Prospectus. Faktor Eiendom ASA

Transcription

1 Prospectus Faktor Eiendom ASA (a public limited liability company organized under the laws of the Kingdom of Norway) Business registration number: Listing on Oslo Børs of 500,317,777 Shares issued in a Private Placement and Debt Conversion This Prospectus does not constitute an offer to buy, subscribe or sell any of the securities described herein. This Prospectus serves as a listing prospectus only as required by Norwegian regulations and no securities are being offered or sold pursuant to this Prospectus. Lead Managers 27 May 2010

2 Important information Please see Section 15, definitions and glossary, which both apply also to the front page. This Prospectus does not constitute an offer to buy, subscribe or sell any of the securities described herein. Readers are expressly advised that the Shares of the Company are exposed to financial and legal risk and that they should therefore read this Prospectus in its entirety and in particular the section of the Prospectus entitled Risk Factors. This Prospectus serves as a listing prospectus only as required by Norwegian regulations and no securities are being offered or sold pursuant to this Prospectus. The contents of this Prospectus are not to be construed as legal, financial or tax advice. Each reader should consult his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice. This Prospectus dated 27 May 2010 has been prepared by Faktor Eiendom ASA ( Faktor or the Company ) in order to provide a presentation of Faktor in connection with the Listing, as defined and described herein. The Prospectus has been prepared to comply with the Norwegian Securities Trading Act sections 7-3 and related legislation and regulations, including the Commission Regulation (EC) No. 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council. The Prospectus has been prepared solely in the English language. The Prospectus has been approved by the Norwegian Financial Supervisory Authority pursuant to sections 7-7 and 7-8 of the Norwegian Securities Trading Act. The information contained herein is as of the date hereof and subject to change, completion and amendment without notice. In accordance with section 7-15 of the Norwegian Securities Trading Act, any new circumstance, material error or inaccuracy relating to information included in the Prospectus, which may have significance for the assessment of the Shares, and arises between date of publication of the Prospectus and before the Shares are listed on Oslo Børs, will be presented in a supplement to the Prospectus. Such supplementary prospectus shall be approved by the Norwegian Financial Supervisory Authority and be published. Publication of this Prospectus shall not create any implication that there has been no change in the Company s affairs or that the information herein is correct as of any date subsequent to the date of the Prospectus. All inquiries relating to this Prospectus must be directed to the Company or the Managers. No other person is authorised to give information or to make any representation in connection with the listing of the New Shares. If any such information is given or made, it must not be relied upon as having been authorised by the Company or the Managers or by any of the employees, affiliates or advisors of any of the foregoing. In the ordinary course of their respective businesses, the Managers and certain of their affiliates have engaged, and may continue to engage, in investment and commercial banking transactions with the Company. No action has been or will be taken in any jurisdiction other than Norway by the Managers or the Company that would permit the possession or distribution of this Prospectus, any documents relating thereto, or any amendment or supplement thereto, in any country or jurisdiction where specific action for such purpose is required. Accordingly, this Prospectus may not be distributed to or used for the purpose of, and does not constitute, an offer to sell or issue, or a solicitation of an offer to buy or apply for, any securities in any jurisdiction in any circumstances in which such offer or solicitation is not lawful or authorised. Persons into whose possession this Prospectus may come are required by the Company and the Managers to inform themselves about and to observe such restrictions. Neither the Company nor the Managers shall be responsible or liable for any violation of such restrictions by prospective investors. The securities described herein have not been and will not be registered under the US Securities Act of 1933 as amended (the Securities Act ), or with any securities authority of any state of the United States. Accordingly, the securities described herein may not be offered, pledged, sold, resold, granted, delivered, allotted, taken up, or otherwise transferred, as applicable, in the United States, except in transactions that are exempt from, or in transactions not subject to, registration under the Securities Act and in compliance with any applicable state securities laws. This Prospectus, the Offering and the Listing are subject to Norwegian law, unless otherwise indicated herein. Any dispute arising in respect of the Listing, the Offering or this Prospectus is subject to the exclusive jurisdiction of the Norwegian courts.

3 TABLE OF CONTENTS 1 EXECUTIVE SUMMARY RISK FACTORS STATEMENT OF RESPSONSIBILITY NOTICE REGARDING FORWARD-LOOKING STATEMENTS THE RESTRUCTURING PRESENTATION OF THE COMPANY THE MARKET ORGANISATION, BOARD OF DIRECTORS AND MANAGEMENT FINANCIAL INFORMATION SHARES AND SHARE CAPITAL SHAREHOLDER MATTERS AND NORWEGIAN COMPANY AND SECURITIES LAW NORWEGIAN TAXATION LEGAL MATTERS ADDITIONAL INFORMATION DEFINITIONS AND GLOSSARY OF TERMS APPENDIX 1 APPENDIX 2 Articles of Association Complete Legal structures 2

4 1 EXECUTIVE SUMMARY This summary should be read as an introduction to the Prospectus and any decision to invest should be based on consideration of the Prospectus as a whole by the investor, including the documents incorporated by reference and the risks of investing set out in Risk Factors. This summary is not complete and does not contain all the information that you should consider in connection with any decision relating to the New Shares. Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff might under the applicable legislation have to bear the costs of translating the Prospectus before the legal proceedings are initiated. No civil liability will attach to the Board of Directors in respect of this summary, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus. 1.1 DESCRIPTION OF FAKTOR EIENDOM ASA Introduction Faktor Eiendom is a public limited liability company, incorporated in accordance with the Norwegian Public Limited Companies Act and subject to Norwegian law. The Company was incorporated on 18 October The Company's Shares are registered in VPS under ISIN NO and the Company is registered in the Norwegian Register of Business Enterprises with registration number NO The Group employs approximately 396 persons as per the date of the Prospectus History and development The Company s business was established in 1999 by Lasse Fosby, Ronny Antonsen and Rune Kilebu. It quickly focused on the purchase of sites and residential property, project planning, construction, sales and management, and in the space of two to three years the company had established itself as a participant in the holiday home market, primarily focusing on the Swedish and Norwegian mountains and the coast between Oslo and Gothenburg, in addition to a small project in Spain. The company was listed on the stock exchange in This allowed it to raise new capital, which was invested in the Company s activities. In the third quarter of 2009 the Company started up its first module production factory, which enables it to take part of a greater share of the value chain within areas of operations Business description Faktor Eiendom is a property company. Through its various areas the Group possesses to develop property values. The last three years the Company has expanded its areas of operations by entering into hotel- and resort operations. In the third quarter of 2009 the Company started up its first module production factory. A significant part of the Company s activities involves developing projects, and the subsequent sale of properties to long-term owners. Faktor Eiendom is a long-term and active owner of companies with expertise in the development, production, management and operation of properties. The group is generally not a long-term owner of properties Business overview Faktor Eiendom s value chain typically starts with the acquisition and subsequent development of large unregulated plot of land with a potential to develop several different projects. The company continues with the obtaining of planning permission and construction of the building. In the end of the value chain, following completion, the Company carries out property management. Faktor Eiendom does not normally take on any responsibility for a plot before planning permission has been obtained. Unregulated land is normally controlled through option agreements. Step one, after securing a right to a plot, is to obtain the necessary planning permission. Step two is to plan the layout of the infrastructure, with focus at technical solutions desired by the market. The third step is to develop concepts on ownership structure and financial structure, in order to meet each customer s requirements. After a majority of units are sold, the Company takes on a management role in the construction phase. Faktor Eiendom has the responsibility to develop each project/unit, either through the internal contractor Faktor Entreprenør, or through external contractors. Upon completion and during the construction phase, Faktor Eiendom provides management service with the responsibility of the daily management of the established housing or vacation home, structured either as a coownership, cooperative housing unit, or limited liability housing company. Faktor Eiendom s management service makes its best effort to establish necessary routines and systems in place to handle the management of the co ownership, cooperative housing unit, or limited liability housing company. 3

5 1.2 PURPOSE AND BACKGROUND OF THE DEBT CONVERSION AND CONTEMPLATED PRIVATE PLACEMENT The purpose of the Private Placement and Debt Conversion is to strengthen the Company s financial situation. 1.3 DESCRIPTION OF THE COMPLETED PRIVATE PLACEMENT AND THE DEBT CONVERSION On 20 May 2010, the General Meeting of the Company resolved to increase the share capital of the Company through a Private Placement and a Debt Conversion. In total it was resolved to issue 500,317,777 New Shares. The Private Placement consisted of an increase of the Company s Share Capital by NOK 5,555, through the issuance of 277,777,777 New Shares, each having a par value of NOK 0.02 through a Private Placement. The shares in the Private Placement were issued against contribution in cash at a subscription price of NOK 0.90 per share which equals the gross proceeds of approximately NOK 250,000,000. The Debt Conversion consisted of an increase of the Company s Share Capital by NOK 4,450,800 through the issuance of 222,540,000 New Shares, each having a par value of NOK The shares in the Debt Conversion were issued against contribution in kind by converting existing debt to equity at a subscription price of NOK 1.12 per Share. The Debt Conversion will ease the Company s debt obligations by approximately NOK 250,000,000. The New Shares will be admitted to trading on Oslo Børs following approval and publication of this Prospectus. The timetable below provides certain key dates for the Private Placement: Subscription Period started: 20 April 2010 Subscription Period ended: 22 April 2010 Allocation date, expected: 23 April 2010 Payment date: 20 May 2010 Registration of the New Shares with the VPS: 27 May 2010 Distribution of allocated New Shares, expected: 27 May 2010 Listing and start of trading in the New Shares on Oslo Børs, expected: 27 May Dilution following the Private Placement and the Debt Conversion The percentage of immediate dilution resulting from the Private Placement and the Debt Conversion for the existing shareholders who do not participate in the Private Placement or the Debt Conversion is approximately 69.21% Subsequent repair issue On 20 May, 2010, the General Meeting of the Company granted the Board of Directors the necessary authority to carry out a subsequent repair issue directed towards shareholders of the Company at the time of the General Meeting who did not participate in the Private Placement, if the Board of Directors should find it expedient to carry out such issue. The Private Placement was made as a disclosed offering and, even though the minimum subscription price was set to NOK 500,000 it was open to participate in for other investors and shareholders than those who actually did subscribe for New Shares in the Private Placement. As of the date of this Prospectus such repair issue has not been resolved and the Board of Directors have decided that it will not carry out any such issue, inter alia supported by the above and that it is assumed that the potential proceeds from such issue will not justify the costs related thereto Expenses and net proceeds Cost attributed to the Private Placement and the Debt Conversion will be carried by the Company. The total costs are expected to amount to approximately NOK 13, The net proceeds to the Company from the Private Placement will be approximately NOK In additional the Company has as a consequence of the Debt Conversion converted approximately NOK 250,000,000 of its debt to equity. 1.4 BOARD OF DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Board of Directors The Board of Directors consist of five members; Jon Rømer Sandberg (Chairman), Hilde Vatne, Unni Marie Rådalen, Lasse Fosby and Rune Kilebu. Please refer to Section 8.1 for further information. 4

6 1.4.2 Employees As of the date of the Prospectus, Faktor Eiendom ASA and its subsidiaries employ approximately 396 people. For more information, please refer to Section 8.4 below Management The Company's executive management comprise of: Rune Kilebu (CEO, Faktor Eiendom ASA and head of Property Development), Pål Henning Johansen (Finance, Faktor Eiendom ASA), Johann B. Stenrød (CEO, Production), and Rune Kilebu (Administration Manager). 1.5 ADVISORS AND AUDITORS Auditor BDO Noraudit Borg DA has been the Company s elected auditor for the three years ended 31 December 2009, 2008 and The auditor is a member of Den Norske Revisorforening (The Norwegian Institute of Public Accountants). The registration number in the Norwegian Register of Business Enterprises is NO The Company changed auditor 5 January 2010 to BDO AS. This is the same auditing company as before. The registered address of BDO AS is: Name: BDO AS Address: Vika Atrium, Munkedamsveien 45, 0250 Oslo, Norway Telephone: Fax: Advisors Handelsbanken Capital Markets, Rådhusgaten 27, 1342 Vika, 0113 Oslo and Pareto Securities AS, Dronning Mauds gate 3, N-0115 Oslo is the Manager for the Private Placement and the Debt Conversion. The Legal Advisor to the Company is Advokatfirmaet Selmer DA. 5

7 1.6 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTION Shareholders per 27 May 2010: Name of shareholder Number of Shares Percentage (%) 1 Faktor Invest AS... 49,024, % 2 Rune Kilebu AS... 29,287, % 3 Lasse Fosby AS... 29,287, % 4 Mons Holding AS... 12,754, % 5 Institusjonen Fritt Ord... 10,509, % 6 Krag Invest AS... 5,998, % 7 Trafalgar AS... 4,162, % 8 Sæter Haakon Morten... 2,470, % 9 Welle Gruppen AS... 2,312, % 10 Bonnie AS... 2,260, % 11 First Securities AS... 2,124, % 12 KEB Eiendom AS... 2,116, % 13 Botek Norge AS... 2,112, % 14 HGT Invest AS... 2,106, % 15 FW Invest AS... 2,106, % 16 Vige AS... 2,106, % 17 Stein Håkon Glosli AS... 2,106, % 18 MP Pensjon... 1,804, % 19 Odin Norge... 1,689, % 20 Tveteraas Eiendomsselskap... 1,500, % Total 20 largest shareholders ,838, % Others... 54,701, % Total ,540, % Related party transactions Year Related party Description of transaction Amount (NOK) Lasse Fosby Faktor Eiendom ASA has hired the sole proprietorship Lasse Fosby (business reg. no ) to the position as CEO 1 December The remuneration is upward limited to NOK 150,000 per month + VAT and expenses. The agreement expires on 30 June Rune Kilebu Faktor Eiendom ASA has hired Rune Kilbu AS as Management for Hire (business reg. no ) from 1 December The remuneration is upward limited to NOK 150,000 per month + VAT and expenses. The agreement expires on 30 June Lasse Fosby Faktor Landbrygga AS has entered on 1 May 2009 into an agreement with Lasse Fosby regarding the purchase of a section in agglomeration of buildings in Langbrygga 1 AS. The purchase price is set in accordance with an external valuation of the section. Kilebu Transport DA Faktor Eiendom ASA has purchased services from KilebuTransport DA Remuneration regarding tasks necessary to comply with the requirements set out by NOK 1.5 million the municipality under which the Hällekind project was approved. Kilebu Transport DA Kilebu Transport DA has purchased two apartments in the Hällekind NOK 4,306,360 Terje Fosby project Terje Fosby has entered into a co-operation agreement to assist Faktor Eiendom ASA in selling apartments in the Hällekind project. Remuneration NOK 40,000 at sales of each unit Terje Fosby Terje Fosby has purchased one apartment in the Hällekind project SEK 2,990,000 6

8 Year Related party Description of transaction Amount (NOK) Lasse Fosby s sole proprietorship with registration no Consultancy agreement, effective until 1 July 2009 Hourly rate of NOK 1,500. Total amount of NOK 792,000 in 2008 Rune Kilebu AS Consultancy agreement, effective until 1 July 2009 Hourly rate of NOK 1,500. Total amount of NOK 792,000 in 2008 Lasse Fosby AS Loan to the Company NOK 25,000,000 Rune Kilebu AS Loan to the Company NOK 25,000,000 Morten Riiser (CEO Agreement concerning warrants See section Lasse Fosby AS Sale of housing unit in Opsalhagen community association Approximately NOK 2,000,000 (including shared debt) Rune Kilebu AS Sale of housing unit in Opsalhagen community Approximately NOK 2,000,000 (including shared debt) Lasse Fosby AS/AFE Invest AS Sale of housing unit in Opsalhagen community association Approximately NOK 1,750,000 (including shared debt) Flydirect.no AS Purchase of flight time (minimum 12 hours per month) Hourly rate of NOK 12,000 (minimum) NOK 144,000 per month. Total minimum investment of NOK 5,784,000. Son Resort Utleie AS Guarantee in favour of Nordea Bank Norge ASA NOK 44,000,000 Rune Kilebu On 1 July 2008, Rune Kiliebu acceded into an agreement which Faktor entered into with a third party on 25 January 2005 regarding the purchase of a ground for NOK The purchase price and the other terms of the contract are the same as they were originally. NOK 800,000 Year Related party Description of transaction Amount (NOK) Østlandske Tomteselskap Sale of various leased properties Totally NOK 17,624,000 AS Skjærøy Slipp AS Framework agreement regarding provision of services for Onsøy Vest II and Stavtaket projects Hourly rate of NOK 650 Rune Kilebu Construction of garage Approximately NOK 1,000,000 Tomtebank 1 AS Purchase of property at Gystamyra NOK 18,480,000 Several direct and indirect shareholders/members of management Sale of housing units in Nøtholmen Resort 1 and 2 AS NOK 100,000 per unit Østsiden storsenter Sale of properties in Fredrikstad NOK 24,000,000 7

9 1.7 KEY FINANCIAL INFORMATION Key financial data The tables below lists the key financial data for 2007, 2008 and 2009 INCOME STATEMENT, CONSOLIDATED Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Sales revenues Other revenues Total revenues Cost of goods sold Salaries Depreciation Write downs of assets Other operating expenses Total operating expenses Operating profit Share of profit in associated companies Net financial items Profit before tax Tax Profit for the period Minority interests Majority interests Dividend per share (diluted), NOK

10 BALANCE SHEET, CONSOLIDATED Figures in NOK million Audited FY2009 Audited FY2008 Audited FY2007 ASSETS Goodwill Other intangible assets Fixed assets Financial fixed assets Investments in related companies Total fixed assets Current assets Construction contracts n.a. Stock of goods n.a. Ownership in cooperatives Sum plots and buildings under construction Accounts receivable Other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Retained earnings and share premium Minority interests Total equity Deferred tax liability Provisions for guarantees Long term interest bearing debt Long term non-interest bearing debt Total long term liabilities Short term interest bearing debt Accounts payable Taxes payable Other short term debt Total short term liabilities Total equity and liabilities

11 CASH FLOW STATEMENT, CONSOLIDATED Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Profit before tax Change in accounts receivable Change in accounts payable Change in investment and development property Profit from sale of assets Depreciation Write downs Change in other accruals Payments purchases of units for sale Paid taxes for the period Net cash flow from operating activities Sale of tangible fixed assets Purchases of tangible fixed assets Purchases of intangible fixed assets Sale of shares Purchases of shares Installments on receivables Installments on liabilities Purchases of subsidiaries Net cash flow from investing activities Proceeds from share issues New debt Installments paid on debt Paid/received to/from minorities Dividend paid Net cash flow from financing activities 733, Net change in cash and cash equivalents 49, Cash and cash equivalents beginning of period 72, Cash and cash equivalents end of period 122, For complete financial statements, accounting policies, management discussion & analysis and other financial information see section 9 below Significant changes and trends after 31 December 2009 Faktor commissioned the rehabilitation of Renaissance Malmö Hotel and handed it over to its new owner Kristiania Eiendomsforvaltning AS in December Hotel Courtyard by Marriot Stockholm was commissioned and handed over to its new owner Invesco Hotel Investments Swedish HoldCo AB the date the hotel opened, which was 8 February, The Company also entered into a new agreement with Studentskipnaden in Bergen to construct 727 student flats. The contract has a total value of NOK million (NOK 378 million inclusive VAT). A large proportion of the construction will be done through Faktor Eiendom s new module factory. In April 2010, Faktor Eiendom agreed upon new debt terms with its main bank, DnB NOR. The restructuring agreement includes a Debt Conversion of NOK 250 million by the issuance of New Shares, as well as a Private Placement of NOK 250 million. Both agreements where resolved by the Company s General Meeting in May,

12 1.7.3 Capitalisation and indebtedness TOTAL CAPITALISATION Figures in NOK million 31 December 2009 Guaranteed current debt 0.0 Secured Unguaranteed/unsecured 0.0 Non-interest bearing current debt Current debt 1,292.1 Guaranteed non-current debt 0.0 Secured Unguaranteed/unsecured 0.0 Non-interest bearing non-current debt 79.9 Non-current debt Share capital 4.4 Share premium fund 0.0 Other reserves Total shareholders' equity Total capitalisation 2,893.3 NET FINANCIAL INDEBTEDNESS Figures in NOK 31 December 2009 Cash Cash equivalents 0.0 Traded securities and other financial 0.0 instruments Liquidity (cash) Current bank debt Current portion of non-current debt 50.6 Other current financial debt 0.0 Current financial debt Net current financial indebtedness Non-current bank loans Bonds issued 0.0 Other non-current loans 59.6 Non-current financial indebtedness Net financial indebtedness 1, SUMMARY OF RISK FACTORS A number of risk factors may adversely affect the Company. Below is a summary of the most relevant risk factors which are further described in Section 2. Please note that the risks below are not the only risks that may affect the Company s business or the value of the Shares. Additional risks not presently known to the Board of Directors or considered immaterial at the time of the Prospectus may also impair its business operations and prospects. The risk factors the Company and its Shares are subject to are, inter alia: Market Risk Environmental risk related to land Macro economic development Risk associated with obtaining planning permission and other regulatory consents Competitive market, including risk of changes in peoples preferences for hotel- and resort destinations Financial Risk Access to financial funding Currency and interest rate risk Insurances Taxes 11

13 Operational risk Organisational and internal control Risk associated with use of contracts Capacity issues Project planning Loss of key personnel Risk related to unsold units Risk related to module production factory Risk factors relating to the Shares Price volatility of Public traded Securities Difficulties for foreign investors to enforce civil liabilities in Norway No registration in the United States Potential dilution of shareholders Norwegian law may limit the shareholders' ability to bring an action against the company Nominee registered shares- voting rights 1.9 ADDITIONAL INFORMATION Share capital and shareholder matters The issued share capital of the Company is NOK 14,457, comprising of 722,857,777 Shares fully paid with a par value of NOK 0.02 and issued in accordance with Norwegian law. The Shares are registered in the VPS register with ISIN NO The Registrar for the Shares is DnB NOR Verdipapirservice, Stranden 21, Aker Brygge, 0021 Oslo, Norway. The Shares are equal in all respects and each Share carry one vote at the Company s General Meeting. The Company s Articles of Association do not contain any provisions imposing any limitations on the ownership or the tradability of the Shares Articles of Association The Company's Articles of Association are included in Appendix 1 in this Prospectus Documents on display For the life of this Prospectus the following documents may be inspected at the offices of the Company or downloaded from the Company's web page: Articles of Association of Faktor All reports, letters and other documents, historical financial information, valuations and statements prepared by any expert at the issuer's request any part of which is included or referred to in the registration document; Historical financial information for the Company annual accounts for 2007, 2008 and 2009; and Stock exchange notices, including quarterly reports, distributed by the Company through Oslo Børs information system NewsWeb. 12

14 1.9.4 Incorporation by reference The information incorporated by reference in the Prospectus shall be read in connection with the cross-reference list as set out in the table below except as provided in this Section, no other information is incorporated by reference into this Prospectus. Disclosure requirements of the Prospectus Audited historical information (Annex I, Section 20.1) Audit report (Annex I, Section ) Accounting Policies (Annex I, Section 20.1) Section in the Prospe ctus 9, 9.1, 9.2,9.3, 9.4,9.5, 9.6,9.7, 9.9, ,9.1,9. 2,9.3,9. 4,9.5,9. 6,9.7,9. 9,9.10 Reference document Consolidated annual report 2007 Consolidated annual report 2008 Consolidated annual report 2009 Consolidated annual report 2007 Consolidated annual report 2008 Consolidated annual report ,9.1 Consolidated annual report 2009 Internet pdf 9_web.pdf pdf 9_web.pdf 9_web.pdf Statement regarding sources The Company confirms that when information in this Prospectus has been sourced from a third party it has been accurately reproduced and as far as the Company is aware and is able to ascertain from the information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. 13

15 2 RISK FACTORS 2.1 GENERAL Faktor Eiendom and its Shares are exposed to inherent risks. Readers should consider, among other things, the risk factors set out in this Prospectus. The risks described below are not the only risks facing the Company. Additional risks not presently known to the Company or currently deemed by the Company to be immaterial to the Company s business may in future impair the Company s business operations and adversely affect the Share or the Company. If any of the following risks actually occur, Faktor s business, financial position and operating results could be materially adversely affected. Readers should consider carefully the factors set out below, and elsewhere in the Prospectus, and should consult his or her own expert advisors for assistance if deemed necessary. An investment in the Shares is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or part of the investment. The information is presented as of the date hereof and is subject to change, completion or amendment without notice. All Share investments are connected with risks. The Company is exposed to fluctuations in the general economy. Changes in interest rates and foreign exchange ratios will influence the financial situation of the Company. 2.2 MARKET RISK Risk related to land In the course of its business, Faktor Eiendom acquires lots of land for development of real-estate projects. The risks related to land are mainly related to foundation issues. These are normally due to man-made land fillings of poor quality or problems caused by leak or stability problems due to soft clay. In addition, purchase of land involves inherent environmental risks, from time to time, deposits of toxics which have to be removed or taken care of prior to development occurs. Finally the land acquired can contain historical artefacts limiting the use of land. The Company has procedures for evaluating environmental risks related to land, however such risks are an inherent part of the business Macro-economic development Norway has experienced a period with falling house-building activity and low interest rates. Macroeconomic experts, as well as financial markets, expect an overall increase in the total house-building activity as well as a modest increase in interest rates. Faktor Eiendom operates in a market segment that they believe to be less sensitive to changes in macro-economic factors than the overall market. However, a sharp increase in interest rates, and/or an adverse change in other economic variables for which the Company s end customers are sensitive to, will have an impact on Faktor Eiendom s ability to sell its projects within the required time frame at the required price level. Such a scenario could therefore materially adversely affect Faktor Eiendom s operating results and financial condition Risk associated with obtaining planning permission and other regulatory consents Changes in, or completion, of existing planning regulations by relevant authorities may significantly affect the operations of the Company s properties. Furthermore, existing planning regulations may limit the possibility to further develop the properties. The level of utilization allowed for land subject to a development project will significantly affect the profitability of the project. There can be no assurance that Faktor Eiendom will obtain planning permission for utilization at the assumed levels. Planning authorities have discretion to set conditions for planning permissions, including the right to require the Company to make costly investment or the right to set conditions based on environmental or other considerations which may adversely affect a project s profitability Competitive market The Norwegian house-building and vacation home market is fragmented with many competitors. Increased competition and consolidation in the market may result in future reductions in income and loss of market share, which could adversely affect the Company s operating results and financial condition. Furthermore there is a risk that peoples preferences change in a way that visiting our hotel and resort destinations becomes less attractive.

16 2.3 FINANCIAL RISK Access to financial funding In addition to cash generated from operations, Faktor Eiendom is dependent upon having access to loans and credit lines to fund its operations and capital expenditures. Should the Company experience weakening markets and lower cash flow, the Company may have to make substantial changes in its business plans including curtailing new development projects to adapt the business to the funds available Currency and interest rate risk The Company endeavours to minimize its foreign exchange and interest rate exposure. A portion of the Company s activities is located outside Norway, and the Company has income and expenses in foreign currency. The Company seeks to hedge this exposure to the extent possible, but a certain foreign exchange risk will remain. Changes in the rate of interest charged on the Company s borrowings will have an impact on the Company s finance costs Insurances The Company maintains insurances in line with industry standards. Any insurance payment is generally subject to a deductible. There can be no assurance that the Company s insurance policies will cover all risks or that all insurances can be obtained at an acceptable price Taxes Faktor Eiendom has activities in Norway, Sweden, and Spain. The overall tax rate will depend on where profits are accumulated and taxed since these countries have different tax systems and tax rates. Changes in taxation law or the interpretation of taxation law may impact the business, results of operations and financial condition of the Company. To the extent tax rules change, this could have both a prospective and retrospective impact on the Company, both of which could be material. 2.4 OPERATIONAL RISK Organisational and internal control The Group operates a relatively complex business model with numerous legal entities and intergroup transactions implying a need for effective systems and procedures in order to ensure the required control and management of the business. The Company has found that there is potential for improvement in this respect and is therefore planning to reorganize the Group with the purpose of simplifying the legal and operating structure, to implement adequate financial reporting and control systems, improve internal control and enhance corporate governance. Successful implementation of such changes might be of vital importance for the Company achieving its operational and financial objectives, and there can be no assurance that such changes will be implemented successfully Risk associated with use of contracts Faktor Eiendom utilizes the services of external building contractors and service providers in connection with the development and construction of new projects. The majority of contracts with contractors are on a fixed price basis and the Company endeavours to use established contractors with a long track record for its projects. However, Faktor Eiendom will be exposed to losses and extra costs on projects if a contractor should experience financial difficulties and/or become insolvent. Faktor Eiendom will also be exposed to cost overruns on projects in the event changes in plans or additional work outside the scope originally agreed should become necessary during the construction phase Capacity issues Lack of skilled manpower is a problem in some areas. Capacity constraints experienced by construction contractors and also in-house in Faktor Eiendom can negatively affect the Company s ability to complete projects on time and on budget, and its overall ability to develop and sell a sufficient number of housing units to fulfil its business plans Project planning Planning and development of new projects in a manner which makes the project attractive for customers requires highly skilled and qualified personnel. There can be no assurance that the Company in future will manage to develop projects which are seen as sufficiently attractive by customers to achieve the prices necessary to secure the necessary project profitability for Faktor Eiendom. 15

17 2.4.5 Loss of key personnel Faktor Eiendom is dependent upon attracting and retaining key employees and management personnel, in particular within the areas of project planning and development and management and administration of property projects. Personnel with competence in these areas are attractive in the market. Competition for qualified staff and other factors could adversely affect the Company s ability to attract and retain key employees. The loss of the services of key personnel may adversely affect the Company s operating results and financial condition. The localisation of Faktor Eiendom is not necessarily optimal with regard to management in general and other key personnel Risk related to unsold units As of the date of the Prospectus Faktor Eiendom has a stock of approximately 400 completed but unsold home and leisure property units on its own balance sheet. There can be no assurance that the Company will manage to sell these units, and any future developed unsold home and leisure units, at all or that a sale will be at satisfactory prices to Faktor Eiendom. Potential future write downs of unsold home and leisure units and rent obligations related to such units will adversely affect Faktor Eiendom s business, financial position and operating results Risk related to module production factory The module production factory in Rakkestad which was completed in Q has as of the date of this Prospectus not yet completed its first project. The module production factory is still in a start-up phase and thus it is too early to conclude on its utilization, efficiency and profitability. The profitability of the module production factory is also dependent on stabile development in prices of input factors. There can be no assurance that the Company will manage deliver modules from the factory at satisfactory margins which will have an adversely affect on Factor s business financial position and operating results. 2.5 RISK FACTORS RELATING TO THE SHARES Price volatility of Public traded Securities The trading price of the Shares could fluctuate significantly in response to quarterly variations in operating results, adverse business developments, interest rate, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors, or changes to the regulatory environment in which the Company operates. The market price of the Shares could decline due to sales of a large number of the Shares in the market or the perception that such sales could occur. Such sales could also make it more difficult for the Company to offer equity securities in the future at a time and at a price that are deemed appropriate Difficulties for foreign investors to enforce civil liabilities in Norway The Company is organized under the laws of Norway. Currently, all of its directors are residents of Norway, and a substantial portion of its assets is located in various jurisdictions. As a result, it may not be possible for non Norwegian investors to affect service of process on the Company or the Company s directors in the investor s own jurisdiction, or to enforce against them judgments obtained in non-norwegian courts. Norway is party to the Lugano Convention and a judgment obtained in another Lugano Convention state will in general be enforceable in Norway. However, there is substantial doubt as to the enforceability in Norway of judgments of non-lugano Convention state courts, such as the courts of the United States No registration in the United States The Shares have not been registered under the US Securities Act of 1933, as amended, or the securities laws of other jurisdictions other than in Norway, and is not expected to be so in the future. The Shares may not be offered or sold in the United States or in any other jurisdiction in which the registration of the Shares is required but has not taken place, unless an exemption from the applicable registration requirement is available or the offer or sale of the Shares occurs in connection with a transaction that is not subject to these provisions. In addition, there can be no assurances that shareholders residing or domiciled in the United States will be able to participate in future capital increases or rights offerings Potential dilution of shareholders The Company may require additional capital in the future in connection with financing of new capitalintensive projects. In addition, the Company may incur unanticipated liabilities or expenses. There can be no assurance that the Company will be able to obtain the necessary financing in a timely manner or on acceptable terms. Where the Company issues shares in the future, such issuance may result in the then existing shareholders of the Company sustaining dilution to their relative proportion of the equity of the Company. 16

18 Certain foreign investors, including US investors, may be unable to participate in share issues in the Company, and accordingly their percentage shareholding may be diluted. Unless otherwise resolved by the General Meeting, shareholders in Norwegian public companies such as the Company have pre-emptive rights proportionate to the aggregate amount of the shares they hold with respect to New Shares issued by the Company. For reasons relating to US securities laws and the laws in certain other foreign countries or other factors, certain foreign investors, including US investors, may not be able to participate in a new issuance of shares or other securities, and may face dilution as a result Norwegian law may limit the shareholders ability to bring an action against the Company The Company is a public limited company incorporated under the laws of Norway. The rights of holders of Shares are governed by Norwegian law and by the Articles of Association. These rights differ from the rights of shareholders in typical US corporations. In particular, Norwegian law limits the circumstances under which shareholders of Norwegian companies may bring derivative actions. Under Norwegian law, any action brought by a company in respect of wrongful acts committed against the company takes priority over actions brought by shareholders in respect of such acts. In addition, it may be difficult to prevail in a claim against the Company under, or to enforce liabilities predicated upon, U.S. securities laws Nominee registered shares- voting rights Beneficial owners of the Shares that are registered in a nominee account may not be able to vote such shares unless their ownership is re-registered in their names with the VPS prior to the Company s General Meetings. The Company cannot guarantee that beneficial owners of the Shares will receive the notice for a General Meeting in time to instruct their nominees to either effect a re-registration of their shares or otherwise vote their shares in the manner desired by such beneficial owners. 17

19 3 STATEMENT OF RESPSONSIBILITY 3.1 STATEMENT BY THE BOARD OF DIRECTORS OF FAKTOR EIENDOM ASA The Board of Directors of Faktor Eiendom ASA accepts responsibility for the information contained in this Prospectus. The Board of Directors hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. 27 May 2010 The Board of Directors of Faktor Eiendom ASA Jon RømerSandberg Chairman Lasse Andre Fosby Rune Kilebu Unni Marie Rådalen Hilde Vatne 3.2 THIRD PARTY STATEMENTS Information contained in this Prospectus which has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. 18

20 4 NOTICE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus includes forward-looking statements, including, without limitation, projections and expectations regarding the Company s future financial position, business strategy, plans and objectives. All forward-looking statements included in this document are based on information available to the Company, and views and assessment of the Company, as of the date of this Prospectus. The Company expressly disclaims any obligation or undertaking to release any updates or revisions of the forward-looking statements contained herein to reflect any change in the Company s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless such update or revision is prescribed by law. When used in this document, the words anticipate, believe, estimate, expect, seek to, may, plan and similar expressions, as they relate to the Company, its subsidiaries or its management, are intended to identify forward-looking statements. The Company can give no assurance as to the correctness of such forwardlooking statements and investors are cautioned that any forward-looking statements are not guarantees of future performance. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company and its subsidiaries, or, as the case may be, the industry, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company and its subsidiaries are operating or will operate. Factors that could cause the Company s actual results, performance or achievements to materially differ from those in the forward-looking statements include, but are not limited to, those described in Section 2 Risk Factors and elsewhere in the Prospectus. Given the aforementioned uncertainties, readers are cautioned not to place undue reliance on any of these forward-looking statements. 19

21 5 THE RESTRUCTURING 5.1 BACKGROUND FOR THE RESTRUCTURING Since the end of 2009, Faktor Eiendom experienced a challenging financial situation. Due to the challenging situation initiatives were taken in order to establish a comprehensive restructuring involving conversion of debt and an equity issue as announced in a stock exchange notice of 19 April On 20 April 2010, the Company announced a restructuring proposal to its shareholders to address the financial situation in the Company. The new debt package provides substantial improvement of the Company s long term debt, the liquidity situation and creates a platform to complete and sell projects going forward. In addition, the Board of Directors made announcement of the contemplated Private Placement of NOK 250 million in new equity. 5.2 THE COMPLETED PRIVATE PLACEMENT On 20 April 2010 the Company and the Board of Directors instructed Handelsbanken Capital Markets and Pareto Securities AS to advice on and effect a potential Private Placement of NOK 250,000,000 in new equity with a price to be set through a bookbuilding process. The subscription period opened on 10:30 CET on 20April 2010 and could close at 17:30 CET on 22 April 2010 at the latest. The Board of directors resolved to close the book at 16:00 CET on 21 April 2010 after being informed by the Managers in the Private Placement that the book was more than fully covered. In order to ensure swift and successful completion of the Private Placement it was considered necessary to set aside the shareholders preferential rights to subscribe for New Shares pursuant to Section 10-5 of the Norwegian Public Limited Liability Companies Act. Approximately 140 investors were in total allocated 277,777,777 New Shares, each with a nominal value of NOK 0.02, at a subscription price of NOK 0.90 per New Share, giving total proceeds of NOK 249,999, On 22 April 2010, the subscribers in the Private Placement were notified of their allotment subject to the condition for the Private Placement being fulfilled. The Private Placement was carried out with a minimum subscription amount (minimum lots) of NOK 500,000, hence not triggering an offering prospectus pursuant to the Securities Trading Act. The Private Placement was conditional upon the approval of the increase in share capital by the general meeting of Faktor Eiendom which was held on 20 Mai Resolution from the Company s general meeting Pursuant to the Board of Directors proposal the annual general meeting passed the following resolution in its meeting held on 20 May 2010 (in-house translation of the Norwegian original text): 1. The share capital is increased with NOK 5,555, by issuance of 277,777,777 New Shares, each with a nominal value of NOK 0.02 per Share; 2. The shares are subscribed by Pareto Securities AS on behalf of investors as provided in the enclosed Appendix 1 to the minutes; 3. The pre-emptive right of the shareholders is waived; 4. The subscription price shall be NOK 0.90 per share; 5. Subscription of shares will take place within 25 May 2010 on a separate subscription form; 6. Payment of the allotted shares shall be made in cash to a bank account established by Pareto Securities AS in the name of the Company within 20 May 2010; 7. The New Shares shall carry a right to dividend and have shareholder rights from registration of the share capital increase with the Norwegian Register of Business Enterprises; 8. Article 4 of the Articles of Association shall be amended in accordance with the above The subscription price in the Private Placement The Private Placement was executed as a book-building process with an indicative price range of NOK 0.90 to NOK 1.10 per New Share. On 21 April 2010, the Board of Directors resolved to set the subscription price to NOK When determining the subscription price, the Board of Directors considered the overall subscription level and the limits received from the subscribers in the book-building period. 20

22 5.2.3 Settlement of the Private Placement On 22 April 2010 the Managers in the Private Placement sent conditional allocations and payment instructions to the subscribers in the Private Placement. The payment for the New Shares being issued in the Private Placement was made to a blocked escrow account on 20 May 2010 pending the publication of this Prospectus. The New Shares will be issued to the subscribers on or about 27 May 2010 and will immediately begin trading on Oslo Børs under the Company s ticker code FAKTOR. The New Shares will be issued in the Private Placement pursuant to the resolution by the general meeting of 20 May 2010, as referred to in Section above. 5.3 THE COMPLETED CONVERSION OF DEBT On 20 April 2010, the Company announced that it over the last weeks had been working together with its main banks to meet the capital requirements for the activities to be completed in the period. The new debt package provides substantial improvement of the long term debt package, the liquidity situation as well as a platform to complete and sell projects going forward. Previous to the Debt Conversion, the Company s had debt of NOK 310 million and NOK 75 million to DnB NOR ASA and Nordea Bank ASA respectively. Of the NOK 310 million in debt to DnB NOR, NOK 250 million was converted into equity through a private placement, the Debt Conversion Resolution from the company s general meeting Pursuant to the Board of directors proposal the annual general meeting passed the following resolution in its meeting held on 20 May 2010 (translation from Norwegian): 1. The share capital is increased with NOK 4,450,800 by issuance of 222,540,000 New Shares, each with a nominal value of NOK 0.02 per Share; 2. The shares are subscribed by DnB NOR Bank ASA; 3. The pre-emptive right of the shareholders is waived; 4. The subscription price shall be NOK 1.12 per share; 5. Subscription of shares will take place within 25 May 2010 on a separate subscription form; 6. Payment of allotted shall be made through conversion of the Company s debt to the subscribers and is considered settled at subscription as described in the auditor s review of the contribution in kind; 7. The New Shares shall carry a right to dividend and have shareholder rights from registration of the share capital increase with the Norwegian Register of Business Enterprises; 8. Article 4 of the Articles of Association shall be amended in accordance with the above The subscription price in the Debt Conversion The Debt Conversion was executed in accordance with a separate agreement entered into with DnB NOR Bank ASA, at an agreed subscription price of NOK 1.12 per New Share Settlement of the Debt Conversion The New Shares in the Debt Conversion were deemed settled at subscription in accordance and will be issued pursuant to the resolution by the general meeting of 20 May 2010, included in Section The New Shares will be issued to the subscribers on or about 27 May 2010 and immediately begin trading on Oslo Børs under the Company s ticker code FAKTOR. 5.4 USE OF PROCEEDS The proceeds from the Private Placement and the Debt Conversion will go to reducing debt and increasing the cash position for the Company. 5.5 THE NEW SHARES All of the New Shares will be issued electronically in accordance with the regulations set forth in the Norwegian Public Limited Company Act. The New Shares will be freely tradable and carry the right to any dividend, declared with a record date on or after the date of issuance of the New Shares, and otherwise rank pari passu with the other outstanding Shares from the date of issuance of the New Shares in VPS. For a further description of the rights and tradability of the Shares, see Section 11 Share Capital and Shareholder Matters. 21

23 5.6 SHARE CAPITAL FOLLOWING THE PRIVATE PLACEMENT AND THE DEBT CONVERSION The Company s share capital prior to the Private Placement and the Debt Conversion was NOK 4,450,800, consisting of 222,540,000 shares with a pair nominal value of NOK 0.02 per share. Following the registration of the New Shares issued in the Private Placement and as a result of the Debt Conversion, the Company s share capital is as of the date of this Prospectus NOK 14,457, consisting of 722,857,777 Shares, each having a par value of NOK 0.02 each. 5.7 REGISTRATION WITH THE NORWEGIAN CENTRAL SECURITIES DEPOSITORY (VPS) The Shares are registered with the VPS under the International Securities Identification Number (ISIN) NO The Registrar for the Shares is DnB NOR Verdipapirservice, Stranden 21, Aker Brygge, 0021 Oslo, Norway. All issued Shares in the Company are issued in accordance with Norwegian law, and vested with equal shareholder rights in all respects. There is only one class of Shares. The Company s Articles of Association do not contain any provisions imposing any limitations on the ownership or the tradability of the Shares. 5.8 EXPENSES Costs attributable to the Private Placement will be borne by the Company. The total costs are expected to amount up to approximately NOK 13.5 million, of which NOK 12.5 million will be the remuneration of Pareto. The net proceeds to the Company from the Private Placement will be NOK million. 5.9 DILUTION EFFECT The percentage of immediate dilution resulting from the Private Placement and the Debt Conversion for the existing shareholders who do not participate in the Private Placement or the Debt Conversion is approximately 69.21%. Prior to Private Placement and debt conversion Post Private Placement and debt conversion Number of Shares 222,540, ,857,777 Number of Shares pre Private Placement and conversion of debt in % of new number of Shares 100.0% 30.79% 5.10 ADVISORS The Managers and bookrunners for the Private Placement are Pareto Securities AS, Dronning Mauds gate 3, P.O. Box 1411 Vika, 0115 Oslo, Norway, and Handelsbanken Capital Markets, Rådhusgaten 27, P.O. Box 1249 Vika, 0110 Oslo, Norway. Advokatfirmaet Selmer DA has acted as the Legal Advisor to the Company in connection with the placements. 22

24 6 PRESENTATION OF THE COMPANY 6.1 OVERVIEW Faktor Eiendom is a public limited liability company, incorporated in accordance with the Norwegian Public Limited Companies Act and subject to Norwegian law. The Company was incorporated on 18. October The Company's Shares are registered in VPS under ISIN NO and the Company is registered with the Norwegian Register of Business Enterprises with business reg. no. NO The Faktor Group employs approximately 396 persons as per this date. The registered business and postal address of Faktor Eiendom is: Visiting address: Rudskogen Næringspark NO 1890 Rakkestad Telephone: Fax: Website: Postal address: Rudskogen Næringspark NO 1890 Rakkestad 6.2 HISTORICAL BACKGROUND AND COMPANY DEVELOPMENT The company s business was established in 1999 by Lasse Fosby, Ronny Antonsen and Rune Kilebu. It quickly focused on the purchase of sites and residential property, project planning, construction, sales and management, and in the space of 2-3 years the company had established itself as a participant in the holiday home market, primarily focusing on the Swedish and Norwegian mountains and the coast between Oslo and Gothenburg, in addition to a small project in Spain. During its first couple of years of operation the Company recruited a further seven key people, who are currently all owners of Faktor Eiendom through Faktor Invest AS and participate in the management team in various parts of the value chain in line with other managers in the group. Over time the Planbo name has become established as a brand in the industry, and today is one among other larger developer and manager of residential property. In 11 years Planbo has delivered approximately 2,200 homes and holiday properties. During this time Faktor Eiendom has accumulated expertise in several key areas with respect to the development, management, operation, sale and production of property. The company was listed on the Oslo stock exchange in In 2006, the company signed an agreement to buy Informa Solinvest AS, which controls 75% of the shares of Servatur SA, a participant in tourism on Gran Canary. Servatur SA is a hotel management company that runs 12 hotels and resorts, all located on Gran Canary. In 2007, Faktor Eiendom purchased 100% of Scandinavian Hospitality Group AS. In 2007, the Company decided to invest NOK 260 million in a factory that produces modules for use in the building industry. The main focus areas are housing projects and hotels, as well as nursing homes and other public buildings and 2009 was challenging years for property developers in general mainly due a significant drop in sale of home and leisure units under development. This was also the case for Faktor Eiendom leaving the Company with a high number of unsold home and leisure property units on its own balance sheet. The company took measures to adjust the operations in accordance with the general market. Due to the fact that Faktor Eiendom in the period 2007, 2008 and 2009 acquired a number of companies like Servatur, Scandinavian Hospitality Group, Trysil Resort and started development of a number of housing projects and hotels, the company increased its interest bearing debt substantially in the period up to year end Interest bearing debt increased from NOK 388 million at year end 2007 to NOK 1,713 million at year end 2009, due to these projects. In the same period, the financing in the market became more challenging, causing the company to have challenges with their debt portfolio. In 2008, Faktor Eiendom wrote down assets by NOK million. During 2009, Faktor Eiendom delivered a NOK 105 million (including MVA) contract with Sarpsborg Kommune, to provide housing for the elderly. 25% of the project was delivered by the new module factory. Faktor Eiendom also finalized 68 apartments in Hallekind in Strømstad. In the third quarter of 2009 the Company started up its first module production factory. Faktor Eiendom also restructured the debt package to the two major banks, DnB NOR and Nordea. The renovation of Renaissance Malmö hotel was finished in December 23

25 and was sold and handed over to the new owners, Kristiania Eiendomsforvaltning AS. The hotel opened in January The new hotel Courtyard by Marriott Stockholm was finished and handed over to the new owner, Invesco Hotel Investments Swedish HoldCo AB, when the hotel opened on 8 February On the 12 April 2010 Faktor Eiendom signed a contract with Studentskipnaden i Bergen regarding the building of 727 studio apartments. The contract has a value of NOK million (NOK 378 million inclusive VAT). A big portion of the units will be constructed in the Company s new module factory. The contract is conditional upon sufficient financing for both parties. In April 2010 the Company also negotiated a restructuring agreement which included a conversion of NOK 250 million in debt with its main bank, DnB NOR, into new equity. The restructuring also included a private placement of NOK 250 million. 6.3 LEGAL STRUCTURE The establishment of Faktor Holding AS was the first step in organizing the value chain as one group. The company became the sole owner and parent company for Faktor Gruppen AS, Faktor Entreprenør and later Planbo Forvaltning AS. After the listing on 19 October 2006 the Company changed its name to Faktor Eiendom ASA, by the date of this Prospectus the Company's main structuring is as illustrated below. The complete legal structure is to be found in appendix ORGANISATIONAL STRUCTURE Faktor Eiendom ASA is the mother company in the group, containing a top management within administration of the ownership of the different main subsidiaries. All the main businesses are within different segments of developing value into properties. The subsidiaries are divided in three main business-areas, as follows: Management, operation and sales (Planbo) This subsidiary contains of three main parts 1. Private homes and holiday homes a. Management and technical support of housing cooperatives b. Partnering in development projects 2. Management / operation of hotels and resorts 3. Hospitality within the Marriott brand Production Faktor Entreprenør AS and Faktor Industrier AS are two of the main subsidiaries in this area. Since its establishment Faktor Eiendom has had its own contracting business that has carried out contracts for the group, as well as for external customers. This company specialises in building houses and holiday homes within the low-rise wooden house segment. The company has established a module factory in Rakkestad. Production is largely be automated Property development Faktor Gruppen AS and Faktor Næringseiendom AS are two of the main subsidiaries in the property development area. These companies hold different ownerships in development projects. The company has a portfolio of property that can be developed into housing, holiday homes, hotels and other commercial properties. Development work is undertaken by the company s own employees. 24

26 6.5 DESCRIPTION OF THE COMPANIES IN THE GROUP Faktor Eiendom ASA Faktor Eiendom ASA is a holding company listed at the Oslo Stock Exchange. The company is incorporated in Norway. Through its subsidiaries, the group perform activities within the following business areas: Purchase and sale of lots and properties (Planbo Prosjekter AS and Planbo Bostad AB) Development and sale of residential and leisure residential properties (Planbo Prosjekter AS and Planbo Bostad AB) Development and sale of commercial properties (Faktor Næringseiendom AS) Development and sale of hotels (Scandinavian Hospitality Group AS) Administration of housing companies and commercial property (Planbo Forvaltning AS) Operation of resort and hotel complexes (Scandinavian Hospitality Group AS) Production and contractor activities (Faktor Industrier AS and Faktor Entreprenør AS) Faktor Eiendom ASA has five employees Planbo Forvaltning AS The subsidiary Planbo Forvaltning AS is a licensed accountancy firm, and provides ordinary accounting services, management and property administration to cooperative housing, co-ownerships or limited liability housing companies. It is also a project partner to other Group companies by providing administrative services to ongoing projects. The company also delivers various kinds of administrative services including accounting services to some of the Group companies. Planbo Forvaltning AS has three employees. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company. Planbo Forvaltning AS has two subsidiaries as described below. Planbo Garanti AS Planbo Garanti AS has contracts with all the co-ownerships, housing cooperatives and limited liability housing companies established by the Group, engaging Planbo Garanti to administrate the invoicing of the overhead/joint costs from the members of the cooperative, and guarantees that the correct amount to be paid in to the cooperative from the members of the cooperative each month. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company. Planbo Garanti has zero employees. Planbo Eiendomsmegling AS Planbo Eiendomsmegling AS has as its main function to conduct the settlement in the projects generated by the Group, including invoicing, advance payments, keep client funds in the project phase, if necessary vouch for financing institutions, and undertake all payments to the involved parties in each project upon delivery of the housing units. Besides conducting the settlement process, Planbo Eiendomsmegling AS also undertake re-selling of properties/housing units in the secondary market when one of the housing units in a delivered project is put up for resale. Planbo Eiendomsmegling is not a proactive player in the secondary market, and do not compete against the local real-estate agents in traditional real-estate services, and do only focus on value creation in projects generated within the Group. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company. Planbo Eiendomsmegling AS has three employees in addition to an authorized real-estate agent Planbo Prosjekter AS The subsidiary Planbo Prosjekter AS is a property development company. The management is responsible for development and sale of homes and holiday homes. This company is responsible for develop Faktor Eiendom ASA s investments in such properties. Planbo Prosjekter AS works closely together with Planbo Forvaltning AS in establishing new projects, and has a history of developing more than 2200 new homes and holiday homes in Norway, Sweden and at Gran Canary. Planbo Prosjekter has zero employees as of today, except for the CEO of the Company. Prior employees have been transferred to Planbo Resort and Faktor Næringseiendom. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company Planbo Bostad AB The subsidiary Planbo Bostad AB develop, build and manages commercial properties as well as private residences in the Öresund Region. The company is headquartered in Malmö, and has 4 employees. The company is incorporated in Sweden. Faktor Eiendom ASA owns 100% of the company. 25

27 6.5.5 Scandinavian Hospitality Group AS Early in 2007 Faktor Eiendom purchased all shares in Scandinavian Hospitality Group AS (SHG). Special purpose wholly owned subsidiaries of SHG will be responsible for the operation of hotels and resorts with the Marriott` s different brands in the Nordic Region. SHG has opened two hotels in 2010 (Malmö and Stockholm) which SHG are responsible for operating. SHG has thirty-six employees. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company Planbo Resort AS Planbo Resort works within the resort and holiday home market. The business is primarily directed towards the Norwegian mountains, the Norwegian and Swedish coastline and Gran Canary. The company s activities are focused on hotel and resort management, as well as participating in development projects. The management of Planbo Resort AS is responsible for at total team of 16 people within the Group. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company Faktor Entreprenør AS The subsidiary Faktor Entreprenør AS is a traditional construction company that delivers the building supervision service to all the projects that the Group develops and delivers. Faktor Entreprenør AS is also the main construction contractor supervisor for approximately 1/5 of the projects that the Group develops. For the remaining 4/5 of projects, the construction role is conducted by external contractors, while Faktor Entreprenør AS provides only the building supervision service. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company. Faktor Entreprenør AS has 43employees, of which 5-7 of the employees are in management positions, and the remaining in production. The company has capacity to produce housing units per year, and delivers services to competitive market prices Faktor Næringseiendom AS The subsidiary Faktor Næringseiendom AS is the real estate developer of commercial properties in the Group. Faktor Næringseiendom AS is managing some of the major building projects in the Group. Typically, Faktor Næringseiendom AS purchase a tract of land, determine the marketing of the property, develop the building program and design, obtain the necessary public approvals and financing, build the structure, and lease, manage, and ultimately sell it. For the most part projects are developed in co-operation with other companies in the Group. Faktor Næringseiendom has three employees. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company Faktor Industrier AS In 2007, the plan for a separate industrialized production of buildings was realized. Principal objective was to provide larger and taller buildings. The company is incorporated in Norway. Faktor Eiendom ASA owns 100% of the company. Construction of the factory started in 2007 following the acquisition of a 40 hectares area at Rudskogen in Rakkestad. The factory was completed in Q The factory will produce modular building-systems with steel and concrete bearing system. A separate R&D centre is now established at the same location as the factory. Faktor Industrier AS has 15 employees. 6.6 OVERVIEW OF THE BUSINESS AREAS Introduction Faktor Eiendom s value chain starts with the acquisition and subsequent development of a large un-regulated plot of land with a potential to develop several different projects and continues with the obtaining of planning permission and constructing the buildings and ends with the management of the properties following completion. Faktor Eiendom has the competence to acquire and complete the projects all the way throughout the value chain, however, Faktor Eiendom does not normally take on any responsibility for a plot before planning permission has been obtained. Unregulated land is normally controlled through option agreements. The first step after securing a right to a plot is obtaining necessary planning permission for the plot in order to realize the projects. The second step is to plan the layout of the infrastructure for each project on the area with focus on good technical solutions desired by the market. The third step is to develop concepts on ownership 26

28 structure and financial structure. Faktor Eiendom provides management service in the construction phase, and manages the construction on behalf of the independent project. Faktor Eiendom has the responsibility to develop each project/unit, either through the internal contractor Faktor Entreprenør, or through external contractors. Upon completion and during the construction phase, Faktor Eiendom provides management service with the responsibility of the daily management of the established housing or vacation home, structured either as a coownership, cooperative housing unit, or limited liability housing company Acquisition of projects Acquisition of plots and properties are conducted through miscellaneous subsidiaries. In some cases the Company will enter into agreements to acquire un-regulated plots, whilst on other occasions, agreements are made to acquire properties with existing buildings and infrastructure in place Development of projects When a contract is signed for a plot or a property, the plot or the property goes into the Group s plot stock. The Group initiates development of the plot or the property. The development of the projects various, depending on what kind of project it is. The next step is in cooperation with Planbo Forvaltning to develop the right concept and the best suited ownership and financial structure for the project. Upon completion of the development phase of a project, the sales-start of the project is initiated, and the project is handed over to the sales business unit Production/implementation In project with financial clauses related to pre sold units, the project will not be initiated before pre-sale of enough units in a project has reached a level where the covenants from the financial institutions providing financing to the projects are fulfilled, and the reservations are lifted. The production is carried out through the internal contractor company Faktor Entreprenør at market rates, or through other external contractors. However, the building supervision is always handled by Faktor Entreprenør, on behalf of the projects that always are organized as an independent company, normally as a co-ownership, housing cooperative or a limited liability housing company. As described above, Planbo Forvaltning normally signs a contract with the final owners of the projects through an elective agreement, regarding the management of the co-ownership, cooperative housing unit or a limited liability housing company. In addition Planbo Forvaltning offers a range of services to the coownership, cooperative housing unit or a limited liability housing company, such as janitor services, and services in connection with rental of the units, in particular for the resort and vacation units, where the owners want to rent out the units for a period when they are not using the units themselves. In some projects the owners of the units are obligated to rent out their units, however in these cases this is described in the planning regulations decided by the relevant municipalities Hotel and resort Early in 2007 Faktor Eiendom entered into hotel and resort business through acquisitions of Servatur SA (Gran Canary), Scandinavian Hospitality Group AS and Trysil Resort AS. Through these acquisitions the Group has established another area of business Factory Faktor Eiendom owns a module factory. The factory was finished in Q This is the second of three links in the value chain in developing properties. First the acquisition and establishing of infrastructure, then raising the buildings with major components delivered from the factory, and finally operating and managing the different buildings such as hotels, resorts and private houses. On the 12 April 2010 Faktor Eiendom signed a contract with Studentskipnaden in Bergen regarding the building of 727 studio apartments. The contract has a value of NOK million (NOK 378 million inclusive VAT). A big portion of the units will be constructed in the Company s new module factory. 27

29 6.7 VISION, STRATEGY AND BUSINESS MODEL Faktor Eiendom is a property company through its various businesses the group believe they have the expertise to safeguard and develop property values. A significant part of the company s activities involves developing projects and the subsequent sale of properties to long-term owners. Faktor Eiendom aims to adopt a transaction-oriented approach to property development. Faktor Eiendom is a long-term and active owner of companies in development, production, management and operation of properties. The Group is generally not a long-term owner of properties. 6.8 CUSTOMER BASE AND MARKET POSITION Sales Planbo is a typical partner-company regarding participating in housing projects. Today the company have entered into agreements to participate in more than 20 development projects, where Planbo aims to take care of activities regarding preparing for sale, the selling-process, customer-care, delivery and handling claims from customers in the period after closing / delivery. Operations and management Planbo started establishing itself within operations and management of hotels and resorts 5-6 years ago and hotels. Through the company Servatur, Planbo is selling approximately 600,000 guest nights at Gran Canary, the same figure in Trysil is approximately 500,000 (Trysil Resort) The operation regarding the new Marriott-hotels started in Q Property development The company has a portfolio of development properties. These properties are developed into housing, holiday homes, hotels and other commercial properties. They are developed by the company s own employees..the typical customers are single- purpose development companies or housing cooperatives. Typical Faktor Eiendom takes ownership in these companies during the development, and together with partners the company establish the long-term ownership of the property. Production Faktor Eiendom has carried out its own contractor activities ever since its establishment. These have delivered contracts for the group s projects, as well as for external customers. This company s specialises in the building of homes and holiday homes within the low wooden house segment. The company also have project management for larger projects. The typical customer is development companies, often regarding the projects that Faktor Eiendom is developing, but this unit also has a wide range of other independent customers, locally and regional. 6.9 IMPORTANT ACHIEVEMENTS TO DATE Date Milestone Faktor Eiendom acquires approximately 400 acre from Rakkestad municipality Purchase of Servatur SA located on Gran Canary, Spain. The area of operation is booking and management of hotels, resorts and apartments Faktor Eindom enters into a final agreement to purchase all shares in Scandinavian Hospitality Group AS and Nordic Hotel Property AS. The agreement secure Faktor Eiendom rights with respect to building and operating hotels and resorts with the Marriott's different brands in Scandinavia and Finland Faktor Eiendom recorded the Nøtholmen project as income in 1st quarter This transaction was a substantial part of the total revenue this quarter Purchase of Trysil Resort. The area of operation is booking and management of hotels, resorts and apartments The Hållekind project outside Strömstad was put out for sale Faktor Eiendom has signed an agreement regarding sale of Marriott Hotel in Malmö. The Company will operate and run the hotel through one of its subsidiaries, SHG Rosen R Hotel AB. Q Sale of Beitostølen Tomteselskap AS. Transaction value of NOK 54.9 million, resulting in a net profit of NOK 1.9 million Q Sale of office block in Sarpsborg. Transaction value of NOK 32.5 million, resulting in a net profit of NOK 19.0 million Hotell in Malmö opened Hotell in Stockholm opened Signed contracts with Studentskipnaden in Bergen to build 727 units in Bergen. Contract value of NOK million (NOK 378 million inclusive VAT). The delivery is to be made by Faktor Eiendom s new module factory Received bid for Faktor Eiendom s hotel in Halden. Bid price NOK 80 million. 28

30 6.10 ONGOING PROJECTS Below is a short description of the two main ongoing projects, also refer to section 9.12 for information on the capital requirement and sources of financing of the projects: Kilden, Tønsberg Project name... Kilden Location... Tønsberg, Norway # of units Housing units, m2 commercial property Type of project... Combination property, cinema, restaurant, office and housing units. Sales start... Summer 2009 Status of 30 housing units sold. 75 % rental contracts signed. Comment... Finished summer/fall 2010 Hindtåsen Project name... Hindtåsen Location... Kongsberg, Norway # of units Type of project... Housing Sales start... Started in 2007 Status... Sold 12 units Comment... Development finishes in Q

31 7 THE MARKET 7.1 INTRODUCTION After a long period with weak economic development and lower business activity, the global economy has started to recover in The European economy is expected to grow by about 1.5% in 2010 after a 4.0% fall in In Norway, gross domestic product fell 1.5% in 2009, but it is expected to grow by 2.0% in 2010, according to Statistics Norway. Unemployment is currently at 3.4%. Consumption is expected to increase by 5% for In addition, credit conditions for private and businesses have improved significantly during This has fuelled increases in housing prices over the last 12 months. The table below shows estimated percentage change in the main numbers from 2009 to Macroeconomic key factors Private consumption 0.0% 5.5% 4.7% Public consumption 5.2% 2.7% 1.9% Gross investments -7.9% -3.1% -0.5% Trad. Export -4.3% 2.4% 1.1% Trad. Import -9.7% 6.8% 3.2% GDP -1.5% 1.5% 1.9% Mainland-GDP -1.5% 2.0% 2.7% Employment -0.4% -0.1% 0.4% CPI 2.1% 1.7% 1.3% CPI-JAE 2.6% 1.0% 1.3% Yearly wage 4.1% 3.4% 3.9% Hourly wage cost Source: Statistics Norway ( 2010) Norwegian Housing Prices March 2010 NOK per m2 1 mth 12 mths Type Single family house 17, % 11.1% Undetached house 22, % 11.3% Apartments 30, % 10.5% Average 25, % 10.7% *=CPI adj. To latest reported CPI, SSB Source: NEF and Statistics Norway ( and March 2010) 7.2 LABOUR MARKET AND DEMOGRAPHICS The demand for new housing starts was low in the 2008 and 2009 period. The market has started to picked up in The unemployment rate is expected to increase from 3.2% in 2009 to 3.9% in year end 2011 according to Statistics Norway. Unemployment rate, 2000 to 2013E 5.0 % 4.5 % 4.0 % 3.5 % 3.0 % 2.5 % 2.0 % 1.5 % 1.0 % 0.5 % 0.0 % E 2012E Source: Statistics Norway ( 30

32 7.3 INFLATION AND INTEREST RATES Inflation measured by growth in the Consumer Price Index (CPI), excluding energy prices and adjusted for taxation changes was 2.1% last year. Inflation is expected to be low in the coming years, 1.7% for 2010 and 1.3% for International interest rates are low due to the financial downturn and due to the fact that the economic growth has been weaker in Europe and globally than in Norway. Low international long-term interest rates are expected to limit the Norwegian long term rates. Currently the Norwegian Central bank key policy rate is 2.00%, up from the 1.25% in Interest rates are expected to increase in a moderate pace during Low interest rates have fuelled housing prices over the last year together with a labor market being stronger thn expected. Norges Bank Key Interest rate and NIBOR 3 months 8.00 % 7.00 % 6.00 % 5.00 % 4.00 % 3.00 % 2.00 % 1.00 % 0.00 % Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 NB Key Interest rate NIBOR 3M TH Source: Statistics Norway and Norges Bank ( and ) 7.4 CONSUMPTION Low interest rates have contributed significantly in strengthening a lot of household budgets. Normal households have seen a noticeable improvement in purchasing power from 2009 year to Private consumption is expected to grow by 5.5% for 2010 after a flat development for Private consumption Norway E 6.0 % 5.0 % 4.0 % 3.0 % 2.0 % 1.0 % 0.0 % -1.0 % E 2012E Source: Statistics Norway (

33 7.5 DEMAND AND MARKET EXPECTATIONS The Norwegian residential prices reached a top in August The decrease in prices, however, did not become as substantial as expected. After a negative period, the negative trend in prices ceased, and early last year residential prices started to rise again. There are two main reasons to the growth in prices: the considerable decrease in mortgage interest rates, and a better macro economical development than first expected, with very few workers being laid off. The residential prices increased throughout 2009, and in March the year-on-year nominal increase was 11.1%. This is above the 2007 top levels. The average turnover was 28 days in March 2010, down from 42 days in December 2009 and 61 days in December The number of housing starts in Norway has been increasing since the early 1990s. Following a couple of especially strong years in 2004 and 2005, the total number of housing starts started to decrease in 2007 and As a result of the weak residential market in 2008 and first part of 2009, the number of residential units under construction declined steadily during 2008 and parts of In autumn 2009, however, the number finally levelled out, after a total decrease of about 15%. Lower construction costs and rising residential prices has caused increase in new residential projects in Sales turnover is picking up, and the general market sentiment seems more bullish. 32

34 8 ORGANISATION, BOARD OF DIRECTORS AND MANAGEMENT 8.1 BOARD OF DIRECTORS In accordance with Norwegian law, the Board of Directors is responsible for administering the Company's affairs and for ensuring that the Company's operations are organized in satisfactory matter. The composition of the board complies with the Code Members of the Board The Board of Directors of Faktor Eiendom currently consists of the following persons: Director Current Board member since term expires Jon Rømer Sandberg AGM 2011 Rune Kilebu AGM 2011 Business address Erling Skjalgssonsgt 1a, 0267 Oslo Skjæløyveien 67, 1626 Manstad Lasse Fosby AGM 2011 Åsenveien 24, 1743 Klavstadhaugen Hilde Vatne AGM 2011 Lachmannsvei 2F, 0495 Oslo Unni Marie Rådalen AGM 2011 C/o Advokatfellesskapet Norlaw DA, P.O.Box 67, 1801 Askim, Norway Jon Rømer Sandberg (50), Chairman of the board Jon R. Sandberg has since 2000 worked as an independent consultant and Investor. Prior to this Sandberg worked as an Equity Analyst for Handelsbanken Markets, Financial Manager for Saga Petroleum and a Credit Analyst for DnB Factoring. He has experience from different board positions. Sandberg has a University Degree in Business Administration from Mannheim/Hamburg and is Certified Financial Analyst (AFA/CEFA) from Norwegian Business School. Sandberg is a Norwegian citizen and is resident in Oslo. He holds 582,087 shares in Faktor Eiendom after the recent private placement. Lasse Fosby (42), Board member Lasse Fosby is one of the founders of Faktor Eiendom ASA, and one of the two main owners of Faktor Invest AS and has been employed by the Faktor Group since Fosby is educated at the Police academy and served in Sarpsborg police district. Fosby is a Norwegian citizen and is resident in Sarpsborg. He owns 16,498,666 shares (33.65%) in Faktor Invest AS. Fosby owns 32,065,233 shares through Lasse Fosby AS. Rune Kilebu (41), Board member Rune Kilebu is one of the founders of Faktor Eiendom ASA, and one of the two main owners of Faktor Invest AS. Kilebu is operative Chairman in Faktor Gruppen AS, Faktor Entreprenør AS, Planbo Forvaltning AS, Planbo Bolig AS and Planbo Resort AS. He has been employed by the Faktor Group since Kilebu was CEO of Skolt Holding from 1998 to 2001 and business manager finance for Skolt Auto AS from 1997 to Previously, Kilebu worked as consultant, in an accountant office, and was running a gas station for Esso Norway from 1993 to Kilebu holds a Master of Business and Economics from NHH in Kilebu is a Norwegian citizen and is resident in Fredrikstad. He owns 16,498,666 shares (33.65%) in Faktor Invest AS. Kilebu owns 32,065,233 shares through Rune Kilebu AS. Hilde Vatne (45), Board member Hilde Vatne is Chief Financial Officer in Coor Service Management AS. Vatne has extensive experience from the real estate and financial sector. Vatne has been financial director in Selvaag Bygg. Vatne has no Shares in the company Unni Marie Rådalen (39), Board member Unni Marie Rådalen is a partner in the law firm Norlaw DA. Her main areas are tax and real estate. She worked as legal practitioner in tax for Askim tax office from 2001 to Prior to this position, Rådalen worked for the real estate company Hjørnet AS from 1998 to 2001 and as a part-time employee with the family firm Rørleggerservice AS from 1990 to Rådalen is educated lawyer from the University of Oslo ( ), and has since taken 15 credits in company lay in 2004, 10 credits in basic training for executive officers in the tax office and written a project statement on sources of law on the tax laws with particular focus on international transactions. Rådalen is a Norwegian citizen and is resident in Askim. She holds no Shares in Faktor Eiendom ASA. 33

35 8.1.2 Remuneration and benefits The remuneration of the members of the Board of Directors is determined annually by the General Meeting of the Company. The remuneration to be paid for the board members for 2009 was: Name of director Renumeration (Figures in NOK) Jon Rømer Sandberg 382,500 Børge Krogsrud 275,000 Lasse Andre Fosby 0 Rune Kilebu 0 Hilde Vatne 111,667 Unni Marie Rådalen 257,500 Synne Syrrist 143,750 Total 1,170,417 The numbers in the table above reflects the remuneration that was based on the resolution by the annual general meeting in On 20 May 2010 the annual general meeting resolved to give the board of directors an additional remuneration due to the extraordinary workload related to the financial problems in and restructuring of the Company. The general meeting made the following resolution (unofficial translation of the original text in Norwegian): "The members of the board of directors are remunerated for the work from the annual general meeting 2009 to the annual general meeting 2010 as follows: - the chairman of the board: NOK the members of the board: NOK The above mentioned remuneration is additional to the remuneration for the period prior to the annual general meeting Director's Shareholding and Options The following of the Company's directors have direct or indirect ownership interest in the Company. The following table sets forth information concerning ownership of the Company's Shares, as of the date of this Prospectus, by each of the directors. Total number of Shares is accounted to be 722,857,777 after the Private Placement and the Shareholder Offering. Name of director Number of ordinary shares % Ownership Options Jon Rømer Sandberg* 582, % 0 Lasse Fosby 48,563, % 0 Rune Kilebu 48,563, % 0 Hilde Vatne % 0 Unni Marie Rådalen % 0 *Belvedere AS, a company controlled by Jon Rømer Sandberg, was allocated 556,000 shares in the Private Placement The Board of Directors' current and previous directorship and partnerships Over the five years preceding the date of this document, the Board of Director's holds or have held the following directorships (apart from their directorships of the Company) and/pr partnerships. Jon Rømer Sandberg Jon Rømer Sandberg is currently the chairman of the board in Belvedere AS, ISAR AS, Faktor Eiendom ASA, and a board member in Jope AS and EC Partner AS, and deputy board member in Virkelyst AS. Sandberg also holds the role as CEO in Belvedere AS. Sandberg has previously been the Chairman of the Board in Storm Capital AS and Deep Sea Bergen Invest AS, the CEO of Utla AS and has held a position as a board member of Pareto Pensjonskasse AS. Sandberg was acting as the CEO of UTLA AS, which were liquidated for a merger 14 October

36 Lasse Andre Fosby Lasse Andre Fosby is currently the chairman of the board in Faktor-Gruppen AS, Sorgenfri Eiendom AS, Planbo Racing Stable AS, Faktor Construction AS, Bakketunet Eiendom AS, Lasse Fosby AS, Rudskogen Biovarme AS, Stavtaket AS, Gystadmyr Utbygging AS, Uvdal Prosjekt AS, Fredriksten Brygge utbygging AS, Jernbanegata 11 AS, and a board member in Planbo Resort AS, Manstad Kjøtt Øivind Karlsen AS, Faktor Invest AS, Faktor Eiendom AS, Faktor Næringseiendom AS, Manstad Kjøtt Holding AS, Planbo Norge AS, Hvaler Bygg AS, Ving Ferie Fredrikstad AS, Scandinavian Hospitality Group AS, Manstad Kjøtt Eiendom AS, Alpedrift AS, Faktor-Entreprenør AS, and deputy board member in Pål Eriksen Eiendom AS, Bakkebygrenda 2 AS, Rudskogen Eiendom AS, SkjæløyBrygger AS, Servateur Holding AS, Nordic Hotel Property AS, Planbo Prosjekter AS, Start Up 6 AS, Faktor Industrier AS, Manstad Kjøtt Utleie AS, Staven Næringseiendom AS and Lervikveien 26 AS. Fosby also holds the role as CEO in Faktor Eiendom ASA, Faktor Invest AS and Faktor- Gruppen AS. Fosby has previously been a board member in Kilden Kino AS, and deputy board member in Informa Solinvest AS, and he has held the role as CEO in Lasse Fosby AS. Rune Kilebu Rune Kilebu is currently the chairman of the board in Norske Fritidsbåter AS, Scandinavian Hospitality Group AS, Rune Kilebu AS, Bakkebygrenda 2 AS, Hvaler Bygg AS, Rudskogen Eiendom AS, Skjæløy Brygger AS, Nordseter Sportell AS, Nordseter Eiendom AS, Faktor Invest AS, Planbo Prosjekter AS, Viking Ferie Fredrikstad AS, Trysil Holding AS, Faktor Industrier AS, Servateur Holding AS, Planbo Norge AS, Faktor Næringseiendom AS, Manstad Kjøtt Utleie AS, Alpedrift AS, Staven Næringseiendom AS, Lervikveien 26 AS, Planbo Resort AS, and a board member in Manstad Kjøtt Holding AS, Planbo Forvaltning AS, Stavtaket AS, Manstad Kjøtt Øivind Karlsen AS, Manstad Kjøtt Eiendom AS, Faktor Eiendom ASA, Trysil Resort AS, Planbo Eiendomsmegling AS, and a deputy board member in Faktor-Gruppen AS, Planbo Garanti AS, Bakketunet Eiendom AS, Consept Partner AS, Jernbanegata 11 AS, Faktor-Entreprenør AS, Faktor Construction AS, Lasse Fosby AS, Flydirect.no AS. Kilebu has previously been chairman of the board in Informa Solinvest AS, Kilden Kino AS, and a board member in Scandinavian Hospitality Group AS, Fredrikstad Spillerinvest AS and Dag Lillestrand AS. Kilebu was acting as a board member in Noral AS, which went bankrupt 25 June Kilebu was also acted as a board member in K E B Music Group AS and Kilen Servicenter AS, which were liquidated 11 June 2007 and 27 January 2009 respectively. Hilde Vatne Hilde Vatne is currently a board member in Knut Ramstad Sivilarkitekt MNAL AS, Sparebank 1 Næringskreditt AS, Faktor Eiendom ASA and DnB NOR Kapitalforvaltning AS. Hilde Vatne has previously been the chairwoman of the board in Utsikten Lier AS, Lillohøyden Hjemmel AS, Utsikten Lier KS, and she has been a board member in Norwegian Property ASA, Vmetro ASA, Avanse Forvaltning AS, Sparebank 1 Boligkreditt AS, Papvarefabriken AS, Sandvika Boligutvikling AS, Sandvika Boligutvikling AS, Løren Park AS and Løren Park KS. Vatne has also been a deputy board member in Moss Glassverk 1 KS, Moss Glassverk 1 Komplementar AS, Lørenplatået 1 KS, Lørenplatået 1 Komplementar AS. Vatne was acting as a deputy board member in Moss Glassverk 1 KS and Moss Glassverk 1 Komplementar AS, which were liquidated on 1 May 2010 and 26 January 2010 respectively. Vatne also acted as the chairwoman of the board in Utsikten Lier AS, which was liquidated 23 April Unni Rådalen Unni Rådalen is currently the board member in Hjørnet AS, Faktor Eiendom ASA,Løvestad Eiendom AS, Hovsveien Eiendom AS, and the deputy board member in Haugomsenteret AS, Askim Trening og Helse AS, Spydeberg Vekst AS, Gamle Tomter AS, Trøgstadveien Næringspark AS, Grydelandgården AS and Rørleggerservice AS. She is the CEO and sole proprietor of Advokat Unni Rådalen, as well as the CEO and Coowner of Advokatfellesskapet Norlaw DA Independence of the Board of Directors In accordance with Norwegian law, the board is responsible for administering the Company s affairs and for ensuring that the Company s operations are organized in a satisfactory manner. The Company s Articles of Association provide that the board shall have no fewer than 4 members and no more than 7 members. In accordance with Norwegian law, the CEO and at least half of the members of the Board must either be resident in Norway, or be citizens of and resident in an EU/EEA country. The members of the board are elected by the General Meeting of shareholders. The board is elected for a term of 1 year. Board members may be reelected. In the event of equal voting, the chairman of the board shall have a double vote. The Board of Directors 35

37 consists of five members, whereof three are independent of the Management, main business associates and the main shareholders. Lasse Fosby and Rune Kilbu is currently part of the Company s Management, as well as being shareholders in the Company. Fosby and Kilbu possess significant competency and experience within the business of the Company. It has therefore been deemed appropriate, in particular taking into consideration the restructuring phase the Company has been, and currently is in, that they are represented in the Board of Directors and the Management. The Board of Directors has organised its work in consideration of the above relations. It is contemplated that both Fosby and Kilbu shall resign as members of the Board of Directors on the Company s next general meeting planned to be held in June - July Election Committee The Company shall have an election committee in accordance with its articles of association. The election committee currently consist of the following three persons; Kristen Jakobsen (chairman) Lasse Fosby Elisabeth Teigland Gjesdahl Pursuant to the articles of association of the Company, the election committee shall give recommendation to the general meeting on election of, and compensation to, the board members. The proposal shall be justified. The general meeting elects the members of the election committee. The election committee shall give a recommendation on election of members to the election committee. The general meeting determines compensation to the members of the election committee Audit Committee The Company has established an audit committee in accordance with the Public Limited Companies Act that shall consist of between two and three members elected by and amongst the members of the Board. The members of the audit committee are appointed by the Board for a period of two years, or until they resign their position as a member of the Board. The committee currently consists of the following two persons: Jon Rømer Sandberg Hilde Vatne The audit committee is a preparatory and advisory committee for the Board. The audit committee shall; (a) prepare the supervision of the Company s financial reporting process for the Board, (b) monitor the systems for internal control and risk management, including the internal audit of the Company to the extent such function is established, (c) have continuous contact with the Company s auditor regarding the auditing of the Company s annual accounts, and (d) review and monitor the independence of the Company s auditor, including in particular to which extent other services than audit services having been rendered by the auditor or the audit firm represents a threat against the independence of the auditor. The Company has adopted separate instructions for the audit committee setting out further details on the duties, composition and procedures of the committee Remuneration Committee The Company has recently established a remuneration committee between two and three members of the Board. The members of the remuneration committee shall be independent of the Company s executive management. The members of the remuneration committee are appointed by the Board for a period of two years, or until they resign their position as a member of the Board. The committee currently consists of the following three persons: Jon Rømer Sandberg Hilde Vatne Unni Marie Rådalen The remuneration committee is a preparatory and advisory committee for the Board that shall prepare matters for the Board s consideration and decisions regarding the remuneration of, and other matters pertaining to, the Company s executive management. The recommendations of the remuneration committee shall cover all aspects of remuneration to the executive management, including but not limited to salaries, allowances, bonuses, options and benefits-in-kind. All aspects of remuneration, including but not limited to directors fees, salaries, allowances, bonuses, options and benefits-in-kind will be considered by the Remuneration Committee. 36

38 The Company has adopted separate instructions for the remuneration committee setting out further details on the duties, composition and procedures of the committee. 8.2 EXECUTIVE MANAGEMENT The figure below shows the organizational structure of the Executive Management of the Company: Finance Pål H. Johansen CEO Lasse Fosby Property dev. Lasse Fosby Production Johann B. Stenrød Management, operations and sales Rune Kilebu As of the date of publication of this Prospectus, the Company's Executive Management consists of the following 6 individuals: Lasse Andre Fosby (42), Chief Executive Officer Lasse Fosby is one of the founders of Faktor Eiendom ASA, and one of the two main owners of Faktor Invest AS and has been employed by the Faktor Group since Fosby is educated at the Police academy and served in Sarpsborg police district. Fosby is a Norwegian citizen and is resident in Sarpsborg. He owns 16,498,666 shares (33.65%) in Faktor Invest AS. Mr. Fosby also owns 32,065,233 shares through Lasse Fosby AS. Rune Kilebu (41), CEO Planbo - Hotel, resort, sales & property management Rune Kilebu is one of the founders of Faktor Eiendom ASA, and one of the two main owners of Faktor Invest AS. Kilebu is director in Planbo. He has been employed by the Faktor Group since Kilebu was CEO of Skolt Holding from 1998 to 2001, and business manager finance for 59 Skolt Auto AS from 1997 to Previously, Kilebu worked as consultant, in an accountant office, and was running a gas station for Esso Norway from 1993 to Kilebu holds a Master of Business and Economics from NHH in1993. Kilebu is a Norwegian citizen and is resident in Fredrikstad. He owns 16,498,666 shares (33.65 %) in Faktor Invest AS. Kilebu also owns 32,065,233 shares through Rune Kilebu AS. Johann Bernhard Stenrød (44) CEO Production Mr Stenrød was employed as CEO in Faktor Industrier AS in His main function is to build and run the brand new plant for industrial production of building systems. He has since 1989 been in the agriculture business with poultry and grain production in large scale. He is the founder of the industrial production of growing mushrooms in Norway by building several factories. From Stenrød was member of the board in Prior Herland Produkter AS, the largest processing and packaging factory of poultry meat in Norway. He is educated agronomist. Mr Stenrød is a Norwegian citizen and is resident in Sarpsborg, Stenrød holds 3,000 shares in Faktor Eiendom AS and 11% of the shares in Faktor Industries AS. Pål H. Johansen (46) Finance Manager Pål Henning Johansen is currently hired in to Faktor Eiendom ASA from the company Teslow AS, which Johansen is the managing director of. Johansen has experience from Omnicom AS as CEO, group controller in Berggården Amundsen & Co AS, as well as being CEO and CFO in Elgros AS. 37

39 8.2.1 Remuneration and benefits The table below illustrates the compensation to members of the Executive Management as of Annual Compensation Year Salary Other benefits Pension costs (Figures in NOK million) Morten Riiser* Lasse Andre Fosby** Rune Kilebu*** Johann Bernhard Stenrød Freddy Eriksen Anja Munro * Morten Riiser resigned 1 December ** Lasse Fosby started as Chief Executive Officer from 1 December Totally invoiced the Company NOK million 2.2 for the year *** Rune Kilebu works as Management for Hire for the Group. Totally invoiced NOK 2.2 million for the year Management's Shareholding and Options The following members of the Executive Management of the Company have direct or indirect ownership interests in the Company. The following table set forth information concerning ownership of the Company's Shares and options held, as of the date of this Prospectus. Total number of Shares is accounted to be 722,857,777 after the Private Placement and the Debt Conversion. Name Position Number of ordinary shares % Ownership Lasse Andre Fosby* CEO 48,563, % Rune Kilebu* CEO, Hotel, resort, sales 48,563, % Johann Bernhard Stenrød** CEO, Production 3, % Freddy Eriksen* Finance Manager, Planbo Prosjekter AS 246, % Total 97,376, % * Includes shares owned by close associates. Lasse Fosby and Rune Kilebu each owns 16,498,666 shares (33.65%) in Faktor Invest AS. Mr. Fosby and Mr. Kilebu also owns 35,606,400 shares through Lasse Fosby AS and Rune Kilebu AS, respectively. Lasse Fosby and Rune Kilebu sold 6,319,167 shares each through Lasse Fosby AS and Rune Kilbu AS respectively on 25 March Lasse Andre Fosby and Rune Kilebu were both allocated 2,777,778 shares in the Private Placement. **Stenrød holds 3,000 shares in Faktor Eiendom AS and 11% of the shares in Faktor Industries AS. On 2 June 2009 the General Meeting of the Company resolved to grant Morten Riiser, former CEO of the Company, warrants to subscribe for a total of 3,338,100 shares. The warrants have been issued in accordance with the Norwegian Public Limited Companies Act section The warrants entitle Morten Riiser to subscribe for shares in the Company at a subscription of NOK /3 of the warrants can be exercised from 14 October 2009 to 14 October 2011, 1/3 of the warrants can be exercised from 14 April 2010 to 14 October 2011 and 1/3 of the warrants can be exercised from 14 October 2010 to 14 October No cost is calculated in The cost was distributed over the term from Also see section 10.5 below The Management's current and previous directorship and partnerships Over the five years preceding the date of this document, the senior management holds or have held the following directorships (apart from their directorships of the Company) and/pr partnerships. Lasse Andre Fosby See section Rune Kilebu See section Johann Bernhard Stenrød Johann Bernhard Stenrød is currently the chairman of the board of Stenrød Sjampinjong Salg AS, Start Up 6 AS, Faktor-Entreprenør AS, Agrolink AS, Jarle Invest AS, Økosopp AS, and deputy board member of Rudskogen Biovarme AS. Stenhard is also currently the CEO of Økosopp AS, Rudskogen Eiendom AS, Stenrød Sjamping 38

40 Salg AS, Faktor Construction AS, Faktor Industrier AS, Norwegian Mushroom Holding AS, Agrolink AS and Rudskogen Biovarme AS. Pål H. Johansen Pål Henning Johansen is currently the CEO of Teslow AS. Johansen also acts as the chairman of the board of Øketangen AS and Foreningen for Utbygging av vann og avløp på Øketangen,Teslow AS, and a board member of Ownit AS. Previously Johansen acted as the chairman of the board in Aveno Digital AS, Webtraffik AS and Markedspartner AS. Johansen has also previously been the CEO of Syzweb AS, Markedspartner AS and Omnicom AS. 8.3 CONFLICTS OF INTEREST ETC. Rune Kilebu and Lasse Andre Fosby currently hold positions within the Executive Management, coincident with being shareholders in the Company. The Company, through Planbo Prosjekter AS, has also entered into consultancy agreements as described under with the sole proprietorship Lasse Fosby and with Rune Kilebu AS. Lasse Andre Fosby and Rune Kilebu are also members of the board. In order to increase its financial flexibility, Faktor Eiendom has entered into an agreement with Tomtebank 1 AS regarding the sale of various lots administered by Faktor Eiendom to Tomtebank 1 AS, with an option for Faktorgruppen AS to repurchase the lots at fixed price. Tomtebank 1 AS was established on 8 June Rune Kilebu AS, Lasse Fosby AS and Faktor Invest AS own 11.7%, 11.7% and 19.5% respectively, in total approximately 43% of the company. Other shareholders include Stiftelsen Fritt Ord, LKG Invest AS, Sveinung Flaaten Andersen AS, Kristiania Eiendomsutvikling AS and Faktor Eiendom ASA. Tomtebank 1 AS consists of lots for the development of residential areas of approximately 1,340 housing units that Faktor Eiendom is seeking to develop in the coming years. Tomtebank 1 AS owns the areas Skjønnhaug Slettvold in Mysen and Østmarkskollen in Enebakk in addition to Sorgenfri in Fredrikstad and Gystadmyra in Jessheim. Faktor Eiendom has the right to repurchase these properties at any time prior to 31 December 2015 at a fixed price. During this period Tomtebank 1 AS does not have the right to sell any of the properties to third parties. Tomtebank 1 AS s return on its investment will depend on how quickly and to what extent Faktor Gruppen AS exercises its option to repurchase land. The transaction has been based on an assumed budget for repurchase of land by Faktor Gruppen. In the event that Faktor Gruppen has repurchased less than 50% of the assumed budget after two years and less than 75% of the assumed budget after five years, Tomtebank 1 AS has a right to renegotiate the option agreement or to sell certain plots of land to secure a sufficient cash flow to repay its debt and make payments to its shareholders. The Company is party to an agreement with Flydirect.no AS, a company partly owned by Faktor Eiendom ASA who has a 40% stake, regarding purchase of flight time. Further, the Company is party to an agreement with Skjæløy Slipp AS, a company indirectly partly owned by Lasse Fosby and Rune Kilebu, regarding framework agreement regarding provision of services for Onsøy Vest II and Stavtaket projects. Conflict of interests might arise in respect of the above mentioned matters. As far as the board and the Company are aware of, there are otherwise no conflicts of interest between any duties to the Company of the members of the administrative, management of supervisory bodies, and their private interests and/or duties. During the last five years preceding the date of this Prospectus, except for as described in section 8.1.4, no member of the Board of Directors or the senior management has: any convictions in relation to fraudulent offences; been involved of any bankruptcies, receiverships or liquidations with which a member of the administrative, management or supervisory bodies and; details of any official public incrimination and/or sanctions of such person by statutory or regulatory authorities (including designated professional bodies) and whether such person has ever been disqualified from a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct affairs of any issuer. 39

41 8.4 EMPLOYEES As the date of this Prospectus, Faktor Eiendom has 396 employees. The table below illustrates the number of full time equivalent employees at year end : Area of operations Norway Sweden Spain Total As of the date of this Prospectus, only minor loans have been given to employees of the Company, totalling less than NOK 1 million. 8.5 PENSIONS AND OTHER OBLIGATIONS Employees in the Norwegian companies have a compulsory occupational pension, i.e. a deposits arrangement where the annual cost is the paid-up premium. This is also the case for Faktor Eiendom s subsidiaries. The key employees, except Rune Kilebu and Lasse Fosby, are included in the company's compulsory occupational pension scheme with a deposit of 2% of the salary for salaries between 1G and 12G. No deduction for pension is made for salaries exceeding 12G. The total amount set aside for the Group s pension scheme is NOK 1,850,367. No option arrangement is established for the employees. No severance pay is established for any of the key employees. No key employees receive any payment in kind. The key employees receive car allowance in accordance with rates determined by the state. There are no service contracts with the issuer or any of its subsidiaries providing for benefits upon termination of employment. 40

42 9 FINANCIAL INFORMATION Readers should read the following discussion of the financial condition and results of operations in conjunction with the financial statements included in this Prospectus and the notes to those statements included elsewhere in this Prospectus. The selected consolidated financial data presented below was derived from our audited consolidated financial statements as of and for the three years ended 31 December2009, prepared in accordance with International Financial reporting Standards (IFRS) as adopted by the European Union (EU). The following discussion contains forward-looking statements that are based on current assumptions and estimates by the Company s management regarding future events and circumstances. The Company s actual results could differ materially from those expressed or implied by the forward-looking statements as a result of many factors, including those described in Section 2 Risk factors. Annual reports including audited historical financial information and audit reports in respect of 2009, 2008 and 2007is incorporated by reference to this Prospectus, see section SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES OF CONSOLIDATION The Company has prepared the 2009, 2008 and 2007 financial statements in accordance with IFRS. The group s financial statement includes Faktor Eiendom and its subsidiaries at the end of the fiscal period. IFRS principles for preparation of financial statements, requires that the management makes necessary assessments and estimates, as well as assumptions, which affects the use of accounting principles and amounts used on assets and commitments and revenues and costs. Estimates and underlying factors are based on experience by the management and other factors, which are consider relevant and probable at the time of estimation. Estimates have been continuously covered, so final values may divert from the estimates. 9.2 INCOME STATEMENT INCOME STATEMENT, CONSOLIDATED Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Sales revenues Other revenues Total revenues Cost of goods sold Salaries Depreciation Write downs of assets Other operating expenses Total operating expenses Operating profit Share of profit in associated companies Net financial items Profit before tax Tax Profit for the period Minority interests Majority interests Dividend per share (diluted), NOK

43 9.3 BALANCE SHEET STATEMENT BALANCE SHEET, CONSOLIDATED Figures in NOK million Audited FY2009 Audited FY2008 Audited FY2007 ASSETS Goodwill Other intangible assets Fixed assets Financial fixed assets Investments in related companies Total fixed assets Current assets Construction contracts n.a. Stock of goods n.a. Ownership in cooperatives Sum plots and buildings under construction Accounts receivable Other receivables Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Retained earnings and share premium Minority interests Total equity Deferred tax liability Provisions for guarantees Long term interest bearing debt Long term non-interest bearing debt Total long term liabilities Short term interest bearing debt Accounts payable Taxes payable Other short term debt Total short term liabilities Total equity and liabilities

44 9.4 CASH FLOW STATEMENT CASH FLOW STATEMENT, CONSOLIDATED Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Profit before tax Change in accounts receivable Change in accounts payable Change in investment and development Property Profit from sale of assets Depreciation Write downs Change in other accruals Payments purchases of units for sale Paid taxes for the period Net cash flow from operating Activities Sale of tangible fixed assets Purchases of tangible fixed assets Purchases of intangible fixed assets Sale of shares Purchases of shares Installments on receivables Installments on liabilities Purchases of subsidiaries Net cash flow from investing Activities Proceeds from share issues New debt Installments paid on debt Paid/received to/from minorities Dividend paid Net cash flow from financing Activities Net change in cash and cash Equivalents Cash and cash equivalents beginning of Period Cash and cash equivalents end of period CHANGES IN EQUITY CHANGES IN EQUITY, CONSOLIDATED Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Equity at beginning of the period Profit/loss for the period Equity capital raised Dividend paid Other changes in equity Equity at the end of the period

45 9.6 OPERATING AND FINANCIAL REVIEW The Management s comments to the operational development and financial statements for the fiscal years 2009, 2008, and 2007: was another challenging year for Faktor Eiendom. The property market, both residentially and commercially, were weak during the year, but with an improvement in the second part of the year. The company has during the year changed the corporate structure and has now full focus on three main areas of business to improve efficiency and profitability. In addition, the company strengthened the balance sheet with new equity and refinancing of the debt portfolio. Total revenues increased 76% to NOK 997 million compared to 2008, and the Company incurred an operating loss NOK minus 3 million, compared to an operating loss of NOK 351 million in Write-offs and provisions related to property values, rent obligations of unsold units and impairment tests of goodwill, amounted to NOK 4 million for the year. The reason for the improved result in 2009, compared to 2008, is due to the fact that the company made substantial write downs of their assets in In 2008, write downs amounted to NOK million compared to NOK 4.5 million in The main reason for the increase in volumes from 2008 to 2009 is the fact that a larger number of projects were delivered in 2009 compared with the year before. Among the larger sales in 2008, the company sold the hotel in Malmø during The company took measures to adjust the operations in accordance with the general market. Do to the fact that Faktor Eiendom in the period from 2007, 2008 and 2009 acquired a number of companies like Servatur, Scandinavian Hospitality Group, Trysil Resort and started development of a number of housing projects and hotels, the company increased the interest bearing debt substantially in the period up to year end Interest bearing debt increased from NOK 388 million at year end 2007 to NOK 1,713 million at year end 2009 due to these projects. In the same period, the financing in the market became more challenging, causing the company to not fulfilling their debt obligations The Company s financial results for 2008 were adversely affected by the economic climate, and the negative development in the Norwegian and Swedish property markets. Total revenues declined 38% to NOK 565 million compared to 2007, and the Company incurred an operating loss NOK 351 million, compared to an operating profit of NOK 184 million in Write-offs and provisions related to property values, rent obligations of unsold units and impairment tests of goodwill, amounted to NOK 307 million for the year. The Company s financial position weakened during 2008, as the equity was reduced from NOK 1,073 million (2007) to NOK 662 million (2008), resulting in the equity to total assets ratio declining from 60% to 27%. Cash and cash equivalents increased to NOK 73 million (2008) compared to NOK 67 million (2007), while interest bearing debt increased to NOK 1,346 million (2008) from NOK 388 million (2007). The 2008 figures are affected by the Company s acquisitions of Planbo Prosjekter Beitostøl Tomteselskap AS (51%), Knutstølen Panorama (100%) and Hållekind Resort AS (100%). Hållekind Resort AS develops leisure apartments for sale in the municipality of Strømstad, Sweden, and the two other acquired companies owns undeveloped land in Beitostølen, Norway Revenues totalled NOK 947 million compared to NOK 538 million in Operating profit for the year was NOK 184 million, compared to NOK 183 million in Acquisitions, as described below, had an annualised negative effect of NOK 16 million on the operating profit. The equity at the end of the year was NOK 1,073 million, corresponding to 60% of total assets. Cash and cash equivalents totalled NOK 69 million and interest bearing debt NOK 388 million. During the year, Faktor Eiendom acquired Informa Solinvest AS, which owns 75% of Servatur SA. Servatur SA operates hospitality establishments on Gran Canary (Spain), in addition to owning property, mainly leisure apartments. The Company acquired most of Welle Gruppen AS (formerly Viking Gruppen AS) operations in Trysil, Norway. The acquired assets included large development properties and commercial properties along with Trysil Resort AS, a service and booking operation. Furthermore, the Company acquired Scandinavian Hospitality Group AS, which owns the rights to develop, build and operate Marriot hotels in Norway, Sweden, Denmark and Finland. 44

46 9.7 SEGMENT INFORMATION The Company reports revenues and operating profit of primary segments of the income statement is operational. Both revenues and operating profit are reported in the primary segments. Geographical segmentation of revenues is also reported. Segment information REVENUES PER OPERATING SEGMENT Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Property development Production Management, operations and sales Other / eliminations Total revenues OPERATING PROFIT PER OPERATING SEGMENT Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Property development Production Management, operations and sales Other / eliminations Total income Revenues per geographical segment REVENUES PER GEOGRAPHICAL SEGMENT Audited Audited Audited Figures in NOK million FY2009 FY2008 FY2007 Norway Sweden Spain Total revenues Description of primary segments Property development segment includes the company s property development operations. Production is the company s own entrepreneur business and the company module factory. The Management, operations and sales operations includes administrative operations of housing cooperatives, Scandinavian Hospitality Group, Planbo Resort. Refer to Section 6.6, for more details regarding activities of the operational segments (business units) of the Company. 9.8 SHARES IN SUBSIDIARIES AND ASSOCIATED COMPANIES Please refer to the annual report 2009, note 15, 16 and 20, enclosed in appendix 3, below. 9.9 DESCRIPTION OF CASH FLOWS MANAGEMENT 2009 The cash flow from operations in 2009 was negative by NOK million. The cash flow was mainly due to investments in ongoing property development projects, mainly hotels in Stockholm and Malmö. Net cash outflow of investing activities was NOK 50.6 million. Net cash flow from financing activities of NOK million was mainly due to new interest bearing debt and new equity which the majority relates to investments in property The cash flow from operations in 2008 was negative by NOK million after paid interest and taxes. The outflow was, in addition to cash negative ordinary operations, mainly due to investments in ongoing property development projects (e.g. hotels in Stockholm and Malmø) and change in accruals related to the revenues accounted for in such projects, in addition to investments in unsold home and leisure property units. Net cash outflow of investing activities was NOK million, mainly due to investments in the building-module factory. Net cash inflow from financing activities of NOK million was mainly due to new interest bearing debt of NOK 1,036.5 million, of which the majority relates to investments in property, and which was partly offset by dividend paid of NOK 50.8 million. 45

47 As of 31 December 2008, Faktor Eiendom had cash of NOK 72.6 million. At the same time unused drawing rights on credit facilities (excluding project financing) which amounted to NOK 50 million. Total available liquidity (excluding project financing) as of 31 December 2008 was NOK million, and there were only limited potential further liquidity available from the project financing at year-end The cash flow from operation in 2007 was negative by NOK million driven primarily by a negative net change in trade receivables and other accruals, mainly related to revenues accounted for in property projects, and which was partly offset by profit for the period of NOK million. Net cash outflow of investing activities was NOK million mainly due to the acquisitions of the majority of Viking Gruppen s operations in Trysil (Norway) and Informa Solinvest AS, which owns 75% of Servatur S.A (Spain), and also partly related to investments in unsold home and leisure property units. Net cash inflow from financing activities of NOK 89.1 million was mainly due to new interest bearing debt of NOK million, partly offset by NOK 79.4 million paid in dividends. Net change in cash and cash equivalents was negative with NOK million and cash and cash equivalents amounted to NOK 66.9 million at year-end Cash and cash equivalents as of 31 December 2009 was NOK 80.6 million, whilst the corresponding figures in 2008 and 2007 were NOK 72.6 million and NOK 66.9 million, respectively INVESTMENTS HISTORICAL INVESTMENTS Figures in NOK million Audited 2009 Audited 2008 Audited 2007 Investments in tangible fixed assets Investments in land and buildings Investments in aeroplanes and helicopters Investments in equipment and machinery Total investments in tangible fixed assets Investments in intangible fixed assets Investments in goodwill Investments in other intangible assets Investments in research and development Total investments in intangible fixed assets Total Investment in fixes assets Investments in development properties Investments in investment properties 0, Investments in development and investment properties In 2009 the Company has invested NOK million in their module factory construction project at Rakkestad. There have been no other investments of significance in this time period. For more information see section 9.12 below Investments in tangible fixed assets amounted to NOK 251.5, mainly related to investments in the building - module factory. Investments in development and investment properties, classified as part of operational cash flow, amounted to NOK in Investments in tangible fixed assets amounted to NOK 35.7, mainly related to the acquisition of Servatur S.A. made during the year. Investments in intangible fixed assets amounted to NOK 164.9, mainly driven by investments in goodwill and other immaterial assets, related to the acquisition of Scandinavian Hospitality Group. Investments in development and investment properties, classified as part of operational cash flow, amounted to NOK in PLANNED AND COMMITTED INVESTMENTS Per 30 st of April 2010, the Company had committed to investments of an estimated MNOK 35 related to ongoing property development projects, related to projects at Kilden and Hindtåsen. The investments are mainly financed by construction debt. See section 6.10 for further information about the ongoing Projects. No other material investments, beyond ordinary maintenance investments in assets already held by the Company, are or are about to be committed to at the date of this prospectus. 46

48 9.12 CAPITAL RESOURCES The capital resources of Faktor Eiendom consist of equity from its shareholders, long term financing from DnB NOR Bank ASA and other credit institutions as set out in section 9.16, and short term credit facilities related to the construction of properties and general overdraft facilities. As of 31 December 2009, Faktor Eiendom had an equity ratio of 25% and net interest bearing debt amounting to NOK 1,713 million. As of 31 December 2009, Faktor Eiendom s main working capital assets mainly consisted of buildings held for sale (NOK 1,196 million), buildings under construction (NOK 499 million) inventory of finished home and leisure property units (NOK million), accounts receivable (NOK million) and other short-term receivables (NOK 99.4 million). Accounts payable (NOK million) and other short term debt (NOK million), mainly related to property development projects, were the main working capital liability elements. Faktor Eiendom s net working capital as of 31 December 2009 was NOK million. As means of funding the property development projects the Company has short term interest bearing debt in the form of construction debt, reflecting, although not necessarily entirely, the construction cost of the projects. Utilised short term construction debt totalled NOK 1,806 million per 31 December As of 31 December 2009, Faktor Eiendom had cash of NOK 122 million. Total available liquidity, excluding construction debt, as of 31 December 2009 was NOK 122 million. Faktor Eiendom, and its subsidiaries, constantly has a number of different projects under development. The projects require various amount of working capital in different stages of the project. Currently, there are construction related to projects at Studentskipnaden in Bergen, Kilden and Hindtåsen and some other smaller projects. The construction will be financed by new cash from the current restructuring of Faktor Eiendom ASA. The construction is mainly financed by construction debt. For further information regarding the ongoing projects, see section Do also note that many of the projects are ongoing projects for many years and at the same time not under development during every quarter and every year. The company has through the current restructuring of the company improved its financial situation substantially on quarter and Year-by-Year, by increasing its equity of MNOK 500. The proceeds will go to reducing debt and increasing the cash position for the Company. In addition, the Company has increased its credit lines to DnBNOR by NOK 172,800,000 in frame loans for completing new projects going forward. The improved cash position will put the company in position to complete ongoing projects and future projects going forward WORKING CAPITAL In the opinion of the Company, its working capital is sufficient to cover its present requirements for at least the 12 coming months. The table below sets forth some consolidated key ratios for Faktor Eiendom as of 31 December Key ratios Working capital ratio Debt to equity ratio % 72.1% 39.6% Solidity % 27.1% 60.4% 9.14 SIGNIFICANT CHANGES AND TRENDS AFTER 31 DECEMBER 2009 In connection with the refinancing of the Company, work has started to restructure the Company into 3 business units, compared to the previous 8. The restructuring is to be completed within Please refer to section 9.12 for futher description. Faktor Eiendom has, after 31 December 2009, sold its hotel in Stockholm according to contract. This reduced short-term debt with NOK 500 million. No other material changes to the Company s financial or trading position have occurred after 31 December 2009 and up until the date of this prospectus. 1 Current assets/current liabilities. 2 Total interest bearing debt/total equity plus total interest bearing debt. 3 Equity/total capital. 47

49 9.15 CAPITALISATION AND INDEBTEDNESS The tables below show the consolidated statement of capitalisation and indebtedness as per 31 December The historical consolidated financial statements should be read together with this section. The credit facility, established with DnB NOR, during the summer of 2008 was secured by the majority of properties and assets owned by the Company and its subsidiaries. This security covers all debt provided by DnB NOR. Other debt providers have security in specific properties. Table 9: Indebtedness and capitalization TOTAL CAPITALISATION Unaudited Figures in NOK 31 December 2009 Guaranteed current debt 0.0 Secured Unguaranteed/unsecured 0.0 Non-interest bearing current debt Current debt Guaranteed non-current debt 0.0 Secured Unguaranteed/unsecured 0.0 Non-interest bearing non-current debt 79.9 Non-current debt Share capital 4.4 Share premium fund 0.0 Other reserves Total shareholders' equity Total capitalisation NET FINANCIAL INDEBTEDNESS Figures in NOK 31 December 2009 Cash Cash equivalents 0.0 Traded securities and other financial Instruments 0.0 Liquidity (cash) Current bank debt Current portion of non-current debt 50.6 Other current financial debt 0.0 Current financial debt Net current financial indebtedness Non-current bank loans Bonds issued 0.0 Other non-current loans 59.6 Non-current financial indebtedness Net financial indebtedness The tables above should be read together with the Company s consolidated financial statements set forth above in Section 9.3. The refinancing of the Company will lead to an increase of NOK 250 million in cash. A further NOK 250 million in Debt Conversion will reduce Faktor Eiendom s short-term debt. 48

50 LONG TERM DEBT STRUCTURE AFTER THE DEBT CONVERSION Figures in NOK million Maturity Debt amount Long term interest bearing debt Bank loan Storebrand Bank ,0 Bank loan Nordea ,9 Bank loan DnB NOR ,7 Bank loan DnB NOR ,0 Bank loan DnB NOR ,1 Bank loan DnB NOR ,0 Bank loan DnB NOR ,7 Bank loan DnB NOR ,7 Bank loan DnB NOR ,7 Bank loan DnB NOR ,0 Bank loan Sparebanken Møre ,2 Bank loan Handelsbanken ,0 Bank loan Skånes Provinsbank ,1 Bank loan Nordea ,2 Bank loan Nordea ,1 Bank loan Nordea ,0 Other loans ,3 Other loans - 46,3 Total long term interest bearing debt 891,9 Instalments due next financial year -50,6 Total interest bearing long term debt excl. upcoming next financial year 841,3 There are limited amortizations on the bank loans. The majority of the loans are construction loans in connection with the building of Faktor Eiendom s projects. The maturities on these projects are when the projects are completed, sold and delivered. NOK 62.2 million is corporate debt to DnB NOR ASA. In 2010, NOK 50.6 million of the debt is expiring. Faktor Eiendom has through the refinanced debt package the necessary funds to meet the maturities and obligations. Gurantees related to housing cooperatives Faktor Eiendom ASA, Faktor-Gruppen AS, Planbo Resort and Trysil Resort have issued guarantees in favor of banks financing the building of housing cooperatives. Such loan agreements may initially have been entered into by a group company and later taken over by the relevant housing cooperative. The guarantees are valid also after the units of the housing cooperative are sold out to physical persons. Current major guarantees by group companies to housing cooperatives are: - Guarantee in the amount of NOK 149,200,000 granted by Faktor Eiendom ASA and Faktor-Gruppen AS (jointly and severally liability) in favour of DnB NOR in respect of obligations of Hindtåsen Terrasse Borettslag - Guarantee in the amount of NOK 160,000,000 granted by Faktor Eiendom ASA in favour of Nordea in respect of obligations of Gystadmyra Borettslag There are in the building process, where the projects are organized as housing cooperatives, given guarantees for the building of the apartments and other buildings to the banks. This is an important way to start building for Faktor Eiendom ASA in many projects. The Subsidiary Planbo Garanti AS acts as business manager for around 50 housing cooperatives. The company guarantees the payments of monthly rent from each of the part owners to the housing cooperative. One month's rent for each unit is deposited by Planbo Garanti AS security for the relevant unit. The guarantee business is financed by fees and interests. The subsidiaries Planbo Prosjekter AS and Planbo Resort AS regularly guarantee that there will be no increase of the price of the housing units in the housing cooperatives between signing of the sale's contract and delivery to the costumer. The same two subsidiaries guarantee the full subscription in housing cooperatives to be established and pay rent for the unsold units. The subsidiaries Planbo Resort AS, Trysil Resort AS and Faktor-Gruppen AS guarantee a certain rent for part owners of Staven Appartment Borettslag and Bakkebygrenda Borettslag renting out their apartments. The duration of the guarantees is three years. 49

51 9.16 FOREIGN CURRENCY Transactions in foreign currency are booked in NOK according to the exchange rates at the time of each transaction. Receivables and liabilities held in foreign currency are translated into NOK at the observed exchange rate at the day of the balance sheet. Exchange rate differences from period to period are accounted for in the Income Statement. Nonmonetary assets held in foreign currency are accounted for using the exchange rates at the time of purchase. Assets accounted for in real value held in foreign currency are translated into NOK using the exchange rate observed at the time of the real value assessment. At April 31 st 2009, the Company held assets in the foreign currencies Swedish Kronor (SEK) and Euro (EUR) USE OF FINANCIAL INSTRUMENTS Not applicable FINANCIAL RISK MANAGEMENT The Management continuously assesses and takes measures to limit the financial risks of the Company. The Company is exposed to foreign exchange risk through foreign operations, interest rate risk through financing activities, credit risk related to customers and solvency risk. Foreign exchange risk is limited through the use of currency forwards. At the end of Q the Company had no such contracts. Interest rate risk is limited though the use of interest derivatives. At the end of Q the Company had no such contracts, including fixed interest agreements. Credit risk related to customers is limited through the internal routine of only being exposed to customers with acceptable credit ratings. The Company s strategy is to at any time be able to access cash, cash equivalents or credit facilities to finance ongoing operations and investments. The Management controls the Company s solvency and cash management THE COMPANY'S AUDITOR BDO Noraudit Borg DA has been the Company s elected auditor for the three years ended 31 December 2009, 2008 and The auditor is a member of Den Norske Revisorforening (The Norwegian Institute of Public Accountants). The registration number in the Norwegian Register of Business Enterprises is NO The Company changed auditor 5 January 2010 to BDO AS. This is the same auditing company as before. The registered address of BDO AS is: Name: BDO AS Address: Vika Atrium, Munkedamsveien 45, 0250 Oslo, Norway Telephone: Fax:

52 10 SHARES AND SHARE CAPITAL 10.1 SHARE CAPITAL AND SHARES The issued share capital of the Company is NOK 14,457, comprising of 722,857,777 Shares fully paid with a par value of NOK 0.02 and issued in accordance with Norwegian law. The Shares are registered in the VPS register with ISIN NO The Shares are equal in all respects and each Share carry one vote at the Company s General Meeting HISTORICAL DEVELOPMENT IN SHARE CAPITAL AND NUMBER OF SHARES The Company s share capital per 1 January 2005 was NOK 750,001 divided into 750,001 Shares each with a nominal value of NOK The development of the Company s share capital from this date is shown in the table below. Table 10: Historical development in share capital and number of Shares Year Type of change in share capital Change in issued share capital (NOK) Change in number of shares Par value per Share (NOK) 2006 Private Placement Total issued share capital (NOK) Total number of issued Shares following change 249, , ,000, ,000, Share Split 0 1: ,000, ,000, Public Offering 286,000 14,300, ,286, ,300, Capital increase 95,000 4,750, ,381, ,050,000 contribution in kind 2007 Capital increase 69,800 3,490, ,450, ,540,000 contribution in kind 2009 Capital increase 1,500,000 75,000, ,950, ,540,000 (private placement) 2009 Capital increase 1,500,000 75,000, ,450, ,540,000 (private placement) 2010 Capital increase 4,450, ,540, ,901, ,080,000 (converting of debt) 2010 Capital increase (private placement) 5,555,555,54 277,777, ,457, ,857,777 In the period from 1 January 2005 to the date of this Prospectus the Company has issued shares against contribution in kind for more than 10% of the share capital AUTHORIZATION TO ISSUE SHARES On 20 May, 2010, the General Meeting of the Company granted the Board of Directors the necessary authority to carry out a subsequent repair issue directed towards shareholders of the Company at the time of the General Meeting who did not participate in the Private Placement, if the Board of Directors should find it expedient to carry out such issue. The Private Placement was made as a disclosed offering and, even though the minimum subscription price was set to NOK 500,000, it was open to participate in for other investors and shareholders than those who actually did subscribe New Shares in the Private Placement. As of the date of this Prospectus such repair issue has not been resolved and the Board of Directors have decided that it will not carry out any such issue, inter alia supported by the above and that it is assumed that the potential proceeds from such issue will not justify the costs related thereto. On 20 May 2010, the General Meeting resolved to grant the board an authorization to increase the Company's share capital with up to NOK 7,228,577 through one or more capital increases. The authorization is valid until the ordinary General Meeting of 2011, and no later than 30 June The authorization includes increase in share capital in return for non-cash contributions, by set offs and subscriptions on other special terms cf. Section 10-2 of the Public Limited Liability Companies Act, and increase in capital by merger pursuant to Section of the Public Limited Liability Companies Act. 51

53 The board may deviate from the shareholders' pre-emptive rights when issuing new shares pursuant to the authorization. As of the date of this Prospectus, the Company has not used its authorization to issue new shares AUTHORIZATION TO REPURCHASE SHARES As of the date of this Prospectus, the Company does not have any authorization to repurchase own Shares RIGHTS TO ACQUIRE SHARES On 2 June 2009, the General Meeting of the Company resolved to issue 10,147,824 warrants to DnB NOR Bank ASA. The warrants have been issued in accordance with the Norwegian Public Limited Companies Act section Each warrant gives DnB NOR Bank the right to subscribe for one new Share in the Company at a subscription price of NOK 4, equal to four times of the subscription price in the Shareholder Offering. The warrants must be issued no later than 31 December The subscription price of shares to be issued upon exercising the subscription is adjusted due to the private placement in April 2010 according to principles of the protocol from the company from the General Assembly, June 2, The issuance of the warrants is subject to that the Private Placement and the Shareholder Offering has been registered in the Norwegian Register of Business Enterprises. On 2 June 2009 the General Meeting of the Company resolved to grant Morten Riiser, CEO of the Company, warrants to subscribe for a total of 3,338,100 shares. The warrants have been issued in accordance with the Norwegian Public Limited Companies Act section The warrants entitle Morten Riiser to subscribe for Shares in the Company at a subscription price of NOK /3 of the warrants can be exercised from 14 October 2009 to 14 October 2011, 1/3 of the warrants can be exercised from 14 April 2010 to 14 October 2011 and 1/3 of the warrants can be exercised from 14 October 2010 to 14 October The subscription price and the number of shares to be issued upon exercising the subscription rights shall if relevant corporate events occur be adjusted in accordance with certain standard adjustment principles. Upon increase or decrease of the share capital, resolution to issue convertible loan or warrants or upon liquidation, merger or demerger, the owner of the warrants shall have the same rights as if they were shareholders. The new shares issued under the subscription rights holds a right to dividends from and including the financial year the subscription right is exercised. Apart from the above, the Company has not issued any convertible securities, exchangeable securities or securities with warrants giving anyone the right to acquire Shares through utilization of such rights. 52

54 10.6 OWNERSHIP STRUCTURE As of the date of this Prospectus, the Company had 1,114 shareholders of whom 1,080 were Norwegian and 34 were non-norwegian. The table below shows the 20 largest shareholders of the Company as registered in the VPS on 27 may 2010: Name of shareholder Number of Shares Percentage (%) 1 Faktor Invest AS... 49,024, % 2 Rune Kilebu AS... 29,287, % 3 Lasse Fosby AS... 29,287, % 4 Mons Holding AS... 12,754, % 5 Institusjonen Fritt Ord... 10,509, % 6 Krag Invest AS... 5,998, % 7 Trafalgar AS... 4,162, % 8 Sæter Haakon Morten... 2,470, % 9 Welle Gruppen AS... 2,312, % 10 Bonnie AS... 2,260, % 11 First Securities AS... 2,124, % 12 KEB Eiendom AS... 2,116, % 13 Botek Norge AS... 2,112, % 14 HGT Invest AS... 2,106, % 15 FW Invest AS... 2,106, % 16 Vige AS... 2,106, % 17 Stein Håkon Glosli AS... 2,106, % 18 MP Pensjon... 1,804, % 19 Odin Norge... 1,689, % 20 Tveteraas Eiendomsselskap... 1,500, % Total 20 largest shareholders ,838, % Others... 54,701, % Total ,540, % Post Private Placement and Debt Conversion the following shareholders hold more than 5% of the issued share capital as of the date of this Prospectus (based on the official shareholder list and disclosures of holdings to the Oslo Stock Exchange). Shareholders holding 5% or more of the Company's shares have an interest in the Company's Share capital which is notifiable according to the Norwegian Securities Trading Act: - DnBNOR Bank ASA - Perestoika AS - Faktor Invest AS The Company is not aware of any shareholder or group of shareholders whose direct and/or indirect shareholding gives right to a controlling influence over the Company. Other than as set out in the Public Companies Act, the Securities Trading Act and other legislation and regulations applicable to the Company, the Company has not implemented any particular measures to ensure that a controlling influence of the Company is not abused. See section 11 for further information. Trysil Resort AS holds 16,500 shares in Company. Except for this, neither the Company, nor any of its subsidiaries, hold any Shares issued by the Company SHARE REGISTRAR AND SECURITIES NUMBER The Company s Shares are registered in the VPS. The Shares current securities number is ISIN NO The shares are listed on Oslo Børs under ticker code FAKTOR. The Registrar for the Shares is DnB NOR Verdipapirservice, Stranden 21, Aker Brygge, 0021 Oslo, Norway DIVIDEND POLICY The Company s aim is to provide the shareholders with a competitive profit based on a long-term growth in earnings. The Company will distribute dividends with on the basis of earnings, financial position, liquidity requirements and other financial considerations. Each year the board proposes the size of the dividend, which is finally determined at the annual General Meeting. For 2007 a dividend of NOK 0.70 per share were distributed. For 2008 and 2009, no dividend was distributed. 53

55 10.9 SHAREHOLDER AGREEMENTS The Company is not aware of any shareholder agreements in respect of the Shares TRANSACTIONS WITH RELATED PARTIES Since 1 January 2006 and until the date of this Prospectus, the Company has not been party to other related party transactions than those listed below: Year Related party Description of transaction Amount (NOK) Lasse Fosby Faktor Eiendom ASA has hired the sole proprietorship Lasse Fosby (business reg. no ) to the position as CEO 1 December The remuneration is upward limited to NOK 150,000 per month + VAT and expenses. The agreement expires on 30 June Rune Kilebu Faktor Eiendom ASA has hired Rune Kilbu AS as Management for Hire (business reg. no ) from 1 December The remuneration is upward limited to NOK 150,000 per month + VAT and expenses. The agreement expires on 30 June Lasse Fosby Faktor Landbrygga AS has entered on 1 May 2009 into an agreement with Lasse Fosby regarding the purchase of a section in agglomeration of buildings in Langbrygga 1 AS. The purchase price is set in Kilebu Transport DA Kilebu Transport DA Terje Fosby accordance with an external valuation of the section. Faktor Eiendom ASA has purchased services from KilebuTransport DA regarding tasks necessary to comply with the requirements set out by the municipality under which the Hällekind project was approved. Kilebu Transport DA has purchased two apartments in the Hällekind project Terje Fosby has entered into a co-operation agreement to assist Faktor Eiendom ASA in selling apartments in the Hällekind project. Remuneration NOK 1.5 million NOK 4,306,360 Remuneration NOK 40,000 at sales of each unit Terje Fosby Terje Fosby has purchased one apartment in the Hällekind project SEK 2,990,000 Year Related party Description of transaction Amount (NOK) Lasse Fosby s sole proprietorship with registration no Consultancy agreement, effective until 1 July 2009 Hourly rate of NOK 1,500. Total amount of NOK 792,000 in 2008 Rune Kilebu AS Consultancy agreement, effective until 1 July 2009 Hourly rate of NOK 1,500. Total amount of NOK 792,000 in 2008 Lasse Fosby AS Loan to the Company NOK 25,000,000 Rune Kilebu AS Loan to the Company NOK 25,000,000 Morten Riiser (CEO Agreement concerning warrants See section Lasse Fosby AS Sale of housing unit in Opsalhagen community association Approximately NOK 2,000,000 (including shared debt) Rune Kilebu AS Sale of housing unit in Opsalhagen community Approximately NOK 2,000,000 (including shared debt) Lasse Fosby AS/AFE Invest AS Sale of housing unit in Opsalhagen community association Approximately NOK 1,750,000 (including shared debt) Flydirect.no AS Purchase of flight time (minimum 12 hours per month) Hourly rate of NOK 12,000 (minimum) NOK 144,000 per month. Total minimum investment of NOK 54

56 5,784,000. Son Resort Utleie AS Guarantee in favour of Nordea Bank Norge ASA NOK 44,000,000 Rune Kilebu On 1 July 2008, Rune Kilebu acceded into an agreement which Faktor entered into with a third party on 25 January 2005 regarding the purchase of a ground for NOK The purchase price and the other terms of the contract are the same as they were originally. NOK Year Related party Description of transaction Amount (NOK) Østlandske Tomteselskap Sale of various leased properties Totally NOK 17,624,000 AS Skjærøy Slipp AS Framework agreement regarding provision of services for Onsøy Hourly rate of Vest II and Stavtaket projects NOK 650 Rune Kilebu Construction of garage Approximately NOK 1,000,000 Tomtebank 1 AS Purchase of property at Gystamyra NOK 18,480,000 Several direct and indirect Sale of housing units in Nøtholmen Resort 1 and 2 AS NOK 100,000 per shareholders/members of unit management Østsiden storsenter Sale of properties in Fredrikstad NOK 24,000,000 55

57 11 SHAREHOLDER MATTERS AND NORWEGIAN COMPANY AND SECURITIES LAW 11.1 GENERAL MEETING According to the Norwegian Public Companies Act, a company s shareholders are to exercise supreme authority in the company through the General Meeting. A shareholder may attend the General Meeting either in person or by proxy. According to the Securities Trading Act section 5-9 (3) a company listed on Oslo Børs shall send proxy forms to its shareholders for the General Meetings. In accordance with the Norwegian Public Companies Act, the Annual General Meeting of the company shall be held each year on or prior to 30 June. The following business must be discussed and decided at the Annual General Meeting: approval of the annual accounts and annual report, including the distribution of any dividend the statement of the Board of Directors with regard to remuneration and benefits to the company s managing director and other senior management; and any other business required to be discussed at the General Meeting by law or in accordance with the company s Articles of Association. Norwegian Public Companies Act requires that written notice of General Meeting be sent to all shareholders whose addresses are known at least two weeks prior to the date of the meeting; unless a company s Articles of Association stipulate a longer period. For listed companies, the Norwegian Corporate Governance Code recommends that the notice calling the meeting and the support information on the resolutions to be discussed at the General Meeting are made available on the Company s web-site no later than 21 days prior to the date of the General Meeting. A shareholder is entitled to have an issue discussed at a General Meeting if such shareholder provides the Board of Directors with notice of the issue so that it can be included in the notice of the General Meeting. In addition to the annual general meeting, extraordinary general meetings of shareholders may be held if deemed necessary by the company s board of directors. An extraordinary general meeting must also be convened for the consideration of specific matters at the written request of the company s auditors or shareholders representing a total of at least 5% of the share capital VOTING RIGHTS Subject to the terms of a company s Articles of Association stating the contrary, the Norwegian Public Companies Act provides that each outstanding share shall represent a right to one vote. No voting rights can be exercised with respect to treasury shares (own shares) held by a company. In general, decisions that shareholders are entitled to make under the Norwegian Public Companies Act or the company s Articles of Association may be made by a simple majority of the votes cast. In the case of elections, the persons who obtain the most votes cast are elected. However, certain decisions, including but not limited to resolutions to: authorize an increase or reduction of the company s share capital, waive preferential rights in connection with any share issue, approve a merger or demerger, and amend the company s Articles of Associations, must receive the approval of at least two-thirds of the aggregate number of votes cast at the General Meeting, as well as at least two-thirds of the share capital represented at the Meeting. Norwegian law further requires that certain decisions, which have the effect of substantially altering the rights and preferences of any shares or class of shares, receive the approval of the holders of such shares or class of shares as well as the majority required for amendments to the Articles of Association. There are no quorum requirements for the General Meeting. In general, in order to be entitled to vote, a shareholder must be registered as the owner of shares in the share register kept by the Norwegian Central Securities Depository ( VPS ) (described below in section 11.13), or, alternatively, report and show evidence of the shareholder s share acquisition to the company prior to the General Meeting. Under Norwegian law, a beneficial owner of shares registered through a VPS-registered nominee is not guaranteed to be able to vote the beneficial owner s shares unless ownership is re-registered in the name of the beneficial owner prior to the relevant General Meeting. 56

58 11.3 AMENDMENTS TO THE COMPANY S ARTICLES OF ASSOCIATION The affirmative vote of two-thirds of the votes cast at a General Meeting as well as at least two-thirds of the share capital represented at the meeting is required to amend the company s Articles of Association. Certain types of changes in the rights of the company s shareholders require the consent of all shareholders or 90% of the votes cast at a General Meeting ADDITIONAL ISSUANCES AND PREFERENTIAL RIGHTS If a public limited company issues any new shares, including bonus share issues (involving the issuance of new shares by a transfer from the company s share premium reserve or distributable equity to the share capital), the Articles of Associations must be amended, which requires a two-thirds majority of the votes cast and the share capital represented at a General Meeting of shareholders. In connection with an increase in the company s share capital by a subscription for shares against cash contributions, Norwegian law provides the company s shareholders with a preferential right to subscribe for the new shares on a pro rata basis in accordance with their then-current shareholdings in the company. The preferential rights to subscribe to an issue may be waived by a resolution in a General Meeting passed by a two-thirds majority of the votes cast at a General Meeting as well as two-thirds of the share capital represented at the meeting. The General Meeting may, with a two-thirds majority vote as described above, authorize the Board of Directors to issue new shares. Such authorization may be effective for a maximum of two years, and the par value of the shares to be issued may not exceed 50% of the nominal share capital as at the time the authorization was registered in the Norwegian Registry of Business Enterprises. The Norwegian Corporate Governance Code recommends that the authorization is limited to specific purposes and not valid for longer than until the next annual General Meeting. The preferential right to subscribe for shares against consideration in cash may be set aside by the Board of Directors only if the authorization includes such possibility for the Board of Directors. To issue shares to shareholders who are citizens or residents of the United States upon the exercise of preferential rights, the Company may be required to file a registration statement in the United States under U.S. securities laws. If the Company decides not to file a registration statement, these holders may not be able to exercise their preferential rights. Under Norwegian law, bonus shares may be issued, subject to shareholder approval and provided, amongst other requirements, that the company does not have an uncovered loss from a previous accounting year, by transfer from the company s distributable equity or from the company s share premium reserve. Any bonus issues may be accomplished either by issuing shares or by increasing the par value of the shares outstanding. If the increase in share capital is to take place by new shares being issued, these new shares must be allotted to the shareholders of the company in proportion to their current shareholdings in the company MINORITY RIGHTS The Norwegian Public Companies Act contains a number of protections for minority shareholders against oppression by the majority, including but not limited to those described in this and preceding sections. Any shareholder may petition the courts to have a decision of the company s Board of Directors or General Meeting declared invalid on the grounds that it unreasonably favours certain shareholders or third parties to the detriment of other shareholders or the company itself. In certain grave circumstances, shareholders may require the courts to dissolve the company as a result of such decisions. Shareholders holding in the aggregate 5% or more of a public limited company s share capital have a right to demand that the company holds an Extraordinary General Meeting to discuss or resolve specific matters. In addition, any shareholder may demand that the company places an item on the agenda for any General Meeting if the company is notified in time for such item to be included in the notice of the Meeting MANDATORY OFFER REQUIREMENTS Mandatory offer requirements in compliance with EU s Take-Over-Directive (Directive 2004/25/EF) were implemented in Norway in the Securities Trading Act (Act of 29 June 2007 No 75) Chapter 6, which came into force on 1 January Norwegian law requires any person, entity or group acting in concert that acquires shares representing more than 1/3 of the voting rights of a company primary listed on Oslo Børs to make an unconditional general offer for the purchase of the remaining shares in the company. The offer is subject to approval by Oslo Børs before submission to the shareholders. The offer price per share must be at least as high as the highest price paid or agreed to be paid by the offeror in the six-month period prior to the date the 1/3 threshold was exceeded, but equal to the market price if the market price was higher when the 1/3 threshold was exceeded. In the event that the acquirer thereafter, but prior to the expiration of the bid period acquires, or agrees to acquire, additional shares at a higher price, the acquirer is obliged to restate its bid at that higher price. 57

59 A mandatory offer must be in cash or contain a cash alternative at least equivalent to any other consideration offered. To the effect that the shareholder when the 1/3 threshold was crossed has stated that sale of shares will take place, the shareholder can reduce the ownership to a level below 1/3 within 4 weeks and avoid the mandatory offer obligation. Otherwise, Oslo Børs may cause the shares exceeding the 1/3 limit to be sold. Until the mandatory bid is made or the shares exceeding the 1/3 threshold are sold, the shareholder may not vote for shares exceeding the 1/3 threshold, unless a majority of the remaining shareholders approve. The shareholder can, however, exercise the right to dividends and pre-emption rights in the event of a share capital increase. Oslo Børs may impose a daily fine on a shareholder who fails to make the required offer or sell down below 1/3. There is a repeated mandatory offer obligation when passing 40% and 50% of the voting rights. However, for companies which were admitted to listing while the previous Securities Trading Act of 13 June 1997 no 79 was in force there is an exemption from this repeated mandatory offer obligation for any person, entity or group acting in concert who at the time of listing held more than 40% of the votes and after listing have uninterruptedly owned shares representing more than 40% of the votes. Any person, entity or group acting in concert who after 1 January 2008 pass a mandatory bid threshold in a way which do not trigger a mandatory bid obligation, is obligated, in general, to make a mandatory offer in case of each subsequent acquisition. The same obligation applies to any person, entity or group acting in concert who prior to 1 January 2008 passed the 40% mandatory offer threshold in a way which did not trigger a mandatory offer or at 1 January 2008 held shares representing between 1/3 and 40% of the votes in the company COMPULSORY ACQUISITION If a shareholder, directly or via subsidiaries, acquires shares representing more than 90% of the total number of issued shares as well as more than 90% of the total voting rights attached to such shares, then such majority shareholder would have the right (and each remaining minority shareholder of the Company would have the right to require such majority shareholder) to effect a compulsory acquisition for cash of any shares not already owned by such majority shareholder in accordance with the requirements laid out in the Norwegian Public Companies Act section In such a case the majority shareholder immediately becomes the owner of all the shares. Upon effecting a compulsory acquisition the majority shareholder would have to offer the minority shareholders a specific price per share, the determination of which price would be at the discretion of the majority shareholder. Should any minority shareholder not accept the offered price, such minority shareholder may, within a specified deadline of not less than two months duration, request that the price be set by the Norwegian courts. Absent such request or other objection to the price being offered, the minority shareholders would be deemed to have accepted the offered price after the expiry of the two months deadline. Generally, the majority shareholder would be responsible for the cost of such court procedure and the courts would have full discretion in respect of the valuation of the shares as per the effectuation of the compulsory acquisition DISCLOSURE OBLIGATIONS Pursuant to the Norwegian Securities Trading Act, a person, entity or group acting in consent that acquire or disposes shares or rights to shares, i.e. convertible loans, subscription rights, options on the purchase of shares and similar rights to shares, which results beneficial ownership, directly or indirectly, in the aggregate, reaching or exceeding or falling below the respective thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 90% of the share capital or a corresponding portion of the votes is obligated to notify Oslo Stock Exchange immediately. Certain voting rights are counted on equal basis as shares and rights to shares. A change in ownership level due to other circumstances (i.e. other than acquisition or disposal) can also trigger the notification obligations when the said thresholds are passed, e.g. changes in the company s share capital RIGHTS OF REDEMPTION AND REPURCHASE OF SHARES A public limited company may issue redeemable shares (i.e., shares redeemable without the shareholder s consent), but this is not common practice. The company s share capital may be reduced by reducing the par value of the shares. Such decision requires the approval of two-thirds of the votes cast at a General Meeting as well as two-thirds of the aggregate share capital present in the General Meeting. Redemption of individual shares requires the consent of the holders of the shares to be redeemed. A public limited company may purchase its own shares if an authorisation for the Board of Directors of the company to do so has been given by the shareholders at a General Meeting with the approval of at least two-thirds of the aggregate number of votes cast at the meeting as well as two-thirds of the aggregate share capital present in the General Meeting. The aggregate nominal value of treasury shares so acquired and held by the company is not permitted to exceed 10% of the company s share capital, and treasury shares may only be acquired if the company s distributable equity, according to the latest adopted balance sheet, exceeds the consideration to be paid for the shares. The authorisation by the shareholders at the General Meeting cannot be given for a period exceeding 18 months. 58

60 11.10 SHAREHOLDER VOTE ON CERTAIN REORGANIZATIONS A decision to merge with another company or to demerge requires a resolution of the company s shareholders at a General Meeting passed by two-thirds of the aggregate votes cast, as well as two-thirds of the aggregate share capital represented, at the General Meeting. A merger plan or de-merger plan signed by the company s Board of Directors along with certain other required documentation shall be sent to all shareholders and registered with the Norwegian Register of Business Enterprises at least one month prior to the General Meeting DISTRIBUTION OF DIVIDENDS Dividends may be paid in cash or in some instances in kind. The Norwegian Public Limited Companies Act provides several constraints on the distribution of dividends: Dividends are payable only out of distributable reserves. Section 8-1 of the Norwegian Public Limited Companies Act provides that distributable reserves consist of the profit for the prior fiscal year (as reflected in the consolidated income statement approved by the annual General Meeting of shareholders) and the retained profit from previous years (adjusted for any reclassification of equity), less (i) uncovered losses, (ii) the book value of research and development, goodwill and net deferred tax assets (as recorded in the balance sheet, as of the most recent fiscal year end, approved by the annual General Meeting of shareholders), (iii) the total nominal value of treasury shares which the Company has acquired for ownership or as security in previous fiscal years, and credit and security which, pursuant to Sections 8-7 to 8-9 of the Norwegian Public Limited Companies Act, fall within the limits of distributable equity, and (iv) that part of the profit for the prior fiscal year which, by law or pursuant to the Company's Articles of Association, must be allocated to the undistributable reserve or cannot be distributed as a dividend. Dividends cannot be distributed if the Company's equity amounts to less than 10% of the total assets Dividends can only be distributed to the extent compatible with good and careful business practice, with due regard to any losses which the Company may have incurred since the balance sheet date (i.e. the prior fiscal year end) or which the Company may expect to incur. According to the Norwegian Public Limited Companies Act, there is no time limit after which entitlement to dividends lapses. Further, there are no dividend restrictions or specific procedures for non-norwegian resident shareholders in the Act. For a description of withholding tax on dividends that is applicable to non-norwegian residents see section DISTRIBUTION OF ASSETS ON LIQUIDATION According to the Public Limited Companies Act, a company may be wound-up by a resolution of the company s shareholders in a General Meeting passed by the same vote as required with respect to amendments to the Articles of Association. The shares rank equally in the event of a return on capital by the company upon a winding-up or otherwise THE VPS AND TRANSFER OF SHARES The VPS is the Norwegian paperless centralized securities registry. It is a computerized bookkeeping system in which the ownership of, and all transactions relating to, Norwegian listed shares must be recorded. The company s share register is operated through the VPS. All transactions relating to securities registered with the VPS are made through computerized book entries. The VPS confirms each entry by sending a transcript to the registered shareholder irrespective of any beneficial ownership. To affect such entries, the individual shareholder must establish a share account with a Norwegian account agent. Norwegian banks, the Bank of Norway, authorized securities brokers in Norway and Norwegian branches of credit institutions established within the EEA are allowed to act as account agents. The entry of a transaction in the VPS is prima facie evidence in determining the legal rights of parties as against the issuing company or a third party claiming an interest in the given security. The VPS is strictly liable for any loss resulting from an error in connection with registering, altering or cancelling a right, except in the event of contributory negligence, in which event compensation owed by the VPS may be reduced or withdrawn. A transferee or assignee of shares may not exercise the rights of a shareholder with respect to such shares unless such transferee or assignee has registered such shareholding or has reported and shown evidence of such share acquisition, and the acquisition of shares is not prevented by law, the Articles of Association or otherwise. 59

61 11.14 SHAREHOLDERS REGISTER Under Norwegian law shares are registered in the name of the owner of the shares. As a general rule, there are no arrangements for nominee registration. However, shares may be registered in the VPS by a fund manager (bank or other nominee) approved by the Norwegian Ministry of Finance, as the nominee of foreign shareholders. An approved and registered nominee has a duty to provide information on demand about beneficial shareholders to the company and to the Norwegian authorities. In the case of registration by nominees, registration with the VPS must show that the registered owner is a nominee. A registered nominee has the right to receive dividends and other distributions but cannot vote at General Meetings on behalf of the beneficial owners. Beneficial owners must register with the VPS or provide other sufficient proof of their ownership to the shares in order to vote at General Meetings THE ARTICLES OF ASSOCIATION The following is a summary of provisions of the Company s Articles of Association as of the date of this Prospectus, some of which have not been addressed in the preceding discussion. A complete copy of the Company s Articles of Association is attached to this Prospectus as Appendix 1. Section 2: The Company's registered office is in the municipality Rakkestad in Østfold. The General Meeting can be held in Oslo if the Board of Directors finds it appropriate. Section 3: The Company's objective is, through its own business or through investment in other companies, to own and/or acquire title to grounds and property with a view to developing, building and selling housing or vacation home projects organised through housing cooperatives, joint properties or otherwise, and any activities related to that, including contracting and construction management and administration, management and administration of housing cooperatives, joint properties and other property companies. Section 4: The Company's share capital is NOK 14,457, divided into 722,857,777 shares, each with a nominal value of NOK Section 5: The Company's Board of Directors shall have 4 7 board members. The Board of Directors is elected for one year at a time. The Board of Directors members can be re-elected. In the event of a tie vote, the chairman of the board shall have a casting vote. Section 6: The right to sign for the Company is held either by two board members jointly or by the general manager together with one board member. The board may grant power of attorney. Section 10: The Company shall have an election committee. The election committee shall have three members who are elected by the General Meeting. The task of the election committee is to nominate board members and deputy board members for the General Meeting. The election committee shall provide its nomination at least two weeks prior to the General Meeting. The board shall ensure that the nomination is distributed to the shareholders together with the notice of the General Meeting CORPORATE GOVERNANCE Corporate governance, based on the principles set forth in the Code is the basis for the activity of the Company. The Management and Board of Directors strive to treat the Company s shareholders equal and just. The Board of Directors and other leading bodies holds integrity and legal qualification. The financial statements are audited by qualified and independent auditors, such that the provided financial statements give a correct picture of the Company s operational and financial position. The Board of Directors are responsible for the implementation of appropriate principles for Corporate Governance and management of the Company. The Board of Directors reviews the Company s Corporate Governance on a yearly basis. In other respect, the Company complies with the Code, except for the following issues: Certain transactions carried out by the Group has not been subject to a valuation obtained from an independent third party in the event of not immaterial transactions (Norw.: ikke uvesentlig transaksjoner ) with shareholders, members of the board of directors, members of the executive management or close associates of any such parties or with individuals where such individuals are directly or indirectly shareholders. These transactions have not been subject to such valuation as the board of directors considered it unnecessary due to the fact that they were entered into on market value terms. Lasse Fosby and Rune Kilebu are members of the Board of Directors, as well as being part of the Management. This has been deemed appropriate due to their significant experience and competency within the business of the Company. The Company has not established formal ethical guidelines as recommended by the Code. The Company has not deemed it necessary to formalize such guidelines beyond the general statement given 60

62 in the annual report of The Company will assess on a continuing basis whether or not to establish such guidelines. The election committee s recommendation was not submitted to the Shareholders 21 days prior to the annual general meeting The recommendation was not completed within this deadline, but was submitted on 5 May 15 days prior to the general meeting. The Company will ensure that this deadline will be complied with in the future. Lasse Fosby is a member of the election committee and member of the Board of Directors. Fosby is nominated for re-election as a member of the election committee. It is contemplated that Fosby shall resign from his position as member of the Board of Directors. The Company has not implemented any guidelines for a potential take-over situation, as this has been deemed not expedient. The Company will assess any take-over situation in accordance with applicable laws and regulations. 61

63 12 NORWEGIAN TAXATION Set out below is a summary of certain Norwegian tax matters related to the Private Placement and the Debt Conversion, holding and disposal of shares. The summary is based on Norwegian laws, rules and regulations applicable as of the date of this Prospectus, and is subject to any changes in law occurring after such date. Such changes could possibly be made on a retroactive basis. The summary does not address foreign tax laws. The summary is of a general nature and does not purport to be a comprehensive description of all the Norwegian tax considerations that may be relevant for a decision to acquire, own or dispose of the Shares. Shareholders who wish to clarify their own tax situation should consult with and rely upon their own tax advisers. Shareholders resident in jurisdictions other than Norway should consult with and rely upon local tax advisors with respect to the tax position in their country of residence. Please note that for the purpose of the summary below, a reference to a Norwegian or foreign shareholder refers to the tax residency rather than the nationality of the shareholder INTRODUCTION This subsection presents a brief outline of certain tax aspects under Norwegian law related to holding and disposal of Shares in the Company. The presentation is based on Norwegian tax regulations in force as of the date of this Prospectus and describes the tax situation for Norwegian shareholders (shareholders with Norwegian tax domicile) and withholding tax for non-norwegian shareholders (shareholders not having Norwegian tax domicile). The presentation does not concern tax issues for the Company. The presentation does not include any information with respect to taxation in any other jurisdiction than Norway, and the presentation only focuses on the shareholder categories explicitly mentioned below. Hence, the presentation does i.a. not exhaustively cover the tax situation for non-norwegian shareholders holding or disposing of Shares in the Company through a Norwegian permanent establishment. Further, special rules, which are not mentioned below, may apply to shareholders which are transparent entities for tax purposes and for shareholders that have moved or will move out of Norway (exit taxation). The presentation is of general nature and is not intended to be an exhaustive analysis of all possible tax aspects relating to Shares in or dividends paid from the Company. Accordingly, prospective holders of Shares in the Company should consult their tax advisors as to the consequences under the tax regulations of Norway and elsewhere. The presentation is subject to any amendments to tax laws and regulations that may occur after the date of this Prospectus, including any retroactive enforcement. Please note that for the purpose of this subsection, a reference to a Norwegian or foreign shareholder refers to the tax residency and not the nationality of the shareholder NORWEGIAN SHAREHOLDERS Taxation of dividends Norwegian personal shareholders Dividends distributed from the Company to Norwegian personal shareholders are taxable as ordinary income at a current rate of 28 per cent. However, this will only apply for dividends exceeding a calculated risk-free return on the investment (tax-free return), which thus is tax exempt. The tax-free return is calculated annually for each Share and pertains to the owner of the Share at the end of the year. The tax-free return is calculated on the basis of the shareholder s cost price on the Share multiplied with a statutory risk-free interest. The risk-free interest is determined on the basis of interest on 3-months Treasury bills, as published by the Central Bank of Norway (Norwegian: Norges Bank), after tax. If the actual distributed dividends for one year are less than the calculated tax-free return (calculated for each Share), the surplus tax-free return can be carried forward to be set-off against dividends or capital gains on the same Share for subsequent years (any surplus tax-free return on one Share cannot be set-off against dividends or capital gains on other shares). Furthermore, any such surplus tax-free return will be added to the basis for calculating the annual tax-free return on the Share for subsequent years Taxation of dividends Norwegian corporate shareholders Dividends distributed from the Company to Norwegian corporations (joint stock companies and similar entities) are tax exempt; provided, however, that 3 per cent of such dividends will be included in the tax base and taxable 62

64 at a rate of 28 per cent, implying a 0.84 per cent effective tax rate for Norwegian corporate shareholders on dividends from the Company Taxation of capital gains Norwegian personal shareholders Sale, redemption or other disposal of shares is considered as a realization for Norwegian tax purposes. A capital gain or loss generated by a Norwegian personal shareholder through a realization of Shares in the Company is taxable or tax deductible in Norway. Such capital gain or loss is included in or deducted from the basis for computation of ordinary income in the year of realization. Ordinary income is taxable at a rate of 28 per cent. Gains are taxable and losses are deductible irrespective of the duration of the ownership and the number of shares owned and/or disposed of. The gain or loss is calculated as net consideration for the share less the cost price on the share, transactional expenses and any surplus tax-free return on the share (as a result of non-utilization of the calculated annual taxfree returns at the time of disposal). However, any surplus tax-free return may only be deducted in order to reduce a capital gain, and not to produce or increase a loss. Further, any surplus tax-free return on one share cannot be set-off against gains on another share. Expenses and broker s commission at both the purchase (subscription) and the sale are deductible when calculating the capital gain or loss. A FIFO (First In First Out) principle applies if shares are not acquired simultaneously Taxation of capital gains Norwegian corporate shareholders Capital gains generated by Norwegian corporations (joint stock companies and similar entities) through a realization of Sharess in the Company are tax exempt, provided, however, that 3 per cent of any such net gains will be included in the tax base and taxable at a rate of 28 per cent, implying a 0.84 per cent effective tax rate for Norwegian corporate shareholders on net profits related to realization of Shares in the Company. Net losses from realization of s in the Company are not tax deductible for Norwegian corporate shareholders Net wealth tax Norwegian corporations are exempt from net wealth taxation. Norwegian personal shareholders are subject to net wealth tax. The marginal net wealth tax rate is currently 1.1 per cent. When calculating the net wealth tax base, shares in listed companies are valued to the shares quoted value as of 1st of January in the assessment year FOREIGN SHAREHOLDERS NORWEGIAN TAXATION Withholding tax on distributions Dividends distributed from the Company to non-norwegian shareholders (personal and corporate shareholders not having Norwegian tax domicile) are generally subject to Norwegian withholding tax. The general withholding tax rate on dividends is 25 per cent, but is normally reduced to 15 per cent (or lower) if a tax treaty applies. Further, and regardless of the withholding tax rate according to a tax treaty, according to internal Norwegian tax law, dividends from the Company to non-norwegian corporations will be exempt from Norwegian withholding tax if the non-norwegian corporations is regarded (i) as a corporation that corresponds to a Norwegian limited liability company and (ii) which are tax domiciled and with an actual establishment and which carries on genuine economic activities in an European Economic Area ( EEA ) member state. Furthermore, personal shareholders resident in an EEA member state may claim that a tax-free return is calculated and applied in the same way as for Norwegian personal shareholders, cf. above. However, the deduction does not apply in the event that the withholding tax rate, pursuant to an applicable tax treaty, leads to a lower actual taxation on the dividends than the withholding tax rate of 25 per cent less the tax-free return. Any tax-free return is only available upon application, and any refund is given after the end of the income year. Nominee registered shares will be subject to 25 per cent withholding tax unless the nominee has obtained an approval from the Norwegian Tax Directorate that a lower tax rate shall apply. To obtain such approval the nominee must file an application to the Norwegian tax authorities, which includes a survey of all beneficial owners that are subject to withholding tax at a reduced rate. 63

65 Non-Norwegian shareholders that have been subject to a higher withholding tax than set out in an applicable tax treaty or the Norwegian Tax Act may apply to the Norwegian tax authorities for a refund of the excess withholding tax deducted. If Shares in the Company are held in respect of a business (permanent establishment) liable to taxation in Norway, dividends distributed from the Company will in general be subject to the same taxation as for Norwegian shareholders, cf. above The Company s responsibility for the withholding of taxes Non-Norwegian shareholders subject to withholding tax on dividends from the Company are subject to advance tax payment. The Company is responsible for the withholding of all tax that is levied on dividends to foreign shareholders and to report and pay in the withholding tax Capital gains Non-Norwegian shareholders (persons and corporations) are not subject to Norwegian tax on capital gains generated through realization of Sharess in the Company. A tax liability in Norway may arise if shares are held in respect of a business (permanent establishment) liable to taxation in Norway, or if a person has previously been tax domiciled in Norway DUTIES ON TRANSFER OF SHARES No stamp duty or similar duties are currently imposed in Norway on the transfer of shares, neither on acquisition nor disposal INHERITANCE TAX When shares are transferred either through inheritance or as a gift, such transfer may give rise to inheritance or gift tax in Norway. 64

66 13 LEGAL MATTERS 13.1 GENERAL The Group operates a relatively complex business model with numerous legal entities and intragroup transactions implying a need for effective systems and procedures in order to ensure the required control and management of the business. There is potential for improvement in this respect. Reference is made to section for a description of planned actions to rectify the situation DISPUTES POTENTIAL DISPUTES The Company is and will be in the future involved disputes and potentially legal proceedings in the course of its regular business operations. Currently the Company is aware of three pending claims which the Company deems may be significant. The purported size under the claims amounts to NOK 20 million. The outcomes of the disputes are currently unknown, and the legal processes are ongoing. The Company is also aware of a potential dispute with the previous owners of Scandinavian Hospitality Group AS over an alleged breach of a share purchase agreement. The previous owners claim that the Company has not taken the necessary steps to give the previous owners a right to appoint one board member to the Company s board of directors and that the Company has failed to pay a cash consideration in accordance with an amendment agreement to the said share purchase agreement. The claim amounts to NOK 6.35 million (including interest). The Company has received one writ of summons in connection with sale of units to customers in the Son Resort project. There are several on-going and/or potential disputes in relation to real property involving the Group with respect to purchasers of property claiming damages due to alleged defects to real property. Other disputes which the Company is aware of are deemed not have the potential of significant negative effects for the Company. Except for the above, the Company is not involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have, or have had significant effects on the Company s financial position or profitability, nor has the Company been involved in any such proceedings during the previous 12 months GUARANTEES AND SECURITIES GRANTED FOR OTHER GROUP COMPANIES A substantial amount of guarantees, both unsecured and secured by mortgage are issued by Faktor Eiendom ASA and its subsidiaries as security for the obligations of the Group companies towards DnB NOR. Any payment difficulties in one of the Group companies are likely to affect other Group companies directly NON-REGISTERED RIGHTS TO REAL PROPERTY The Group has rights to real property which are not registered in the Norwegian Land Registry. It is generally a risk involved when such rights are not registered. 65

67 14 ADDITIONAL INFORMATION 14.1 DOCUMENTS ON DISPLAY For the life of this Prospectus the following documents may be inspected at the offices of the Company or downloaded from the Company's web page ( Articles of Association of Faktor Eiendom All reports, letters and other documents, historical financial information, valuations and statements prepared by any expert at the issuer's request any part of which is included or referred to in the registration document; Historical financial information for the Company annual accounts for 2007, 2008 and 2009; and Stock exchange notices, including quarterly reports, distributed by the Company through Oslo Børs information system NewsWeb INCORPORATION BY REFERENCE The information incorporated by reference in the Prospectus shall be read in connection with the cross-reference list as set out in the table below except as provided in this Section, no other information is incorporated by reference into this Prospectus. Table 11: Cross-reference list Disclosure Section requirements in the of the Prospe Prospectus ctus Audited historical information (Annex I, Section 20.1) Audit report (Annex I, Section ) Accounting Policies (Annex I, Section 20.1) 9, 9.1, 9.2,9.3, 9.4,9.5, 9.6,9.7, 9.9, ,9.1,9. 2,9.3,9. 4,9.5,9. 6,9.7,9. 9,9.10 Reference document Consolidated annual report 2007 Consolidated annual report 2008 Consolidated annual report 2009 Consolidated annual report 2007 Consolidated annual report 2008 Consolidated annual report ,9.1 Consolidated annual report 2009 Internet pdf 9_web.pdf pdf 9_web.pdf 9_web.pdf 66

68 15 DEFINITIONS AND GLOSSARY OF TERMS Annual Report The Company s consolidated annual report from 2009 Articles of Association The Company s articles of association, as displayed in appendix 1 Board Board of directors of the Company Board of Directors Board of directors of the Company CEO Chief Executive Officer CFO Chief Financial Officer Code Norwegian Code of Practice of 21 October 2009 Company Faktor Eiendom ASA Debt Conversion Increase of NOK 4,450,800 in share capital through the issuance of 222,540,000 New Shares, by the conversion of approximately NOK 250,000,000 of debt into equity at a subscription price of NOK 1.12 EBT Earnings Before Tax EBIT Earnings Before Interest and Tax EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation EPS Earnings per share Executive Management Executive management being the administrative and management body of Faktor Eiendom ASA (Norwegian: "konsernledelsen") Faktor Eiendom Faktor Eiendom ASA First Date of Payment Date of Payment for allotted Offer Shares Group Faktor Eiendom ASA with subsidiaries IFRS International Financial Reporting Standards Legal Advisor Advokatfirmaet Selmer DA Managers Pareto Securities and Handelsbanken Capital Markets New Shares Shares to be issued in the Private Placement and/ or the Debt Conversion, in total an issue of 500,317,777 shares. Tradable under the ticker FAKTOR NOK The currency of the Kingdom of Norway (Norwegian krone) Oslo Børs Oslo Børs ASA (the Oslo Stock Exchange) Private Placement Increase of NOK 5,555, in share capital through the issuance of 277,777,777 New Shares at a subscription price of NOK 0.90, a total gross proceeds of approximately NOK 250,000,000 Prospectus This prospectus prepared in connection with the Private Placement and Debt Conversion, including all appendices Public Limited Companies Act The Norwegian Public Limited Companies Act of 13 June 1997 No. 45 (as amended) Register of Business The Norwegian Register of Business Enterprises, in Norwegian "Foretaksregisteret" Securities Trading Act The Norwegian Securities Trading Act of 29 June 2007 No. 75 (as amended) Share Capital The Company s total share capital after the Private Placement and Debt Conversion, amounting to NOK 14,457,155.54, divided on 722,857,777 Shares Shares All shares issued by the Company after the Private Placement and Debt Conversion SSB Statistics Norway (Statistisk Sentralbyrå) US Securities Act The Securities Act of 1933, as amended VPS The Norwegian Central Securities Depository or "Verdipapirsentralen" VPS account An account with VPS for the registration of holdings of securities 67

69 APPENDIX 1 This is an unofficial translation of the original articles which are in Norwegian. In the event of discrepancy, the Norwegian version prevails. Articles of Association FOR FAKTOR EIENDOM ASA (as adopted in the general meeting in the Company 2 June 2009) Article 1 The name of the Company is Faktor Eiendom ASA. Article 2 The company s registered office is in Rakkestad municipality in Østfold. The general meeting can be held in Oslo if the Board finds this appropriate. Article 3 The Company's objective is, through its own business or through investment in other companies, to own and/or acquire title to grounds and property with a view to developing, building and selling housing or vacation home projects organised through housing cooperatives, joint properties or otherwise, and any activities related to that, including contracting and construction management and administration, management and administration of housing cooperatives, joint properties and other property companies. Article 4 The Company's share capital is NOK 14,457, made up of 722,857,777 Shares, each with a nominal value of NOK Article 5 The Company's Board of Directors shall have 4 7 board members. The Board is elected for one year at a time. The board members can be re-elected. In the event of a tie vote, the chairman of the board shall have a casting vote. Article 6 The right to sign for the company is held either by two board members jointly, or by the general manager together with one board member. The Board may grant power of attorney. Article 7 An ordinary general meeting shall be held within the end of the month of June. The notice to the general meeting is to be in writing with 2 weeks notice. The notice shall state the matters that are to be considered. Suggestions from the shareholders must, in order to be considered at the general meeting, be submitted to the Chairman by 15 May the same year. The general meeting is conducted by the Chairman of the Board if no other chairperson is elected. In the general meeting every share has one vote. The shareholders may be represented by proxy holding a written power of attorney. Documents concerning matters that are to be considered at the general meeting do not have to be sent to the shareholders if the documents are made available for the shareholders at the Company s website. This also applies to documents that according to law must be included in or enclosed in the notice to the general meeting. A shareholder may still demand to receive documents that concern matters that are to be considered at the General Meeting. 68

70 Article 8 The general meeting shall consider the following: Directors report. Approval of profit and loss account and balance sheet. Determination of directors' and auditors' fees. Allocation of profit and loss in accordance with the approved balance sheet, and distribution of dividend. Election of the Board of Directors and, if applicable, auditor. Other matters which are subject to approval at the general meeting pursuant to Norwegian law or these articles of association. Article 9 An extra ordinary board meeting will be held when the Board finds this necessary or when the shareholders representing at least 5% of the share capital demands it. The extra ordinary general meeting shall only consider the matters mentioned in the notice. Article 10 The Company shall have an election committee. The election committee shall have three members who are elected by the general meeting. The task of the election committee is to nominate board members and deputy board members for the Board. The election committee shall provide its nomination at least two weeks prior to the general meeting. The Board shall ensure that the nomination is distributed to the shareholders together with the notice of the general meeting. 69

71 APPENDIX 2: Figure 1: Legal Structure * Faktor Industrier is a company under Faktor Construction AS 70