance Standards. Export Credit other loans fell into category C. The This is done by acting responsibly in all processes as bureaucratic and drawn often have overlapping customer-bases, The overarching guidelines for the Norway generally refers to the IFC OECD guidelines do not cover mobile contact with internal and external out, and that the distribution of responsi- making it natural for the two companies to company s work on social and environmen- Performance Standards in its assessment units. stakeholders. Associated ethical bility between Export Credit Norway and co-host various events which serve both tal conditions are found in the OECD and follow-up of projects. Projects must guidelines for all employees were the guarantors is somewhat unclear. their interests. One example is Eksport- Common Approaches for Officially also always comply with the national Corruption developed and implemented in the konferansen, a conference for profession- Supported Export Credits and Environmen- legislation of the country in which they are The OECD has established the Recommen- autumn of There were no breaches External activities als co-hosted by GIEK, GIEK Kredittfor- tal and Social Due Diligence the OECD s located. dation on Bribery and Officially Supported of the guidelines in Export Credit Norway and its range of sikring and Export Credit Norway in 2013 guidelines on assessment and follow-up on Export Credits, which is intended to prevent financing-products must be known to with the aim of focusing attention on environmental and social conditions in GIEK is subject to the same OECD-guide- corruption. Sections 276 a to 276 c of the Reputation Norwegian exporters and borrowers, as current export-related topics. projects for which member-states provide lines, and cooperation with GIEK is Norwegian General Civil Penal Code go Export Credit Norway provides long-term, well as partners both domestically and officially supported export financing. important when assessing the projects further than the OECD Recommendation, stable financing solutions. Its ability to do abroad. The company s marketing-efforts Export Credit Norway also cooperates Under the OECD-guidelines, all loans are risk. GIEK and Export Credit Norway have since they also cover trading in influence. so depends on confidence both in the are based on its marketing and communi- closely with GIEK to arrange regular classified as either a category A, category B concluded an agreement in this field that Export Credit Norway aims to prevent market and among stakeholders. cations strategies and related operational seminars in export-financing and or a category C. The categories illustrate also covers transactions which are not corruption in connection with the export Establishing a good national and action plans. guarantees across Norway, with the risk-assessments relating to environmen- guaranteed by GIEK. The purpose of the contracts it finances. The company seeks to international reputation is a long-term, objective of raising awareness of the tal consequences and/or social conditions. agreement is to establish a joint function to achieve this aim by, amoung other things; ongoing task. In its marketing-work, the company instruments offered by the export credit Projects that are deemed to run a high risk ensure that strong expertise is available acting responsibly, providing information, focuses on targeting relevant stakeholder scheme and to market the government s of causing significant harm to the and that coordinated processes are used in obtaining declarations from exporters (and, in Favourable financing is an important tool in groups. The company s external activities common offer for Norwegian exports. environment, or to present a risk of dealings with exporters and borrowers. relevant cases, the applicant), as well as the battle to win export contracts, and one of largely include professional exchanges Export Credit Norway and GIEK also negative social conditions or consequenc- Export Credit Norway implements including corruption-provisions in loan- the company s tasks is to raise the profile of and representation of the company participated in Norway s first entrepre- es, are assigned to category A. Cases in requirements and specific measures agreements. Additional investigative steps the financing-scheme in all relevant through participation in conferences, neur-fair in Oslo in

13 To make the export credit scheme more known and accessible to SMBs, Export Credit Norway worked systematically in present the export-scheme and meet existing and potential new customers. To facilitate close cooperation with relevant customer surveys, 58 per cent of respondents reported being SMBs. There were no material differences between EXPOSURE WITHIN DIFFERENT RATING CATEGORIES AS OF 31 DECEMBER ,000 BBB+ A to contact Norwegian exporters in non-offshore sectors. More than 3,000 businesses were surveyed, and priority interest and industry groups, the company also arranges regular meetings in smaller forums. As part of day-to-day marketing, the responses received from small, medium-sized and large enterprises. However, follow-up, service and 35,000 30,000 A- A AA- AAA was given to outreach-activities and visits the company also holds ordinary custom- expertise are more important to SMBs 25,000 targeting a relevant selection of these enterprises. A marketing-channel for er-meetings, and more than 700 such meetings took place in than to other companies. 20,000 reaching SMBs was established in 2013 The attractiveness of the scheme to 15,000 through the initiation of cooperation between Export Credit Norway and the heads of Innovation Norway s regional Performance assessment (accessibility) Accessible export-financing entails a borrowers will depend on the complexity and cost of completing transactions. The majority of the company s borrowers are 10,000 5,000 offices. The company has found the cooperation with the regional offices to known product from Export Credit Norway for Norwegian exporters. The larger, solid enterprises. Of all loanapplications received by the company in 0 work very well, and related activities such as export evenings, mini-seminars, etc. product must also be available to small and medium-sized Norwegian exporters 2013, 34 applications (8 per cent), were related to projects classified as 3.3 Effective export-financing responsible for a defined portfolio of the government s balance-sheet. have been arranged to reach potential and companies developing new innovative or highly innovative. However, loans. The system issues warnings Prop. 102 L ( ) Proposition to customers. Export Credit Norway invests knowledge and technology. the majority of the applications were Effective export-financing involves the when loans fall due for repayment, and Stortinget (bill) Act relating to Export 30 per cent of its sales-resources in connected to the maritime or oil and gas efficient organisation of the company about various covenants that have to Credit Norway states that, The company non-offshore sectors, and more than 80 The process of securing a loan-offer sectors. These sectors feature a high and efficient operations, including be followed up on annually or quarterly. is not to carry out hedging-transactions in per cent of the applications received from from Export Credit Norway encompasses degree of innovation compared to other application-processing. The company is Such follow-up involves matters such the market on behalf of the government these sectors in 2013 came from SMBs. several stages. The first stage involves a industries. Based on the characteristics strongly focused on effective risk- as accounting-information, key figures beyond the guarantee of loans, and shall non-binding loan-offer that is condi- of these sectors, the company has management, including the pricing, and insurance-policies. Follow-up is not practise asset-management. The An additional example of the company s tional upon a Norwegian supplier concluded that a large proportion of its establishment and follow-up of loans. conducted through contact with government assumes all risk in connec- external marketing-efforts is the tendering for a contract. The threshold loans are made to projects in highly borrowers, agent banks and, in some tion with the export credit scheme. All Norwegian Finance Day, which is arranged for obtaining such a non-binding innovative industries. The customer Lending-portfolio cases, guarantors. In addition, loans must be 100% guaranteed by in collaboration with the Norwegian loan-offer is low, and the product must surveys showed that exporters and At the end of 2013, Export Credit interest-payments and capital-repay- financial-institutions and/or state Consulate General in Houston, GIEK and be regarded as accessible at this stage. borrowers consider financing from Norway s lending-portfolio of NOK 45 ments are monitored and recorded. In guarantee institutions which satisfy the DNB. In February 2013, the seminar was The next stage, involving the conclusion Export Credit Norway to support the billion encompassed 142 loans and 72 the event of any missed payments, the rating requirements. Export Credit held in Houston for the third time. It aims of the commercial contract, is more development of new technology or borrowers (at group level). Some 69 of affected parties are notified after a Norway is focused on establishing strong to provide attendees with an overview of challenging, since the borrower must knowledge. All of the responding the loans were CIRR loans, while 73 short period. Variable interest-loans routines for risk-management to avoid the financing opportunities available in secure guarantees from GIEK and/or exporters were of the opinion that Export were market-loans. The average often feature a fixed margin for parts losses in connection with the export connection with purchases of Norwegian banks to secure a binding loan-offer Credit Norway supports the develop- loan-size varies considerably in the of the loan s maturity. In case of a credit scheme. No losses were made on technology. The event has developed into from Export Credit Norway. ment of new technology or knowledge to different industries. The largest so-called margin-lapse, a new margin loans in Export Credit Norway did an important meeting-place for partici- a high degree, and 62 per cent of loan-sums are found in the oil and gas is set, often for a period of between not make claims under any of the pants in the oil and gas, shipping and Perceptions of accessibility may differ at borrowers shared this view. sector, wherein the average loan-size three and five years, as agreed with the guarantees provided for its loans in shipbuilding sectors, banks and potential this stage, depending on the creditwor- is approximately NOK 680 million. The borrower and guarantor. All loans are As per year-end, 75 per cent of the customers from Texas. Another example is thiness and attractiveness in the average loan-size in the maritime secured by guarantees. If a guarantee lending-balance was guaranteed by GIEK. Export Credit Norway s participation in the financial market of the borrower or the sector is approximately NOK 275 has a shorter maturity than the loan it Of the remainder, 12 per cent was Nor-Shipping maritime week in June of project. The capacity of GIEK and the million. In the renewable energy and secures, this will also be notified guaranteed by Norwegian banks and , where the company arranged banks to provide guarantees will affect other industries, the average loan-size sufficiently early so that a new per cent by foreign banks. Repayments, various events and hosted a stand. how accessibility is perceived at this was NOK 33 million in 2013, although guarantee can be issued. interests and fees to be paid by borrowers Nor-Shipping has developed into a stage. In 2013, 148 of 409 (36 per cent) the majority of the loans here totalled are monitored on an ongoing basis by world-leading maritime event, and is loan-applications were received from less than NOK 10 million Exposure of credit and risk means of a special IT-system. The same is arranged every two years in Norway. The SMBs. These SMBs tend to be suppliers Guidelines for risk-management are true of other matters relating to borrow- maritime sector is important for Export rather than borrowers, and smaller All loans are monitored by portfolio- provided by law and in instructions to the ers that must be followed up, such as the Credit Norway, and Nor-Shipping gives an suppliers may find the scheme just as managers using the company s company. The export credit scheme is submission of accounts and reports. In excellent opportunity for the company to accessible as larger businesses. In the lending-system. Each manager is designed so that loans are recorded in this area, Export Credit Norway cooper

14 GUARANTORS (%) FOR OUTSTANDING LOANS AS OF 31 DECEMBER % 13 % 75 % GIEK Norwegian banks Foreign banks OPERATING ACCOUNTS IN 2013 (IN THOUSANDS OF NOK) 120,000 Operating revenues Operating expenses 100,000 Operating result Net financial tems 80,000 Annual results before tax 60,000 Tax Annual results 40,000 20,000 0 ates closely with various banks. The banks are often responsible for the direct contact with the borrower. In the event of a default, a dedicated team is formed to manage the process in accordance with granted authorisations, in cooperation with the guarantors. Counterpart-risk In 2013, Export Credit Norway updated the risk-framework for its risk-management activities. The company s counterpart-risk is governed by an overall risk-framework for the entire lendingportfolio, and detailed limits for guarantors, the distribution of rating classes, rating-levels and countries. Regular reports are made to the company s board of directors on limit-utilisation by all guarantors. As per the end of 2013, all loans complied with the established frameworks for counterpart-risk. In day-to-day risk-management, credit-risk is limited by Export Credit Norway s right to require replacement of a guarantor, should the guarantor s rating 5 fall below Export Credit Norway s minimum rating level. At the end of 2013, the volume-weighted rating for the lending-portfolio was somewhat poorer than AA+ 6, including GIEK. The volumeweighted rating excluding GIEK was A+ to A 7. See also the figure below, which shows the guarantor rating-levels. Market risk Pursuant to section 3 of the Export Credit Regulations on decision-making authority, Export Credit Norway may commit to loans denominated both in NOK and foreign currencies. Some 55 per cent of all loans included in the lending-balance as per the end of 2013 were denominated in foreign currencies, primarily USD. Some 61.8 per cent of the lending balance comprised loans made on market terms, and 98.8 per cent of these featured a lending-rate of IBOR + a margin. The remaining 1.2 per cent featured a fixed rate. Operational risk Export Credit Norway s operational risk is primarily associated with ensuring proper documentation, conducting ongoing follow-up of loans and monitoring loan-payments. The company has taken particular steps to address this risk by strengthening its legal capacity and concluding framework-agreements with several reputable law-firms. In addition, emphasis has been given to establish and implement reliable control-procedures The efficiency of Export Credit Norway s operations Stortinget (the Norwegian parliament), made an operating and investment grant of NOK 105 million to the company for The company s operating-costs for the year, which primarily comprised wage-costs, administration-costs and purchases of external services, amounted to NOK 85.2 million. Export Credit Norway s result for the year 2013 was a profit of NOK 12 million after tax. The company enjoys a strong equity-position and strong liquidity, and has little exposure to financial risk. 5 A volume-weighted rating expresses the average rating per disbursed krone. 6 The rating is allocated a number. AAA equals 1, AA+ equals 2, etc. The volume-weighted rating including GIEK was 2.2, i.e. somewhat poorer than AA+. 7 The volume-weighted rating excluding GIEK was 5.6, i.e. mid-a+ to A. The profit in 2013 was due to a combination of several factors. Since 2013 was Export Credit Norway s first full year of operation, it was difficult to prepare an operating-budget that did not include material under- or overconsumption, compared to the operating and investment grant. In particular, there was great uncertainty about the costs associated with staff, external advice, development of new solutions and level of external activities. The greatest difference arose in connection with staff costs. In total, 10 new members of staff were recruited in The timing of the appointments and conditions of employment helped to keep costs below budget, and delayed the implementation of the life-expectancy adjustment used in calculating pension-liabilities; see Note 10 in the annual accounts. The staff-costs budgeted for 2014 better reflect the full-year effect of appointments and real pension-liabilities, and budget-utilisation at the end of the first quarter of 2014 was higher than in Other operating items that had lower totals than budgeted, and thus contributed to the profit, were external purchases of services, office-costs and travel-costs. The experiences from 2013 have been utilised in connection with the drafting of the budget proposal for 2015, and will be used in the revision of the 2014 budget-proposal in the autumn. Overall, the sick leave rate was 3.4 per cent in Short-term sick leave accounted for 1.2 per cent of this total, while long-term sick leave accounted for 2.2 per cent. In 2013, Export Credit Norway implemented several projects to ensure efficient operation of the organisation. The company s lending handbook was completed on October 22 nd, The lending handbook is a reference-work for all Export Credit Norway employees, and contains information on all important processes relating to the various aspects of the company s lending-activities. An up-to-date lending handbook is important for ensuring that application-processes are efficient and that the company s loans are followed up. A new customer and document management system was also implemented in 2013, and tailored to Export Credit Norway s needs during a period of development. The system will ensure efficient, surveyable and reviewable follow-up of customer-related information. The customer management system has been integrated with a document management system that will satisfactorily meet the company s document archiving needs. The following additional IT projects were also implemented and completed in 2013: Completion of SLS: The SLS lendingsystem was adopted when Export Credit Norway began operating in July 2012, without having been finally configured. This project therefore involved the configuration and commissioning of unused parts of the system. Formal establishment of an IT function: This project reviewed the IT strategy, architecture and procedures to ensure that the IT-function is run in an efficient and foreseeable manner and meets the company s needs as effectively as possible. Pilot project reporting and analysis: An important area in which effectivisation-potential remains is the preparation of reports for internal and external use. This purpose of this pilot project was therefore to recommend a future reporting-solution that ensures that Export Credit Norway makes the right choices going forward. The recommendations from the pilot project will be implemented in the first half of

15 In 2013, Export Credit Norway focused on cost-effective procurements and operating and investment grant. The CIRR-scheme contributed net interest Norwegian State remained low. The cost-benefit analysis for the export credit 4.0 Management and control of the company agreements. Several large procurements income of NOK million in 2013, scheme may vary from year to year, and were completed during the year, while the market scheme contributed changes in individual factors such as the Export Credit Norway gives high priority to the adoption of guidelines that secure procedures into staff-members daily including: net interest income of NOK million. duration of loans and financing-costs having a strong, effective system in place the independence and impartiality of routines, and introduce a system for Export Credit Norway also received may have considerable impact. for risk-management and internal control. board members, management and updating all relevant documents relating to New service provider: In March, Export fee-income of NOK 62 million. For The export credit scheme is subject to The company handles large cash-flows, administrative staff regarding cases in internal control and risk-management. Credit Norway replaced the suppliers detailed information on the cost-benefit limits for risk-exposure. The company s and has a very low tolerance for errors with which they are involved of operational and support services for analysis for the export credit scheme, maximum permitted annual credit risk loss serious consequences. The company has that the likelihood of errors is reduced Compliance and controlling all of its IT-infrastructure. The new see page 58. equals 0.02 per cent of the lending-portfo- previously submitted one risk-assessment through risk-management and internal Export Credit Norway s second line of agreement replaced two previous lio. This target has been operationalised by to the Ministry of Trade, Industry and control procedures defence comprises its compliance-func- agreements, and reduced the cost of these services by 30 per cent. The Performance-assessment (efficiency) adopting a limit of 0.02 per cent for the maximum expected loss on the portfolio. At Fisheries (NFD), in the autumn of Starting in 2014, the company will submit transparent, individualised communication with different target-groups to tion, which monitors the risk of the company in terms of breaching laws, agreement has a framework of up to In 2013, Export Credit Norway put great the end of 2013, the expected loss risk-assessments to its owner twice a raise awareness of the export-financ- regulations and guidelines, as well as its four years. emphasis to boosting the efficiency of its amounted to per cent. No actual year, in the spring and in the autumn. ing scheme and the company s controller-function. In organisational New supplier of banking services: In organisation. Cross-cutting strategic losses were made on loans in The Export Credit Norway is focused on processes. and professional terms, the compliance- 2013, Export Credit Norway engaged Sparebank 1 SMN as its new supplier projects, such as improved project-management in connection with lending-pro- credit quality of the portfolio was stable throughout the year, and slightly exceeded ensuring that risk-management and internal control are integrated in its 4.2 Three lines of defence function is part of the legal department, while the controller-function is part of of banking services. The transition to cesses and the expansion of analytical an A rating (on the S&P scale) at year-end. management-dialogue with the Ministry. the financial department. The company Sparebank 1 SMN occurred at the end of 2013/beginning of The agreement has a framework of up to capacity, as well as procurements and investments have helped to make the organisation more efficient and robust. Excluding loans guaranteed by GIEK, the loans in the lending-portfolio were evenly distributed among the guarantors. The 4.1 Governance and company management Export Credit Norway has established three lines of defence in the area of risk-management and internal control. worked on developing a compliancepolicy in This provides a detailed description of the framework for the four years. Export Credit Norway experienced high largest guarantor excluding GIEK had a 5.2 company s compliance-function, activity throughout 2013, and will have to per cent share of the portfolio as per the Export Credit Norway administers Internal control including the organisation and tasks of Cost-benefit analysis for the export credit scheme strengthen its organisation in certain areas going forward. The number of loans under end of GIEK s share of the lending portfolio was 75.7 per cent at the beginning considerable assets on behalf of the Norwegian government. In many cases, Export Credit Norway has developed guidelines and guidance intended to support the function and the allocation of responsibility for first- and second-line The cost-benefit analysis for the export management increased from 82 to 142 of 2013, but fell to 74.5 per cent as per the financing from Export Credit Norway will strong internal control. One objective is for control of compliance with the regula- credit scheme (also known as the during the course of the year. The follow-up end of the year. be crucial for Norwegian exporters in internal control to be integrated into all tory framework to which the company is shadow-accounts), for 2013 has largely of individual loans can be highly work- securing contracts. Good governance employees daily routines, and thus to subject. been drawn up under the same princi- intensive. In Export Credit Norway s view, its and company-management help Export function as a first line of defence against ples as the shadow-accounts for A organisation is now functioning efficiently. Credit Norway to focus on its primary errors. Line-management has responsibility Internal audit function change has been made in how the objective of offering competitive, for risk-assessment, risk-management and The third line of defence is the internal financing-cost of CIRR-loans denomi- Nevertheless, further efficiency-gains can accessible and effective export-financ- risk-reducing measures, including the audit function, an independent and nated in currencies other than NOK is be made by introducing a better reporting ing, and thus to help lay the foundation maintenance of appropriate internal control objective audit and advisory-function. calculated. This has caused a reduction and data-warehouse solution. Such a for the creation of long-term value procedures. The internal audit function is mandated in the calculated financing-cost of these solution will be implemented in among Norwegian exporters and in There is potential for further improvements to help the company achieve its aims by loans. In 2012, one used a somewhat Compared to the full-year effect of the society in general. Export Credit Norway in Export Credit Norway s first-line internal ensuring it adopts a systematic, simpler calculation which reflected the second half of 2012, operating costs were receives an annual grant from its owner control and risk-management. Accordingly, a disciplined approach to evaluating and interest-rate of the Norwegian govern- cut by approximately NOK 15 million in adjusted to meet the company s needs. project has been launched with the improving the effectiveness of its ment. For 2013, a financing-cost was This is primarily due to the phasing The company is fully grant-funded, and assistance of external consultants that aims risk-management, control and manage- assumed that, due to a set of interest out of start-up activities and consultants. does not take up loans. The company s to establish an integrated framework for ment-processes. The work of the internal and currency swaps, better reflects the The financial statements for the company s processes and procedures are designed operational management and internal audit function is guided by a risk-based interest rate levels of the respective lending-operation show that net interest to ensure: control. The objectives of the project include annual audit-plan approved by the currencies. The cost-benefit analysis for income rose from NOK million in 2012 surveying the current situation, clearly company s board of directors. The results the export credit scheme shows that net to NOK million in This increase responsible, proper administrative communicating the level of risk-tolerance of completed audit-activities and related interest income and fee-income in 2013 is primarily due to considerable growth in processing that ensures the equal ambition and ensuring consistency in the improvement-proposals must be totalled NOK million after the the lending-portfolio at the same time as treatment of exporters, borrowers and company s document-hierarchy. The project reported in a timely fashion to manage- deduction of Export Credit Norway s the calculated financing-costs to the guarantors will help to ensure better integration of ment, the control-functions and the internal control and risk-management board. The internal audit function 30 31

16 reports directly to the board, and is functionally independent of the administration and control-functions. Export Credit Norway s internal audit function was established in the spring of 2013, and has been outsourced to PricewaterhouseCoopers. 4.3 Risk management in 2013 When Export Credit Norway s risk-assessment for 2013 was sent to the company s owner, the following risks were deemed critical 8 : Effective project-management and productive cooperation with guarantors (particularly GIEK), exporters and borrowers were identified as a particular risk area in the autumn of During 2013, several measures were implemented to reduce this risk. Among other things, an internal project was completed that reviewed and improved the company s internal procedures relating to the lending-process. Responsibilities have now been allocated in accordance with and are based on the HUKI principle. 9 The Regulations on the Export Credit Scheme state, in section 11 Credit guidelines that, All loans shall be guaranteed either by state export guarantee institutions and/or by financial institutions with solid credit-ratings in accordance with the credit guidelines applicable to Export Credit Norway. The term solid credit-rating was unclear in the autumn of 2012 and, as a result, no final, permanent credit guideline system was implemented. Based on a proposal from Export Credit Norway, the Ministry adopted a credit risk-management 1. Lack of clarification regarding the framework in The new framework pricing of market-loans. In addition, emphasis has been put on has been implemented. 2. The product-range was considered the cooperation with GIEK, wherein rather ineffective. Export Credit Norway and GIEK have 4.4 Incidents in Lack of expertise and capacity to reached an agreement in terms of follow up on the company s social responsibility. simplified loan-documentation for smaller loans. Other than changes to the Regulations on the Export Credit Scheme and an 4. Absence of appropriate clarification increase in the frequency of risk-assessment of the term solid credit-rating and the final risk-management framework. The risk associated with the absence of clarification regarding the pricing of market-loans was removed on March 20 th 2013, when ESA approved the company s pricing-model for marketloans. ESA s approval was implemented by amendment of the Regulations on the Export Credit Scheme, effective as of May 1 st Thus far, Export Credit Norway s experiences with the new pricing-model have been positive. Export Credit Norway aims to meet its social responsibilities and ensure that solutions adopted in projects in which it is involved are sustainable from an environmental and social perspective. The company follows the OECD guidelines for environmental and social responsibility and the OECD anti-bribery convention. Export Credit Norway seeks to maintain a high ethical standard. In the autumn of 2012, the company s expertise and capacity to follow up its social responsibility, including conditions set in loan-documents, was identified as a critical risk-factor. To reduce this risk, Export Credit Norway focused strongly on efficient cooperation and the clear allocation of responsibilities between the company and GIEK with respect to CSR work in Among other things, an agreement was concluded with GIEK, which gives Export Credit Norway access to GIEK s CSR expertise. reporting, the Ministry of Trade, Industry and Fisheries (NFD) did not make recommendations affecting the company s risk-management and internal controls in No incidents occurred in 2013 that altered the company s risk-profile to a noteworthy extent. Export Credit Norway s risk-assessment for 2014 was sent to the Ministry in the autumn of Red or at the intersection between red and orange; see the Norwegian Government Agency for Financial Management s risk matrix. 9 The HUKI model (targeted project management) is used to break down the process areas of tasks and activities. 5.0 Future prospects Export Credit Norway expects strong The oil and gas sector is driving demand demand for financing for projects for loans from Export Credit Norway, related to the oil and gas sector. The measured in application-volume. competitiveness of the Norwegian International developments in this supplier-industry was tested in 2013, sector will have a considerable impact when several larger projects went to on the Norwegian supplier-industry. In foreign companies. However, even in the next two to three years, more than 90 such situations, Export Credit Norway per cent of lending-volume is expected has found that Norwegian exporters are to be linked to the financing of ships and securing major sub-contracts on the equipment for offshore oil and gas projects. Generally speaking, growth is projects. Export Credit Norway has weaker in export-sectors unrelated to financed almost all offshore-related the petroleum sector, and there was no vessels constructed at Norwegian yards notable growth in Export Credit Norway s in the past two years. Exports of order-book for this segment in The ship-equipment are also showing a growth rate of the Norwegian economy strong and increasing growth. Export may be levelling off, and the international growth-picture is varied. The to seek to boost lending-volumes to Credit Norway will work with the sector depreciation of the Norwegian krone support it in new market-areas. towards the end of 2013 and into 2014 is expected to strengthen the competitiveness of Norwegian exporters. drill-ships and rigs is another important Financing for Norwegian equipment for segment for Export Credit Norway. Global demand for export-financing has Norwegian equipment is primarily risen strongly since the financial crisis in installed on drill-ships and rigs constructed for international rig-companies 2008 and the subsequent turmoil in the financial markets. The global volume of at yards in Eastern Asia. The transactions in this industry are typically new long-term export-credits totalled approximately USD 25 billion in 2007, structured as single-tranche, totalling while the estimated figure for 2013 was around USD million, in larger around USD 100 billion. GIEK and Export banking-syndicates. Credit Norway constitute the Norwegian export credit scheme. GIEK s total In the past 10 years, the Norwegian guarantee-liability has more than supplier-industry has more than trebled quadrupled since The combined its sales in markets outside Norway, and loan-portfolio of Export Credit Norway this internationalisation-trend is and Eksportfinans ASA (loans disbursed expected to continue. Brazil s aim of prior to December 2011), grew correspondingly during this period. presents great opportunities for the developing offshore oil and gas fields Norwegian supplier-industry. At the same time, these projects present risks, given this new phase in Brazil s shipbuilding-industry. Export Credit Norway is monitoring developments closely in collaboration with affected Norwegian suppliers and partners. Export Credit Norway has products for small and large enterprises, but recognises that knowledge of the company varies according to industry and company size. In general, larger business are more aware of Export Credit Norway and its products than smaller companies. To make the export-financing scheme better known to small and medium-sized exporters, Export Credit Norway will give priority to strengthening and structuring its cooperation with other parts of the public policy system in 2014, including GIEK and Innovation Norway, as well as regional banks and relevant industry and trade associations

17 that no losses are made on loans due to deficient documentation, pricing, credit Market and lending activity In 2013, the company developed as The aim is for the OECD members and other countries to agree on common assessment, loan follow-up or compli- expected. Although it experienced strong framework conditions for officially ance with applicable laws and regula- demand for export financing, delays to supported export financing. These tions. individual projects and early loan dialogues will continue in redemptions contributed to a lower- Export Credit Norway administers the than-expected lending balance at To ensure that exporters and borrowers export credit scheme in accordance with year-end. As expected, the oil, gas and have a positive export financing requirements laid down by the govern- maritime sectors accounted for the experience, it is crucial that Export ment through governing documents. The majority of the lending volume in Credit Norway and GIEK coordinate their Norwegian government requires the processes closely and apply their export credit scheme s cash flows are to Throughout 2013, there was an observ- mandates in a consistent manner. This is be kept separate from Export Credit able trend towards active bond markets also important to Export Credit Norway s Norway s operations. Cash flows from and generally improved access to bank operational efficiency. In 2013, two the export credit scheme pass directly loans for large businesses with solid important measures were implemented REPORT FROM THE BOARD OF DIRECTORS 2013 through the government s group accounts system, which is administered by the Central Bank of Norway. The credit ratings. The picture was more complicated for SMBs, which faced relatively strict credit policies due to in cooperation with GIEK: A new agreement template was Eksportkreditt Norge AS (Export Credit Norway) is a limited liability company that is wholly owned by the Norwegian government as represented by the Ministry of Trade, Industry and Fisheries. The company was founded on June 25 th 2012, and has been operational since the 1 st of July Export Credit Norway is based in Oslo. maritime (ships and ship equipment): 68 per cent oil and gas: 31 per cent renewable energy and other industries: just over 1 per cent. In 2013, Export Credit Norway experienced the largest relative increase in applications in the mainland industry (other industries and renewable energy/ environmental technology). The lending volume in the mainland segments is relatively small, primarily because more The export credit scheme Export Credit Norway administers the export credit scheme by providing export financing in the form of Commercial Interest Reference Rate (CIRR) loans and CIRR-qualified market loans on commercial terms. CIRR loans are fixed-interest loans made in accordance with the OECD agreement on officially supported export credits. The applicable credit guidelines for Export Credit Norway state that all loans must be 100% guaranteed by a state export annual accounts of the export credit scheme are presented as part of the national accounts in accordance with the government s cash principle. Strategy and objectives Export Credit Norway s primary objective is to promote Norwegian exports by providing competitive, accessible and effective export funding. The Ministry of Trade, Industry and Fisheries has identified assessment parameters for each sub-objective under the primary objective. These parameters are intended to assist in the assessment of requirements for commercial banks to improve their capital adequacy ratios, particularly in Europe. Although market access to capital improved, particularly for large entities, demand for loans from Export Credit Norway remained high. Developments in the financial markets demonstrated the importance of introducing a permanent, competitive model for pricing market loans. The model was approved by the EFTA Surveillance Authority in March, and implemented as of 1 May Thus introduced for medium-sized loans. GIEK and Export Credit Norway concluded a cooperation agreement to ensure that the companies apply shared assessments and have sufficient expertise and capacity in their work on environmental and social conditions in projects that receive financing. The agreement also gives Export Credit Norway access to expertise in connection with loans that are not guaranteed by GIEK. In addition to cooperation with GIEK, a than 80% of applications come from guarantee institution and/or by financial Export Credit Norway s performance. Export far, Export Credit Norway has had further priority was to improve coopera- Export Credit Norway s first full year of small and medium-sized exporters. In institutions with solid credit ratings. Credit Norway reports on the assessment positive experiences with the use of the tion with other guarantors, not least in operation was characterised by high contrast, SMBs accounted for 13% of Loans are recorded in the Norwegian parameters in its annual report. new pricing model, which gives the order to make relevant processes more activity levels in terms of both the applications from the maritime sectors government s balance sheet. The company greater flexibility to set efficient. The company will continue to number of applications received and the and equipment for the oil and gas sector government is liable for the obligations Based on the Ministry s objectives, the margins that reflect price trends in the focus on simplifying and improving number of loans disbursed. During 2013, in 2013.The company s probability-ad- the company incurs in connection with company has defined a business strategy lending market. common processes in Export Credit Norway received more than justed order book totalled NOK 47.6 its lending activities and which do not focused on the following priority areas: an 400 loan applications for a total of more billion at year-end. relate to the operation of the company. attractive offering, efficient processes, Export Credit Norway s mandate Export Credit Norway received loan than NOK 170 billion. At the end of the fulfilment of the company s public role and includes acting as a resource centre for applications for all of the offshore-relat- year, Export Credit Norway s lending Export Credit Norway has in 2013 The company advises applicants on all social responsibility and employment of the authorities. Among other things, the ed vessels for which Norwegian yards balance totalled NOK 45 billion, focused on strengthening its organisa- aspects of the financing process, motivated and competent staff. company is participating in ongoing concluded contracts in Although distributed among different sectors as tional structure further and improving including sales and marketing, applica- OECD negotiations relating to export the supply industry for the international follows: the products it offers to customers. tion processing, commitment, the Export Credit Norway s operations financing regulations. In 2013, dialogues oil and gas industry developed positively implementation of loan agreements and normalised in In total, 10 persons were initiated with important export during the year, Norwegian suppliers loan documentation, and disbursement joined the company during the year, while countries that are not OECD members, experienced stronger competition from and follow-up of the loan. These external consultants were phased out. including China, India, Russia and Brazil. countries with lower cost levels. procedural steps are intended to ensure 34 35

18 The total application volumes for 2012 and 2013 were as follows 1 : OPERATING EXPENSES FOR 2013 (IN THOUSANDS OF NOK) Table 1: Loan applications All amounts in NOK million number of Number of Application Application applications applications volume volume Ships ,120 57,106 Ship equipment ,152 14,263 Oil and gas industry equipment ,955 85,722 Renewable energy and environmental technology ,748 8,356 Other industries ,083 6,743 Total , ,190 60,000 50,000 40,000 30,000 20,000 10,000 Personell costs Depreciation and impairment Cost premises IT operations, inventory and operating materials External procurement of services Other expenses 0 The key figures for the export credit scheme for 2012 and 2013 are as follows: Table 2: Cash flow statement for the export credit scheme All amounts in NOK million total 2012 total 2013 New disbursements 24,217 23,237 Interest income Repayments 2 1,058 8,701 Fee income New disbursements relate to projects submitted to Eksportfinans ASA in the period , as well as applications addressed directly to the Norwegian government/export Credit Norway after The disbursements also include loans taken over from Eksportfinans in connection with the re-setting of interest margins. At the end of December 2013, Export Credit Norway was administering 142 loans with a total value of NOK 45 billion 3. Delays to individual projects and early redemptions resulted in a somewhat lower-than-expected lending balance as at 31 December. Distributed by currencies and industries, the lending balance was follows: Table 3: Lending balance All amounts in NOK million nok usd eur GBp total Ships 19,582 8, ,309 Ship equipment ,233 Equipment for the oil and gas industry 14,118 14,118 Renewable energy and environmental technology Other industries Total 20,250 23,183 1, ,023 Share 44.98% 51.49% 2.45% 1.08% 100% 1 Several projects are likely to be cancelled, meaning that the figure for probability-adjusted disbursements will be considerably lower. 2 Repayments are recorded at historic cost, i.e. at the exchange rate used when the loans were disbursed. The company does not hedge to cover foreign currency fluctuations. In 2013, the Norwegian government incurred a net foreign exchange loss of NOK 97 million in connection with repayments, meaning that, adjusted for currency losses, repayments amounted to NOK 8,604 million. 3 The historical exchange rate is the exchange rate at which the loans were originally dispersed. The depreciation of the Norwegian krone (NOK) towards the end of 2013 has strengthened the competitiveness of exporters. In 2013, Export Credit Norway gave priority to raising awareness of the loan-scheme amongst SMBs in the mainland industry, which included contacting more than 100 exporters that had not previously used export financing. Greater familiarity with the scheme helped to increase the number of applications from other industries. At the end of 2013, the lending balance at the historical exchange rates (historical cost), totalled NOK 44.4 billion 4. The currency distribution generally reflects the industries to which most loans are made. Within the oil and gas sector Export Credit Norway only has loans in USD, while loans to the maritime sectors are dominated by NOK, followed by USD. The high volumes in the oil, gas and maritime sectors are also reflected in the average loan sizes. In 2013, the oil and gas sector featured the largest average loan size at NOK 680 million per loan, whereas the average loan size in the maritime sector was NOK 275 million. In contrast, in the renewable energy sector and other industries, the average loan size was NOK 33 million, with most loans totalling less than NOK 10 million. At the end of December 2013, the total order book amounted to NOK billion, while the probability-adjusted order book totalled NOK 47.6 billion 5. The probability-adjusted order book for the oil and gas sector amounted to NOK 28 billion. The totals for the maritime sector amounted to NOK 19.1 billion, while renewable energy and other industries totalled NOK 462 million. Export Credit Norway, Singleentity financial statements Export Credit Norway receives a grant to administer the export credit scheme under the government s budget. The grant is approved by the Norwegian parliament (Stortinget), annually. In 2013, the grant amounted to NOK 105 million. Of this total, NOK 99.2 million was recognised as income, while operating costs totalled NOK 85.2 million. In 2012, the operational grant was NOK 71 million and operating costs 4 The historical exchange rate is the exchange rate at which the loans were originally dispersed. 5 A loan is included in the order book once the customer has accepted the conditions in the outline. amounted to NOK 50.8 million. The figures for 2012 relate to the second half of the year, as the company only began operating on July 1 st The operational costs primarily comprise wage costs, administrative costs and purchases of external services. The financial result for 2013 shows a profit of NOK 12.0 million after tax, compared to a post-tax profit of NOK 12.8 million in The company has NOK 38.7 million in equity and little exposure to financial risk. The company s cash flow statement shows that it enjoys strong liquidity. Differences between the operating result and cash flow are due to deferred recognition of investment grants as income. The company s assets primarily consist of cash and cash equivalents, fixtures and intangible assets. The Norwegian parliament (Stortinget) has approved an operating grant for Export Credit Norway of NOK 105 million for 2014, meaning that the grant amount will remain unchanged in nominal terms from 2013 to

19 Pursuant to sections 3-3a and 3-2a of Regular reports are made to the board of being made to implement and further working environment committee and that the likelihood of errors is reduced corruption in connection with the export the Accounting Act, the board of directors on framework utilisation for all develop business-critical systems and former EHS committee held two meetings through risk management and internal contracts it finances, and has developed directors confirms that the company s guarantors. At the end of the year, all procedures. In 2013, Export Credit in controls separate guidelines to combat corruption annual accounts and the cash flow loans were well within the stipulated Norway concluded an agreement with transparent, individualised communi- that reflect both Norwegian legislation statement for the export credit scheme counterparty risk limits. PwC for the delivery of internal audit The company s overall sick leave rate was cation with different target groups to and the OECD Recommendation on provide a true picture of the company s services. 3.4% in Short-term sick leave raise awareness of the export Bribery and Officially Supported Export assets and liabilities, financial position and result, and that the accounts have been prepared subject to the goingconcern assumption. Market risk At the end of 2013, 55% of all loans included in the lending balance were denominated in foreign currencies, Research and development activities Export Credit Norway does not have its accounted for 1.2% of this total, while long-term sick leave amounted to 2.2%. The board considers these figures satisfactory. No work-related accidents or financing scheme. Corporate social responsibility The board emphasises that Export Credit Credits. In all transactions, exporters are asked to sign a self-declaration on corruption. Additional investigative steps are taken when a case presents an representing a drop from 68.1% in own research and development (R&D) incidents resulting in significant damage Norway s corporate social responsibility increased risk of corruption or money No matters have risen after the end of Some 61.8% of the lending balance programme. The Ministry of Trade, or personal injury were reported during work is an integral part of the company s laundering or these things are suspected. the financial year that are of significance comprised loans granted on market terms, Industry and Fisheries has asked the the year. The working environment is operations and strategy. In such cases, the type of customer, in the evaluation of the accounts. compared to 58.1% the previous year. company to prioritise projects that deemed to be positive. company and ownership structure, Allocation of profits for the year The board proposes that the profit of NOK 12.0 million is to be transferred to Export Credit Norway s own market risk is limited. The company s market risk is primarily linked to the re-invoicing of develop new knowledge and technology. In 2013, Export Credit Norway began evaluating projects for which applications are made with regard to the degree Governance and company management Export Credit Norway administers Corporate social responsibility policy Export Credit Norway can help to focus greater attention on environmental and social conditions by imposing require- geographical location and transaction structure are investigated more thoroughly. All loans are granted subject to the proviso that no corruption is other equity. expenses it incurs on behalf of borrowers. of innovation, in accordance with the considerable assets on behalf of the ments on stakeholders in the projects it suspected in connection with the Risk management Risk management guidelines are However, it has been decided that responsibility for the re-invoicing of legal costs is to be moved from the company to OECD classification system. Of the 409 applications received, 34 were classified as highly innovative or innovative. Norwegian government. In many cases, financing from Export Credit Norway will be crucial for Norwegian exporters in finances. It is in the processing of its lending cases that the company can make a real difference. The main transaction. In accordance with the know your customer money laundering principle, Export Credit Norway evaluates provided by law and instructions to the company. All loans are recorded in the government s balance sheet. The the export credit scheme. This is expected to be implemented in the first half of Working environment One of Export Credit Norway s strategic securing contracts. Good governance and company management help Export Credit Norway to focus on its primary guidelines for this work are found in the OECD s Common Approaches for Officially Supported Export Credits and Environ- borrowers pursuant to the rules in the Money Laundering Act. company is not permitted to engage in hedging transactions. Loans must be Operational risk Operational risk is primarily linked to the priorities is employment of motivated and competent staff. For the company, objective of offering competitive, accessible and effective export financ- mental and Social Due Dilligence. Under the guidelines, all loans made by Export The company s direct impact on the external environment 100% guaranteed by financial institu- correctness of loan and security this means being a knowledge-based ing, and thus help to lay the foundation Credit Norway are classified as falling Export Credit Norway is not deemed to tions and/or state guarantee institutions documentation, ongoing loan follow-up organisation that puts the customer first. for the creation of long-term value into one of three categories: A, B or C. The pollute the external environment over that satisfy the applicable rating and the receipt and making of payments. Ongoing skills development is ensured among Norwegian exporters and in categories represent different degrees of and above the effects of normal office requirements. Operational risk has been addressed partly through on-the-job training by society in general. Export Credit Norway severity in risk assessments of environ- operation and travel activities for a especially by strengthening Export working on complex, challenging issues receives an annual grant from the mental consequences and/or social business of its size and type. Export Credit Norway is focused on Credit Norway s in-house legal capacity and partly through the introduction of a government adjusted in view of the conditions. Projects that are deemed to having reliable risk management and concluding framework agreements continuing professional development company s needs. The company is fully have a high potential for material harm to Ethical guidelines procedures in place to avoid losses in with several recognised law firms that programme. Export Credit Norway also grant-funded, and does not take up the environment or to present a risk of Export Credit Norway reports to the connection with the export credit advise the company on its loan transac- promotes systematic knowledge-sharing loans. The company s processes and negative social conditions or conse- government as its owner and principal, scheme. No losses were made on loans tions. Further, in 2013, the company to improve the robustness of the procedures are designed to ensure: quences are assigned to category A. and has duties and rights in accordance in focused on implementing strong control company. Management aims to manage Cases in category B are deemed to carry a with the Act relating to Eksportkreditt procedures for ongoing loan follow-up by clear objectives, ensure widespread responsible, proper administrative medium risk, while cases in category C Norge AS (the Norwegian Export Credit The greatest risks associated with the and the receipt and making of payments. information-sharing and provide clear processing that ensures the equal are considered to present a low risk of Act), and applicable national and export credit scheme are counterparty feedback on completed work. The treatment of exporters, borrowers and failure to safeguard environmental and international laws, rules and guidelines. risk relating to guarantors, market risk Other company operations company s values are responsibility, guarantors social conditions. Export Credit Norway The company is responsible for ensuring and operational risk. The risks associated with Export Credit enthusiasm and dynamism. the adoption of guidelines that secure has initiated formal cooperation with that the government s funds are properly Norway s other operations primarily the independence and impartiality of GIEK on the assessment of risks relating administered. To ensure optimal Counterparty risk relate to the successful implementation In 2013, management and employees board members, management and to environmental and social conditions. compliance with its obligations, Export The Ministry of Trade, Industry and and continued development of critical agreed to establish a working environ- administrative staff in cases in which The company did not disburse any Credit Norway has developed ethical Fisheries approved a credit policy for the systems, and compliance with the ment committee. The former environ- they are involved category A loans in The OECD guidelines and incorporated them into export credit scheme in 2013, which the requirements imposed on the company ment, health and safety (EHS) committee guidelines do not cover mobile units. its governing documents. The guidelines company operationalised that year. by the government. Targeted efforts are was merged into the new body. The Export Credit Norway aims to prevent set out desirable conduct, and the 38 39

20 2013 annual financial statements Income statement In the front (from right): Siri Hatlen, Trude Husevåg, Else Bugge Fougner (board chair) At the back (from right): Jørgen Hauge (board member and employee-elected representative, Kaare Haahjem (deputy employeeelected representative and observer) and Øivind Rue. All amounts in NOK 000 notes 1 Jan 31 Dec Jun. 31 Dec 2012 Other revenues 2 99,156 71,000 Total operating revenues 99,156 71,000 Salaries and payroll costs 3, 10, 12 53,895 28,330 Appreciation amortisation and impairments 5 2,338 1,092 Other operating expenses 28,937 21,350 Total operating expenses 85,170 50,771 Operating profit 13,986 20,229 Provision for losses on receivables 6 1,018 - Financial income 1, Financial expenses 73 2 company seeks to ensure that all The board also worked on the completion of Oslo, 19 March 2014 Net financial items 1, employees are aware of them. All employees share responsibility for compliance with the guidelines. No guidelines and procedures relating to the establishment of the company, including implementation of credit-risk guidelines. Profit for the year before tax 14,254 20,647 Tax expense 4 2,259 7,873 Net profit for the year 11,995 12,774 breaches of the ethical guidelines were registered in The board introduced internal company audits in the spring of Else Bugge Fougner Board Chair The net profit for the year of NOK 11,995 has been transferred to other equity, see Note 9. Gender equality and diversity Future outlook At the end of the year, the company had 42 employees, including 19 women (45%). The proportions of women on the Export Credit Norway expects continued strong demand for export financing. In Siri Beate Hatlen Board member board of directors and in the manage- 2013, Norwegian yards concluded ment group were 50% and 17%, contracts for fewer but more complex and respectively. The company wishes to offer equal capital-intensive ships than in This trend is expected to continue. In addition, while Export Credit Norway anticipates Trude Husevåg Board member opportunities and rights to all employees strong demand in international markets, irrespective of gender, nationality, colour and ethical outlook. Export Credit Norway s staff members come from a which will be important for the oil and gas supply industry, progress on large individual project is less certain. Finn Ivar Marum Board member range of cultural and ethnic backgrounds. The work of the board of directors The board of directors held a total of 14 meetings in 2013, including nine ordinary meetings and five telephone/circulation Export Credit Norway expects demand from small and medium-sized exporters to continue to grow as more companies realise that export financing can help them to secure new contracts. In 2014, the company will continue to focus on this sector, working to raise the profile of the Øivind Kristian Rue Board member Jørgen Christian Hauge Board member meetings. The board focused on the financing scheme and adapting the range company s strategy and objectives, of export funding products. marketing targeting SMBs and day-to-day approval of major loans and credit limits. Jarle Roth Chief Executive Officer 40 41

21 Balance sheet Statement of cash flow All amounts in NOK 000 notes 31 Dec Dec 2012 All amounts in NOK Jan 31 Dec Jun 31 Dec 2012 Assets Fixed assets Intangible assets 5 9,143 4,404 Means of transport, fixtures and computer equipment 5 2,898 3,888 Deferred tax asset 4 6, Total fixed assets 18,827 8,637 Current assets Trade receivables 6 2,990 2,848 Other receivables ,693 Cash and cash equivalents 7 59,478 47,173 Total current assets 62,670 57,714 Total assets 81,497 66,351 Equity and liabilities Paid-in equity Share capital 8 10,000 10,000 Share premium account 8 3,917 3,917 Total paid-in equity 13,917 13,917 Retained earnings Other equity 9 24,769 12,774 Total equity 38,686 26,691 CASH FLOW FROM OPERATIONS Grants 105,000 71,000 Interest income 1,155 Outflows from operations 87,764 28,360 Net cash flow from operations 18,391 42,640 CASH FLOW FROM INVESTMENTS Investments in tangible fixed assets* -6, Net cash flow from investments -6, Cash flow from financing activities Paid-in equity - - Net cash flow from financing activities - - Net change in cash and cash equivalents during the year 12,305 42,173 Cash and cash equivalents as at 25 June 2012/1 January ,173 5,000 Cash and cash equivalents as at 31 December ,478 47,173 * Purchases of non-current assets recognised in the balance sheet after the formation date, including means of transport, fixtures and intangible assets. Liabilities Provisions for liabilities Pension liabilities 10 14,767 14,728 Investment grants not previously recognised as income 2 5,844 0 Total provisions for liabilities 20,611 14,728 Current liabilities Trade payables 11 1,123 6,488 Public taxes and charges payable 4, 11 12, Other current liabilities 11 8,252 6,551 Total current liabilities 22,199 24,932 Total liabilities 42,810 39,660 TOTAL EQUITY AND LIABILITIES 81,497 66,351 Oslo, 19 March 2014 Else Bugge Fougner Board Chair Siri Beate Hatlen Board member Trude Husevåg Board member Finn Ivar Marum Board member Øivind Kristian Rue Board member Jørgen Christian Hauge Board member Jarle Roth Chief Executive Officer 42 43

22 Note 1 Accounting policies General principles The annual accounts have been prepared, and are presented, in Norwegian kroner (NOK). The annual accounts have been prepared in accordance with good accounting practice and, unless explicitly provided otherwise, the provisions of the Accounting Act (including the basic accounting principles: the transaction principle, the earned income principle, the matching principle and the prudence principle), related regulations and final Norwegian accounting standards in their current form as at 31 December Where uncertainties have arisen, the company has used best estimates based on the information available at the time the accounts were presented, and the effects of changes to accounting estimates are normally recognised in the income statement. All income and costs have been recognised in the income statement, although the effects of changes to accounting principles and any corrections of errors in earlier annual accounts have been recorded directly against equity. The annual accounts have been prepared in accordance with uniform principles applied consistently over time. The annual accounts have been prepared based on the going concern basis, since it is unlikely that the company will be wound up. Provisions Certain income statement items include a provision in respect of anticipated future costs. These provisions are based on estimates and the information available at the time the accounts are presented, and may differ from actual future costs. Provisions have primarily been made for losses on trade receivables and performance-related employee remuneration. Grants/operating revenues The company receives a grant from the Ministry of Trade and Industry (the Ministry of Trade, Industry and Fisheries in 2013), for use in assignments in accordance with the company s objectives. The grant is approved annually by the Storting (the Norwegian parliament), and awarded by the Ministry through annual assignment letters. The grant may comprise a combination of operating and investment grants. The operating grant is disbursed in instalments to reflect the pace of planned activities. The operating grant is fully recognised as operating revenue in the period in which the company performs its activities. Instalments are recognised gross. Estimate deviations attributable to new information or changes in actuarial assumptions that exceed the higher of 10% of the value of pension assets or 10% of the value of pension liabilities are recognised in the income statement over a period corresponding to the employees expected average earnings period. Value added tax Export Credit Norway sells services involving the provision of financing exempted from value added tax pursuant to section 3-6(b) of the Value Added Tax Act. Classification of assets and liabilities Assets intended for permanent ownership or long-term use are classified as fixed assets. Other assets are classified as current assets. Receivables falling due for payment within one year of the acquisition date are classified as current assets. Corresponding criteria are applied in the classification of current and long-term liabilities. Fixed assets Fixed assets are valued at acquisition cost less deductions for Current liabilities Current liabilities are recognised at nominal value in the balance sheet on the date they are incurred. Taxes The tax expense comprises taxes payable during the period and changes in deferred tax liabilities/deferred tax assets. Tax payable is calculated based on the taxable result for the year. The net deferred tax liabilities/deferred tax assets are calculated as 27% of any temporary differences between the accounting values of assets and liabilities and their values for tax purposes, plus any tax loss carryforwards at the end of the financial year. A net deferred tax asset is recognised in the balance sheet if it is likely that it can be utilised. Foreign currency Transactions in foreign currencies are converted using the exchange rate applicable at the time of the transaction. Monetary items in foreign currencies are converted into NOK using the exchange rate applicable on the balance sheet date. Changes in exchange rates are recognised in the income statement on an ongoing basis during the accounting period, under other financial items. depreciation, amortisation and impairments. Fixed assets are Information about new accounting standards The Norwegian Accounting Standards Board has adopted certain changes to its standards with effect from 1 January The company s preliminary assessment is that none of the new/amended accounting standards will have a material effect. Investment grants are treated as deferred income and are recognised in the income statement as an adjustment to amortisation in line with the amortisation period for the associated investment. Accrued grants are recognised as operating revenues in the income statement. written down to fair value when any impairment in value is not considered to be temporary in nature. Intangible assets Intangible assets are recognised in the balance sheet where the Cash flow statement The cash flow statement has been prepared in accordance with the direct method. Cash and cash equivalents include bank deposits. criteria for recognition in the balance sheet are met. Purchased The use of estimates and information on significant estimates The accounting principles described above have required the company to apply estimates and assumptions that have affected items in the income statement and balance sheet. The estimates are based on experience and an assessment of underlying factors. Assessments, estimates and assumptions with a material effect on Pensions The company operates both defined-contribution and defined-benefit pension plans. Contributions to defined-contribution plans are paid into pension insurance plans. Once the contributions have been paid, there are no further liabilities. Payments into defined-contribution schemes are recognised in the income statement in the period to which a given payment relates. software is recognised in the balance sheet at acquisition cost (including the cost of making software operational), and depreciated over its expected useful life (up to 5 years). Costs relating to the development or maintenance of software are expensed as they arise. Tangible fixed assets Tangible fixed assets are recognised in the balance sheet and the accounts are summarised below. Appreciation, amortisation and impairment The appreciation, amortisation and impairment of tangible fixed assets and intangible assets are based on the assumed economic lifetimes of these assets. Future investment decisions will affect expected service life. This may occasion changes to appreciation, amortisation and impairment profiles, and will impact on future results. The liability recognised in the balance sheet in respect of definedbenefit schemes is the present value of the defined benefit on the balance sheet date, less the fair value of the pension assets, adjusted for estimate deviations not recognised in the income statement. Pension liabilities are calculated annually by an actuary using a linear earnings method and the expected final salary. The net liabilities recognised in the balance sheet include employer s national insurance contributions. depreciated on a straight-line basis over their expected economic lifetime. Direct maintenance of such assets is expensed on an ongoing basis under operating expenses, while upgrades and improvements are added to the cost of the asset and depreciated in tandem with it. If the recoverable value of an asset is lower than its book value, the asset is written down to the recoverable amount. The recoverable amount is the higher of the net sale value and the value in use. The value in use is the present value of the future cash flows the asset is expected to generate. Pensions The calculation of the fair value of pension liabilities is based on various financial and demographic assumptions. Any change in the applied assumptions will affect the calculated liability. Reference is made to the note on pension liabilities for a more detailed description of the assumptions applied. The net pension cost for the period relating to defined-benefit plan is included in salaries and comprises the accrued pension entitlements for the period, the interest expense on the estimated pension liabilities, the expected return on pension assets, the effect on the income statement of changes in estimates and accrued employer s national insurance contributions. Current assets Current assets are valued at the lower of acquisition cost and fair value. Trade receivables are recognised at nominal value less a provision for expected losses. Receivables are written down based on an assessment of delayed payment and other indications that the customer is experiencing payment difficulties

23 Note 2 Grants and other income Note 4 Tax expense In 2013, the company received operating/investment grants from the Norwegian government totalling NOK 105 million, excluding value added tax. The company had no other income. All amounts in NOK Grant Operating grant 98,913 71,000 Investment grants recognised in the income statement during the period Total grants recognised in the income statement 99,156 71,000 Investment grants recognised in the balance sheet as at 31 December 5,844 0 Total grants and other income 105,000 71,000 All amounts in NOK Calculation of tax payable Profit before tax on ordinary operations 14,254 20,647 Permanent differences 226 7,470 Change in temporary differences 16,587 1,235 Basis for tax payable 31,067 29,352 Tax payable on the result for the year (28%) 8,699 8,219 Tax payable in the balance sheet comprises Tax payable on the result for the year 8,699 8,219 Total tax payable in the balance sheet 8,699 8,219 Note 3 Salaries and payroll costs, number of employees, remuneration, etc. All amounts in NOK Salaries and payroll costs Salaries 39,431 15,257 Employer s national insurance contributions 6,382 2,062 Pension costs 5,436 9,415 Other personnel costs 2,646 1,595 Total salaries and payroll costs 53,895 28,330 Number of employees as at 31 December Number of employees with signed employment agreements who had not yet started work as at 31 December 0 4 Number of full-time equivalents employed The tax expense for the year comprises Tax payable on the results for the year 8,699 8,219 Change in deferred tax asset -6, Total tax expense for the year 2,259 7,873 Breakdown of the basis for deferred tax assets Operating assets Net pension liabilities -14,767-7,106 Investment grants not previously recognised as income -5,844 0 Other temporary differences -4,818-2,406 Total temporary differences -25,132-8,545 Temporary differences as at 31 December ,235 Deferred tax assets -6, Reconciliation of nominal and actual tax rates Expected tax at nominal rate (28 %) 3,991 5,781 Effect of permanent differences 63 2,091 Effect of recognition as income for tax purposes upon assumption of pension liabilities -2,046 - Effect of reduced tax rate (27%) from Tax expense per income statement 2,259 7,

24 Note 5 Tangible fixed assets Note 9 Equity 2013 Intangible Computer Means of All amounts in NOK 000 assets Fixtures equipment transport total Acquisition cost 1 Jan. 4,893 2,333 1, ,384 Acquisitions of operating assets 5, ,086 Disposals of operating assets Acquisition cost 31 Dec ,811 2,428 1, ,470 Accumulated amortisations 1 Jan ,092 Amortisations for the year 1, ,337 Book value 31 Dec ,143 1, ,041 Useful life 5 years 5 years 3 years - Depreciation schedule linear Linear Linear Reducing balance (20%) 2013 Intangible Computer Means of All amounts in NOK 000 assets Fixtures equipment transport total All amounts in NOK 000 Share capital Share premium account other equity total Equity 25 Jun ,000 3,917 13,917 Profit for the year 12,774 12,774 Equity 31 Dec ,000 3,917 12,774 26,691 Profit for the year 11,995 11,995 Equity 31 Dec ,000 3,917 24,769 38,686 Note 10 Pension costs Defined-contribution scheme The company operates a defined-contribution plan in accordance with the Act on Mandatory Occupational Pensions. The premium rates for the defined-contribution plan follow the maximum permitted by statute: 5% of salary between one and six Gs (G = the Norwegian national insurance scheme basic amount), and 8% of salary from six to 12 Gs. Fair value 25 Jun ,893 2,266 1,758 8,917 Acquisitions of operating assets Disposals of operating assets Acquisition cost 31 Dec ,893 2,333 1, ,384 Amortisations for the year ,092 Book value 31 Dec ,404 2,103 1, ,292 Useful life 5 år 5 år 3 år - Depreciation schedule lineær Lineær Lineær Saldo (20 %) The company does not lease any tangible fixed assets of significant value that are not recognised in the balance sheet. Note 6 Trade receivables and other receivables Four senior executives also have agreements for a defined-contribution scheme for salary above 12 Gs in accordance with the Guidelines on terms and conditions of employment for managers in state enterprises. The plan includes external funding corresponding to 30% of salary above 12 G. Defined-benefit plan Twenty-eight of a total of 29 employees transferred from Eksportfinans ASA upon the establishment of Export Credit Norway are members of a closed collective defined-benefit plan. These employees are entitled to an early retirement (AFP) pension, and may thus opt to draw some of their pension between the ages of 62 and 66. The plan is funded through an insurance company. Three senior executives/employees also have individual agreements concerning a defined-benefit scheme for salary above 12 Gs, as well as early-retirement agreements with Eksportfinans ASA. These agreements have been continued by Export Credit Norway. These are unfunded plans. All defined-contribution schemes have been closed. The pension costs have been calculated by an actuary in accordance with the recommendations of NRS 6. Pension costs and liabilities include employer s national insurance contributions. All amounts in NOK 000 Funded plan unfunded plan total Trade receivables consist entirely of disbursements linked to costs that are re-invoiced to borrowers. In addition, NOK 1 million has been set aside for potential losses on trade receivables in Other receivables comprise pre-payments to suppliers. Note 7 Cash and cash equivalents As at 31 December 2013, the company had NOK 59.5 million in cash and cash equivalents, including NOK 2.3 million in tax deducted at source. Net pension costs Present value of accrued pension entitlements for the year 2, ,585 Interest expense on pension liabilities 1, ,894 Expected yield on pension assets -1, ,209 Administrative costs Estimate deviations recognised in the income statement Net pension costs 3,236 1,221 4,457 Of which employer s national insurance contributions Note 8 Share capital and shareholder information The company s share capital totalled NOK 10 million as at 31 December 2013, distributed among 10,000 shares with a nominal value of NOK 1,000 each. All of the shares are owned by the Norwegian government, represented by the Ministry of Trade, Industry and Fisheries, and all of the shares carry the same rights. All amounts in NOK 000 Funded plan unfunded plan total Liabilities recognised in the balance sheet Accrued pension liabilities -44,241-12,264-56,505 Pension assets at market value 34,127-34,127 Estimate deviations not recognised in the income statement 5,627 1,984 7,611 Pension liabilities recognised in the balance sheet -4,487-10,281-14,767 Of which employer s national insurance contributions 1,250 1,516 2,

25 Note 12 Remuneration paid to executive management and the board of directors 31 Dec Dec 2012 Assumptions Discount rate % 4.20 % Expected to yield on pension assets 4.40 % 4.00 % Expected salary increases 3.75 % 3.50 % Expected adjustment in the national insurance scheme basic amount (G) 3.50 % 3.25 % Expected pension adjustment 0.60 % 0.20 % Mortality table applied K2010 K2010 The assumptions are based on conditions at the time of the preparation of the annual financial statements and on company-specific conditions. The K2010 mortality table has been used in calculating the net pension liabilities as at 31 December Company management and the company s actuary have concluded that the applied mortality table provides an unbiased estimate of the company s liabilities as at 31 December In light of the Norwegian Accounting Standards Board s recommendation to use the K2013 mortality table for 2013, the company has obtained an estimate of its liabilities as at 31 December 2013 on this basis. Using K2013, the actuary has estimated the liabilities at NOK 60.1 million, compared to NOK 56.5 million using K2010. All amounts in NOK The board s declaration on salaries and other remuneration paid to executive management The declaration concerning remuneration paid to the CEO and executive management is consistent with the guidelines for state ownership, including the revised Guidelines on terms and conditions of employment for managers in state-owned enterprises (adopted by the second Stoltenberg Government on 31 March 2011). Remuneration guidelines Export Credit Norway has drawn up guidelines to ensure that salary policies and salary schemes are uniform throughout the company. It aims to be a competitive, but not leading, salary payer compared to relevant companies. The compensation packages of senior executives must reflect the responsibilities and complexities involved in their positions, the company s values and culture, each executive s conduct and performance, and the need to attract and retain key individuals. The schemes are transparent and consistent with the Norwegian Code of Practice for Corporate Governance. Adoption process The remuneration of the CEO is determined by the board of directors, while the CEO determines the remuneration of other executives in consultation with the board. Remuneration elements and adjustment of these in future financial years The total remuneration comprises a fixed salary (main element), performance-related remuneration, benefits in kind and pension and insurance schemes. Total net pension costs Net defined-benefit pension costs 4,457 9,233 Employer s national insurance contributions on paid-in premiums under defined-benefit pension scheme Expensed early retirement (AFP) pensions Net defined-contribution pension costs 1, Total net pension costs 5,436 9,415 1 In 2012, a risk-free interest rate of 2.2% plus a risk premium of 2% (4.2% in total), was used. In 2013, a covered-bond rate 2 Includes compensation for under-coverage received in connection with taking over from Eksportfinans ASA. The fixed salary is subject to annual review and is set based on factors such as salary development in general and in the finance industry in particular. The annual review takes effect on 1 July of each year. Performance-related remuneration is subject to annual review and is set by the company s board. Performance-related remuneration is set based on an overall assessment that focuses primarily on the achievement of targets in specific areas (set at the beginning of the year). The company s objectives are operationalised in the form of scorecards intended to support the objectives set by the owner. The scheme is the same for all employees, including executive management, and subject to a ceiling of 1.5 months fixed salary. The CEO does not have an agreement on performance-related pay. Like other employees, executive management are offered benefits in kind such as newspapers/magazines, partly subsidised personal loans and telephone/communication benefits. All employees have access to partly subsidised personal loans individuals may take up loans with the company s bank totalling up to three times their fixed salary, and the company will cover interest expenses over and above the government s normative interest rate (1.15% in 2013). Benefits in kind may not be of a material size compared with an employee s fixed salary. Note 11 Current liabilities All amounts in NOK Current liabilities Trade payables 1,123 6,488 Tax payable 8,699 8,219 Other public taxes and charges payable 4,125 3,674 Provision for liabilities 4,176 3,450 Provision for holiday pay 3,776 3,101 Pre-payments received from customers Total current liabilities 22,199 24,932 In addition to the ordinary pension scheme, some senior executives, including the CEO, are members of a defined-contribution scheme for salary above 12 Gs. This is in accordance with the Guidelines on terms and conditions of employment for managers in state-owned enterprises. Some executive managers transferred from Eksportfinans ASA have individual agreements concerning a defined-benefit pension for salary above 12 Gs, as well as early-retirement agreements which have been continued by Export Credit Norway. See Note 10 for a complete list of pension benefits. Individual schemes The CEO has an agreement providing severance pay for up to one year after leaving the company in accordance with the government s guidelines. Some executive managers transferred from Eksportfinans ASA have continuing individual agreements on severance pay. The CEO and senior executives have agreements relating to fixed car benefits. All board members receive fixed board fees. The company pays no other types of remuneration than those discussed above

26 Remuneration paid to executive management in 2013 Interest Performance- other Total salary, incl. Taxable pension other All amounts in NOK 000 Salary benefit 3 related salary 4 remuneration remuneration expense pension Jarle Roth 2, , Eli Skrøvset 1, , Olav Einar Rygg 1, , Ivar Slengesol 1, , Tobias Hvinden 1, , Jostein Djupvik , Remuneration paid to executive management in Interest Performance- other total Total pension All amounts in NOK 000 Salary benefit 6 related salary 7 remuneration remuneration expense 8 Jarle Roth Eli Skrøvset Olav Einar Rygg Ivar Slengesol Tobias Hvinden Jostein Djupvik Export Credit Norway (ECN) has concluded an agreement with Eksportfinans ASA (EF) concerning pension liabilities linked to three employees transferred from EF to ECN. The agreement involves the transfer of pension liabilities relating to the affected employees from EF to ECN, and the payment of compensation by EF to ECN. The said agreement contains a conditional obligation to repay an amount to EF if two of the employees resign from ECN during a specified period of time. A claim for full or partial repayment may be triggered if the pension conditions currently applicable to two of the employees are amended. ECN considers it less than 50% likely that the affected employees will resign by the specified dates. The same applies to the likelihood of ECN amending the pension conditions of the two employees so as to trigger a claim for full or partial repayment. In accordance with NRS 13, the conditional liability has not been recorded in the accounts due to the above probability assessment. The total conditional obligation in respect of the two affected employees amounts to no more than NOK 2.1 million. Remuneration paid to the board in 2013 All amounts in NOK 000 Fee Remuneration paid to the board in All amounts in NOK 000 Fee Note 13 Auditor s fees Expensed fees linked to auditing of the company s accounts were as follows: All amounts in the table are quoted in NOK 000 and exclusive of value added tax Fee 2013 Fee 2012 Statutory audit Tax advice 18 0 Other certification services 3 0 Other non-audit services 33 0 Total auditor s fees Note 14 Leases In 2012, the company signed an agreement to lease office space from Bendixen Eiendom AS. The lease runs until 14 June 2017, and contains an option to extend by five years. The annual rental cost is NOK million, including running and shared costs. Note 15 Related parties Export Credit Norway has no ownership interests in other companies. Members of the board of directors and senior executives may not participate in the consideration or determination of matters in which they or parties related to them must be considered to have a direct or indirect personal or financial interest. Directors and executives have a personal duty to ensure that they are not disqualified from participating in the consideration of a given matter. Pursuant to the authorisation granted by Stortinget, the Norwegian government takes over loans from Eksportfinans ASA in connection with reestablishment of the interest margin, through the export credit scheme. Export Credit Norway s mandate gives it responsibility for the practical transfer and subsequent follow-up of loans. Loans are taken over in accordance with the same principle as applied to the loans the State took over before Export Credit Norway was established. Eksportfinans ASA is not considered a related party. At the end of 2013, 75% of the lending portfolio under the export credit scheme was guaranteed by GIEK. GIEK is an administrative body, and thus part of the State s legal person, whereas Export Credit Norway is an independent legal person wholly-owned by the State. An important principle is that the conditions that apply in transactions involving GIEK and Export Credit Norway must be determined on an independent basis. GIEK is not considered a related party. Else Bugge Fougner (Board Chair) 300 Siri Hatlen 180 Trude Husevåg 180 Finn Ivar Marum 180 Øivind Kristian Rue 180 Jørgen Hauge Else Bugge Fougner (Board Chair) 150 Siri Hatlen 90 Trude Husevåg 90 Finn Ivar Marum 90 Øivind Kristian Rue 90 Jørgen Hauge Note 16 Financial market risk Export Credit Norway s financial market risk is limited, and primarily relates to disbursements incurred in connection with external assistance which are re-invoiced to borrowers. Note 17 Events after the balance sheet date The company is not aware of events after the balance sheet date that affected the 2013 annual accounts. 5 Benefits earned since 1 July Subsidised interest rates on personal loans. 7 Performance-related salaries for 2012 are included in the provision for performance-related remuneration; see Note The pension cost corresponds to the expensed pension entitlements accrued from 1 July 2012 to 31 December Employed since 8 October employed since 1 December 2012 in a 50% position due to transition from previous employer. Employed in 100% position since 1 January For Jørgen Hauge, the remaining part of the board remuneration of NOK was paid in Remuneration earned for three months in the case of Jørgen Hauge and six months in the case of other board members

27 Auditors report Auditors report KPMG AS Telephone P.O. Box 7000 Majorstuen Fax Sørkedalsveien 6 Internet N-0306 Oslo Enterprise MVA Independent auditor's report 2013 Eksportkreditt Norge AS To the Annual Shareholders meeting in Eksportkreditt Norge AS INDEPENDENT AUDITOR S REPORT Report on the Financial Statements We have audited the accompanying financial statements of Eksportkreditt Norge AS, showing a profit of NOK thousand. The financial statements comprise the balance sheet as at 31 December 2013, and the income statement and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. The Board of Directors and the Chief Executive Officer s Responsibility for the Financial Statements The Board of Directors and the Chief Executive Officer are responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway, and for such internal control as the Board of Directors and the Chief Executive Officer determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway. Report on Other Legal and Regulatory Requirements Opinion on the Board of Directors report Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors report concerning the financial statements, the going concern assumption and the proposal for the allocation of the profit is consistent with the financial statements and complies with the law and regulations. Opinion on Accounting Registration and Documentation Based on our audit of the financial statements as described above, and control procedures, we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that the management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company s accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway. Oslo, 24 April 2014 KPMG AS Ole Christian Fongaard State Authorized Public Accountant (Norway) [Translation has been made for information purposes only] We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements are prepared in accordance with the law and regulations and give a true and fair view of the financial position of Eksportkreditt Norge AS as at 31 December 2013, and of its financial performance and its cash flows for the year then ended in 54 55

28 Letter from The Office of the Auditor General Lending account 2013 Cash flow statement for the export credit scheme All figures in NOK million note New disbursements 1 23,237 24,217 Interest income Fee income Repayments 1 8,701 1,058 Capital account accounts receivable All figures in NOK million note Opening balance 1 January 2 29,852 6,693 New disbursements 2 23,237 24,217 Repayments 2 8,701 1,058 Corrections (-) 2 16 Total changes during the period 2 14,520 23,159 Closing balance 31 December 2 44,372 29,852 Specification of the lending account Note 1 Cash flow statement New disbursements, interest income and fee income have been recorded in accordance with the actual exchange rate. Repayments have been recorded at historical cost, i.e. at the exchange rate at which the loans were disbursed. No hedging is undertaken to protect against exchangerate fluctuations. The State incurred a repayment-related net foreign exchange loss of NOK 97 million in 2013, meaning that repayments corrected for foreign exchange losses totalled NOK 8,604 million. Note 2 Capital account All amounts are recorded in accordance with historical rates, i.e. the rates at which the loans were disbursed. The corrections are primarily linked to the correction of certain incorrect entries in the 2012 accounts

29 Profitability analysis for the export credit scheme 2013 (shadow accounts) The 2013 shadow accounts have been The State s funding cost is set at the The average portfolio size is calculated Market loans drawn up under the same principles as the shadow accounts for Export Credit Norway s guiding principle when beginning of the year for which the shadow accounts are to be drawn up. The aim is to reflect the fact that the as follows: (opening balance + closing balance)/2. The balances on 1 January, 30 June and 31 December are used to nok USD GBP EUR All amounts in NOK M NIBOR 3 M LIBOR 6 M LIBOR 6 M LIBOR 6 M LIBOR drawing up the shadow accounts is that they must reflect what the scheme State provides annual funding. The starting point is the government bond calculate the average. Weighted average margin over IBOR 1.11 % 1.21 % 0.99 % 0.92 % 0.27 % would cost the State if the State acted like a market participant. Certain minor changes have been made to the assumptions compared to the half-yearly report. These changes primarily relate to points 3, 4 and 5 below. The structure of rate with an almost identical average maturity as the respective lending portfolios. When funding costs are specified in a foreign currency, the interest cost in that currency is calculated by adjusting for the relevant Interest income in foreign currencies will be converted into NOK using the average exchange rates on the first and last banking days of the year. The balances on 1 January, 30 June and 31 December are used to calculate the NOK swap spread % % % % % FX swap 0.18 % 0.18 % 0.10 % % Basis swaps (3M v. 6M) % % % % Swap spread IBOR % % % % % The State s administration costs 0.15 % 0.15 % 0.15 % 0.15 % 0.15 % Funding cost incl. administration costs % % % -0.79% % the shadow accounts is based on the following technical assumptions: interest/currency swap (basis swap). average. Net interest margin 2.00 % 1.79 % 1.70 % 1.71 % 1.15 % The different portfolios are defined as CIRR loans and market loans. These in turn are divided into loans in NOK and loans in foreign currencies, and to reflect the different interest-fixing periods for market loans (3M and 6M IBOR). A supplement is included in respect of the State s administration costs connected to funding. This is set at 15 bp, which equals the administration cost notified to ESA in connection with the market pricing of loans. Average portfolio foreign currencies 6,202,505,053 1,906,421, ,140,202 16,377,937 33,066,667 Average portfolio NOK 6,202,505,053 11,233,907,660 4,096,229, ,208, ,212,622 Net interest income 123,961, ,334,468 69,740,055 2,632,075 2,981,863 Loss provisions (2 bp) 1,240,501 2,246, ,246 30,842 52,043 Net interest income less loss provisions 122,721, ,087,686 68,920,809 2,601,234 2,929,821 Total net interest income market loans 396,260,867 A loan loss provision is deducted. This Total net interest income ,366,895 The average maturity is defined as the weighted average maturity of the portfolio at the end of the year. is set at 2 bp. Fee income 61,984,710 Total income 763,351,605 Management costs 105,000,000 Result for the export credit scheme 658,351,605 The following maturities and exchange rates have been used in the calculations: CIRR loans nok USD GBP EUR All amounts in NOK 000 nok usd GBp eur Weighted CIRR interest rate 3.42 % 3.32 % 3.37 % 3.42 % Funding cost 1.63 % 0.27 % 0.18 % % FX swap 0.00 % 0.12 % 0.01 % % The State s administration costs 0.15 % 0.15 % 0.15 % 0.15 % Funding cost incl. administration costs 1.78 % 0.53 % 0.34 % % Average maturity (CIRR) 6 years 7 years 6 years 5 years Average maturity (market) 3 years 3 years 3 years 2 years Exchange rate (average) ADDItionality CALCULATIONS Net interest margin 1.64 % 2.79 % 3.03 % 3.75 % Additionality total additionality estimate Weight estimated effect Average portfolio foreign currencies 8,866,712, ,626,625 24,757,485 17,339,338 Average portfolio NOK 8,866,712, ,482, ,106, ,449,033 Net interest income 145,587, ,269,943 7,051,715 5,123,434 Loss provisions (2 bp) 1,773,343 1,079,096 46,621 27,290 Net interest income less loss provisions 143,813, ,190,846 7,005,094 5,096,144 Total net interest income CIRR loans 305,106,028 Yes 4 % 0 % 0 % Probably 23 % 10 % 2 % Probably, but not on the same scale 30 % 20 % 7 % No, the contract/sale would probably have been cancelled 27 % 50 % 13 % No 16 % 100 % 16 % Total 100 % 38 % The estimated effect for each additionality category is calculated by multiplying the total additionality estimate by the category s weight. The aggregate estimated effect is then calculated by adding up the individual estimates. The results of the analysis show that there are no significant differences between the various sectors as regards their additionality estimates. This means that an average estimate can be applied to all sectors. Nor are there any statistically significant differences between the average loan amounts in the individual additionality categories

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